3 Undervalued Small Caps In Hong Kong With Insider Buying

The Hong Kong market has seen a mix of volatility and recovery, with the Hang Seng Index recently gaining 0.85% despite broader concerns about deflationary pressures in China. Amid these fluctuating conditions, small-cap stocks can offer unique opportunities for investors looking to capitalize on undervalued assets. In this environment, identifying small-cap stocks with strong fundamentals and insider buying activity can be particularly promising.

Top 10 Undervalued Small Caps With Insider Buying In Hong Kong

Name	PE	PS	Discount to Fair Value	Value Rating
Ever Sunshine Services Group	5.5x	0.4x	37.36%	★★★★★☆
Lee & Man Paper Manufacturing	6.7x	0.4x	35.77%	★★★★★☆
Nissin Foods	13.1x	1.2x	43.73%	★★★★☆☆
Kinetic Development Group	4.4x	1.9x	22.84%	★★★★☆☆
FriendTimes	NA	0.9x	14.68%	★★★★☆☆
Comba Telecom Systems Holdings	348.6x	0.4x	46.50%	★★★★☆☆
Wasion Holdings	11.5x	0.8x	39.86%	★★★☆☆☆
Skyworth Group	5.3x	0.1x	-239.12%	★★★☆☆☆
China Leon Inspection Holding	9.6x	0.7x	37.33%	★★★☆☆☆
Truly International Holdings	11.5x	0.2x	42.39%	★★★☆☆☆

Click here to see the full list of 13 stocks from our Undervalued SEHK Small Caps With Insider Buying screener.

Let's take a closer look at a couple of our picks from the screened companies.

Kinetic Development Group (SEHK:1277)

Simply Wall St Value Rating: ★★★★☆☆

Overview: Kinetic Development Group is engaged in property development, investment, and management with a market cap of CN¥2.56 billion.

Operations: Kinetic Development Group's revenue streams are primarily derived from its core operations, with a notable gross profit margin reaching 67.35% as of March 2022. The company has experienced fluctuations in net income, peaking at CN¥2.91 billion in June 2022. Operating expenses have varied but were recorded at CN¥294.71 million by December 2023, while non-operating expenses showed a significant reduction to CN¥430.50 million in the same period.

PE: 4.4x

Kinetic Development Group, a small cap in Hong Kong, shows potential for growth despite its higher-risk funding structure reliant on external borrowing. Insider confidence is evident with significant share purchases in Q2 2024. A recent board meeting on July 31 discussed approving a special dividend, reflecting strong cash flow management. Investors may find this company appealing due to its proactive financial strategies and insider confidence, though they should remain cautious of the funding risks involved.

• Delve into the full analysis valuation report here for a deeper understanding of Kinetic Development Group.

• Assess Kinetic Development Group's past performance with our detailed historical performance reports.

Lee & Man Paper Manufacturing (SEHK:2314)

Simply Wall St Value Rating: ★★★★★☆

Overview: Lee & Man Paper Manufacturing is a company involved in the production of pulp, tissue paper, and packaging paper with a market cap of HK$16.52 billion.

Operations: Lee & Man Paper Manufacturing generates revenue from pulp, tissue paper, and packaging paper, with the latter being the largest contributor. The company's gross profit margin peaked at 29.08% in Q4 2017 but has seen a decline to 12.49% by Q2 2024. Operating expenses primarily include general and administrative costs along with sales and marketing expenses.

PE: 6.7x

Lee & Man Paper Manufacturing, a small cap in Hong Kong, has shown strong insider confidence with significant share purchases since June 2024. The company reported sales of HK$12.51 billion and net income of HK$805.69 million for the first half of 2024, up from last year’s figures. They also declared an interim dividend of HK$0.062 per share with payment on September 5, 2024. With a focus on enhancing net asset value through repurchases, Lee & Man demonstrates promising potential despite its reliance on external borrowing for funding.

• Dive into the specifics of Lee & Man Paper Manufacturing here with our thorough valuation report.

• Understand Lee & Man Paper Manufacturing's track record by examining our Past report.

Wasion Holdings (SEHK:3393)

Simply Wall St Value Rating: ★★★☆☆☆

Overview: Wasion Holdings specializes in the development and manufacturing of advanced metering infrastructure and distribution operations, with a market cap of approximately CN¥3.82 billion.

Operations: The company generates revenue from three main segments: Advanced Distribution Operations, Power Advanced Metering Infrastructure, and Communication and Fluid Advanced Metering Infrastructure. Its gross profit margin has shown an upward trend recently, reaching 35.59% in the latest period.

PE: 11.5x

Wasion Holdings has recently secured significant contracts worth EUR 31.62 million in Hungary and USD 15.16 million across Singapore and Malaysia, reflecting its growing international presence. Founder and Executive Chairman Wei Ji's purchase of 500,000 shares for HKD 3.17 million in July shows insider confidence in the company's future prospects. Despite relying solely on external borrowing, Wasion's earnings are projected to grow by 25.8% annually, highlighting its potential as an undervalued small cap stock in Hong Kong.

• Unlock comprehensive insights into our analysis of Wasion Holdings stock in this valuation report.

• Gain insights into Wasion Holdings' historical performance by reviewing our past performance report.

Summing It All Up

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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.

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