Companies with shares trading at a market price below what they are actually worth, such as ComfortDelGro and Koh Brothers Group, are deemed undervalued. There’s a few ways you can determine how much a company is actually worth. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. The discrepancy between the price and value means investors have an opportunity to buy shares at a discount. Below are the stocks I believe are undervalued on all criteria, based on their latest financial data.
ComfortDelGro Corporation Limited (SGX:C52)
ComfortDelGro Corporation Limited, an investment holding company, operates as a land transportation company. Established in 2003, and currently headed by CEO Ban Seng Yang, the company provides employment to 22,048 people and has a market cap of SGD SGD4.48B, putting it in the mid-cap stocks category.
C52’s shares are now trading at -26% lower than its intrinsic level of $2.81, at a price of $2.07, based on my discounted cash flow model. This discrepancy gives us a chance to invest in C52 at a discount. Additionally, C52’s PE ratio is trading at 14.3x while its transportation peer level trades at 21.7x, indicating that relative to its comparable set of companies, we can invest in C52 at a lower price. C52 also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities. Finally, its debt relative to equity is 12%, which has been dropping for the past few years signalling C52’s capability to pay down its debt. More on ComfortDelGro here.
Koh Brothers Group Limited (SGX:K75)
Koh Brothers Group Limited, an investment holding company, engages in the construction and building materials, real estate, and leisure and hospitality businesses primarily in Singapore, the People’s Republic of China, Malaysia, and the rest of Asia. Koh Brothers Group was founded in 1966 and with the market cap of SGD SGD142.38M, it falls under the small-cap group.
K75’s stock is now hovering at around -61% below its true level of $0.88, at the market price of $0.35, based on my discounted cash flow model. The discrepancy signals an opportunity to buy low. Furthermore, K75’s PE ratio stands at around 9.7x relative to its construction peer level of 10.4x, suggesting that relative to other stocks in the industry, you can buy K75 for a cheaper price. K75 is also robust in terms of financial health, with near-term assets able to cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 49% has been falling for the past few years indicating its capacity to reduce its debt obligations year on year. Interested in Koh Brothers Group? Find out more here.