The Hong Kong market has recently faced a downturn, with the Hang Seng Index retreating by 2.28% amid broader concerns about China's economic outlook and mixed global economic indicators. Despite this, small-cap stocks often present unique opportunities for investors, especially when there is notable insider buying activity. In the current market environment, identifying undervalued small-cap stocks with insider buying can be particularly compelling as it may signal confidence from those closest to the company's operations.
Top 10 Undervalued Small Caps With Insider Buying In Hong Kong
Overview: Nissin Foods is a company that specializes in the production and sale of instant noodles and related products, with operations primarily in Mainland China and Hong Kong, boasting a market cap of approximately HK$7.39 billion.
Operations: The company generates revenue primarily from Mainland China (HK$2.47 billion) and Hong Kong and Other Asia (HK$1.68 billion). Over the observed periods, the gross profit margin shows variability, peaking at 34.18% and dipping to 30.05%.
PE: 14.1x
Nissin Foods, a notable player in the Hong Kong small-cap market, has shown promising signs of being undervalued. Recent insider confidence is evident with Kiyotaka Ando purchasing 155,430 shares worth approximately HK$770,000. Earnings for Q1 2024 reported sales of HK$963 million and net income of HK$117.95 million, reflecting growth compared to last year. Additionally, the company declared a final dividend of 15.82 HK cents per share for 2023 and announced key executive changes effective July 2024 to bolster leadership.
Overview: Wasion Holdings specializes in the development and manufacturing of advanced metering infrastructure and distribution operations, with a market cap of approximately CN¥2.56 billion.
Operations: Wasion Holdings generates revenue primarily from Advanced Distribution Operations (CN¥2.48 billion), Power Advanced Metering Infrastructure (CN¥2.67 billion), and Communication and Fluid Advanced Metering Infrastructure (CN¥2.21 billion). The company’s gross profit margin has shown a trend of gradual increase, reaching 35.59% as of December 31, 2023. Operating expenses include significant allocations for R&D and sales & marketing, with the most recent figures being CN¥681.38 million and CN¥649.48 million respectively for the period ending December 31, 2024.
PE: 11.1x
Wasion Holdings recently secured significant smart meter contracts in Hungary, Singapore, and Malaysia, totaling approximately HK$386.22 million. This expansion into international markets underscores their growing brand recognition and potential for future revenue growth. Insider confidence is evident with Wei Ji purchasing 500,000 shares worth HK$3.17 million in May 2024. Despite relying solely on external borrowing for funding, the company’s earnings are forecast to grow by 25.8% annually, indicating strong future prospects amidst its small-cap peers in Hong Kong.
Overview: Transport International Holdings operates franchised bus services and engages in property holdings and development, with a market cap of HK$7.62 billion.
Operations: The company generates revenue primarily from franchised bus operations and property holdings and development. The gross profit margin has shown variability, reaching as high as 32.20% in Q3 2016 and as low as 12.30% in Q4 2020. Operating expenses have been consistently significant, with depreciation and amortization being a notable component.
PE: 11.7x
Transport International Holdings, a small cap in Hong Kong, has shown insider confidence with Non-Executive Director Winnie J. Ng purchasing 124,000 shares valued at HK$1.11 million in the past year. This move represents a 68% increase in their holdings and signals potential undervaluation. Despite a net profit margin drop from 8.3% to 5.1%, the company approved a final dividend of HK$0.50 per share on May 16, 2024, indicating stable returns for investors amidst executive board changes and strategic appointments.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SEHK:1475 SEHK:3393 and SEHK:62.
