Three Undervalued Small Caps In Hong Kong With Insider Action To Consider

In recent weeks, the Hong Kong market has experienced a decline as the Hang Seng Index fell by 1.03%, reflecting broader global economic uncertainties and shifts in monetary policies. Despite these challenges, opportunities may arise for investors interested in small-cap stocks, particularly those that demonstrate strong fundamentals and potential for growth amidst current market conditions.

Top 10 Undervalued Small Caps With Insider Buying In Hong Kong

Name	PE	PS	Discount to Fair Value	Value Rating
Vesync	6.4x	1.0x	8.01%	★★★★★☆
Ferretti	10.9x	0.7x	47.23%	★★★★★☆
Edianyun	NA	0.6x	39.85%	★★★★★☆
Cheerwin Group	11.4x	1.4x	46.12%	★★★★☆☆
Lion Rock Group	5.7x	0.4x	47.86%	★★★★☆☆
Gemdale Properties and Investment	NA	0.2x	45.78%	★★★★☆☆
Shanghai Chicmax Cosmetic	16.7x	2.1x	-142.08%	★★★☆☆☆
China Lesso Group Holdings	5.8x	0.4x	-505.97%	★★★☆☆☆
Lee & Man Paper Manufacturing	7.0x	0.4x	-42.81%	★★★☆☆☆
Emperor International Holdings	NA	0.8x	32.06%	★★★☆☆☆

Click here to see the full list of 10 stocks from our Undervalued SEHK Small Caps With Insider Buying screener.

Let's dive into some prime choices out of from the screener.

China Lesso Group Holdings (SEHK:2128)

Simply Wall St Value Rating: ★★★☆☆☆

Overview: China Lesso Group Holdings operates as a leading manufacturer and distributor of building materials and interior decoration products, with a focus on plastics and rubber, boasting a market capitalization of approximately CN¥19.77 billion.

Operations: The company's revenue is primarily generated from the Plastics & Rubber segment, amounting to CN¥29.13 billion. The gross profit margin has fluctuated, reaching 28.75% in June 2020 and then decreasing to 26.04% by October 2024. Operating expenses, including sales and marketing as well as general and administrative costs, have consistently impacted profitability across periods observed.

PE: 5.8x

China Lesso Group Holdings, a smaller player in Hong Kong's market, shows potential for growth despite recent challenges. Their earnings forecast suggests a 10.65% annual increase, though they face high debt levels and rely on riskier external funding. Recent financials reveal sales of ¥13,563 million and net income of ¥1,043 million for the first half of 2024—a decline from last year. Insider confidence is evident as an insider purchased 4 million shares worth approximately ¥10.05 million in August 2024.

• Get an in-depth perspective on China Lesso Group Holdings' performance by reading our valuation report here.

• Review our historical performance report to gain insights into China Lesso Group Holdings''s past performance.

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 capitalization of HK$13.39 billion.

Operations: The company's primary revenue streams are derived from packaging paper and tissue paper, contributing significantly to its overall sales. Over recent periods, the gross profit margin has shown a downward trend from 29.08% in December 2017 to 12.49% by October 2024, reflecting changes in cost dynamics and pricing strategies.

PE: 7.0x

Lee & Man Paper Manufacturing, a smaller player in the Hong Kong market, has shown insider confidence with Ho Chung Lee purchasing 483,000 shares worth approximately HK$1.1 million recently. The company reported a significant increase in net income for the first half of 2024 to HK$805.69 million from HK$359.9 million last year, alongside an interim dividend of HK$0.062 per share declared in August 2024. Despite relying on higher-risk external borrowing for funding, the firm is poised for growth with earnings projected to rise by 8.51% annually and ongoing share buybacks totaling 14,244,000 shares completed by May 2024 for HKD29.65 million potentially enhancing shareholder value further.

• Click here and access our complete valuation analysis report to understand the dynamics of Lee & Man Paper Manufacturing.

• Learn about Lee & Man Paper Manufacturing's historical performance.

Gemdale Properties and Investment (SEHK:535)

Simply Wall St Value Rating: ★★★★☆☆

Overview: Gemdale Properties and Investment is engaged in property development and property investment and management, with a focus on real estate projects, and has a market capitalization of approximately CN¥7.22 billion.

Operations: Gemdale Properties and Investment generates revenue primarily from Property Development (CN¥17.26 billion) and Property Investment and Management (CN¥1.23 billion). The company's gross profit margin has experienced fluctuations, reaching 10.57% in the latest period, while operating expenses have increased to CN¥677.46 million as of the most recent quarter.

PE: -1.8x

Gemdale Properties and Investment, a small player in Hong Kong's market, recently reported a net loss of CNY 2.18 billion for the first half of 2024 despite increased sales compared to last year. Their contracted sales from January to September reached RMB 14.18 billion, reflecting active trading but challenges in profitability. Notably, insider confidence is evident with Non-Executive Director Lian Huat Loh purchasing 10 million shares for approximately HK$2.6 million, indicating potential optimism about future prospects despite current volatility and reliance on higher-risk external funding sources.

• Delve into the full analysis valuation report here for a deeper understanding of Gemdale Properties and Investment.

• Explore historical data to track Gemdale Properties and Investment's performance over time in our Past section.

Turning Ideas Into Actions

• Reveal the 10 hidden gems among our Undervalued SEHK Small Caps With Insider Buying screener with a single click here.
• Are any of these part of your asset mix? Tap into the analytical power of Simply Wall St's portfolio to get a 360-degree view on how they're shaping up.
• Simply Wall St is a revolutionary app designed for long-term stock investors, it's free and covers every market in the world.

Want To Explore Some Alternatives?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.
• Find companies with promising cash flow potential yet trading below their fair value.

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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