Undervalued companies, such as AusGroup and World Precision Machinery, are those that trade at a price below their actual values. There’s a few ways you can value a company. 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. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
AusGroup Limited (SGX:5GJ)
AusGroup Limited, an investment holding company, provides asset maintenance, construction, access, fabrication, and marine services to the energy, mining, and industrial sectors in Australia, Singapore, Thailand, and Malaysia. Established in 1988, and now run by Shane Kimpton, the company now has 770 employees and with the stock’s market cap sitting at SGD SGD55.12M, it comes under the small-cap stocks category.
5GJ’s stock is now trading at -68% under its real value of $0.12, at a price of $0.04, based on my discounted cash flow model. This mismatch indicates a chance to invest in 5GJ at a discounted price. In addition to this, 5GJ’s PE ratio is currently around 3.4x against its its construction peer level of 10.4x, implying that relative to its comparable set of companies, 5GJ can be bought at a cheaper price right now. 5GJ is also in great financial shape, as short-term assets amply cover upcoming and long-term liabilities.
More detail on AusGroup here.
World Precision Machinery Limited (SGX:B49)
World Precision Machinery Limited, an investment holding company, manufactures, distributes, and sells stamping, cutting, and bending machines in the People’s Republic of China. The company was established in 2004 and has a market cap of SGD SGD84.00M, putting it in the small-cap stocks category.
B49’s stock is currently hovering at around -63% below its actual value of ¥0.57, at the market price of ¥0.21, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. Also, B49’s PE ratio stands at around 12x while its machinery peer level trades at 9.9x, implying that relative to its peers, we can purchase B49’s shares for cheaper. B49 is also in good financial health, with current assets covering liabilities in the near term and over the long run. The stock’s debt-to equity ratio of 4% has been dropping for the last couple of years indicating B49’s ability to pay down its debt. Dig deeper into World Precision Machinery here.
Gallant Venture Ltd. (SGX:5IG)
Gallant Venture Ltd., an investment holding company, operates as a commercial development and management company in Batam Island and Bintan Island of Indonesia. Gallant Venture was started in 2003 and with the stock’s market cap sitting at SGD SGD709.96M, it comes under the small-cap category.