In This Article:
United Engineers Limited (SGX:U04), a construction company based in Singapore, saw its share price hover around a small range of SGD2.55 to SGD2.64 over the last few weeks. But is this actually reflective of the share value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at United Engineers’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for United Engineers
What’s the opportunity in United Engineers?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% above my intrinsic value, which means if you buy United Engineers today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is SGD2.25, there’s only an insignificant downside when the price falls to its real value. Furthermore, United Engineers’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will United Engineers generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for United Engineers, at least in the near future.
What this means for you:
Are you a shareholder? U04 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on U04 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on U04 should the price fluctuate below its true value.