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CSI Properties Limited (HKG:497), a real estate company based in Hong Kong, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$0.54 and falling to the lows of HK$0.38. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CSI Properties’s current trading price of HK$0.39 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CSI Properties’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for CSI Properties
What is CSI Properties worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.87x is currently trading slightly below its industry peers’ ratio of 6.45x, which means if you buy CSI Properties today, you’d be paying a fair price for it. And if you believe that CSI Properties should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since CSI Properties’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will CSI Properties 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. With profit expected to more than double over the next couple of years, the future seems bright for CSI Properties. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? 497’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 497? Will you have enough confidence to invest in the company should the price drop below its fair value?