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Undervalued companies, such as REF Holdings and China Zheshang Bank, trade at a price less than their true values. Investors can determine how much a company is worth based on how much money they are expected to make in the future, or compared to the value of their peers. The list I’ve put together below are of stocks that compare favourably on all criteria, which potentially makes them good investments if you believe the price should eventually reflect the stock’s actual value.
REF Holdings Limited (SEHK:1631)
REF Holdings Limited, an investment holding company, provides financial printing services for the financial sector in Hong Kong. Formed in 2010, and currently headed by CEO , the company currently employs 110 people and with the company’s market capitalisation at HKD HK$376.32M, we can put it in the small-cap group.
1631’s shares are currently floating at around -79% beneath its intrinsic value of $7.06, at a price of HK$1.47, based on its expected future cash flows. The mismatch signals a potential chance to invest in 1631 at a discounted price. Moreover, 1631’s PE ratio stands at 5.85x compared to its Commercial Services peer level of, 21.2x indicating that relative to its comparable set of companies, we can purchase 1631’s shares for cheaper. 1631 is also strong in terms of its financial health, with short-term assets covering liabilities in the near future as well as in the long run. 1631 has zero debt on its books as well, meaning it has no long term debt obligations to worry about. More on REF Holdings here.
China Zheshang Bank Co., Ltd (SEHK:2016)
China Zheshang Bank Co., Ltd. provides a range of banking products and services in the People’s Republic of China. Formed in 2004, and headed by CEO Xiaochun Liu, the company employs 13,214 people and with the company’s market capitalisation at HKD HK$88.54B, we can put it in the large-cap stocks category.
2016’s shares are now floating at around -40% beneath its true value of ¥7.9, at a price tag of HK$4.73, based on my discounted cash flow model. The divergence signals an opportunity to buy 2016 shares at a low price. Also, 2016’s PE ratio is currently around 6.61x while its Banks peer level trades at, 6.78x meaning that relative to its comparable company group, we can invest in 2016 at a lower price. 2016 is also strong financially, with current assets covering liabilities in the near term and over the long run.
Dig deeper into China Zheshang Bank here.
Tianyun International Holdings Limited (SEHK:6836)
Tianyun International Holdings Limited, an investment holding company, produces and sells processed fruit products; and trades fresh fruits in the People’s Republic of China and internationally. Founded in 2003, and run by CEO Ziyuan Yang, the company currently employs 624 people and with the company’s market cap sitting at HKD HK$1.31B, it falls under the small-cap stocks category.