Global New Material (SEHK:6616) Valuation After HK$1 Billion Convertible Bond Deal and Share Base Expansion

Global New Material International Holdings (SEHK:6616) has just lined up a HK$1,000 million convertible bond deal that could lift its share count by about 8%, a meaningful shift in the capital structure.

See our latest analysis for Global New Material International Holdings.

The move comes as the HK$9.38 share price rides strong momentum, with a 30 day share price return of 42.12% and a year to date share price gain of 159.83%, while the 1 year total shareholder return of 160.56% hints that recent financing steps and the upcoming EGM on the Chesir Pearl acquisition are being viewed as value accretive rather than purely dilutive.

If this financing story has you thinking about what else is running, it could be worth exploring fast growing stocks with high insider ownership as a way to spot the next wave of strong momentum names.

But with the share price now trading well above analyst targets and recent gains looking stretched, is Global New Material still flying under the radar, or are investors already paying upfront for years of future growth?

Price to Earnings of 53.3x, is it justified?

At a last close of HK$9.38, Global New Material is trading on a rich valuation, with the market paying a steep premium to peers for its earnings.

The preferred multiple here is the price to earnings ratio, which compares the company’s current share price to its per share earnings and is a common yardstick for chemicals and materials stocks. With Global New Material on 53.3x earnings, investors are effectively baking in a lot of future profit growth relative to what the business currently generates.

That premium stands out sharply against both its own estimated fair price to earnings ratio of 19.6x and the Hong Kong chemicals industry average of just 8.3x, as well as a broader peer average of 12.8x. Put simply, the present multiple is several turns above where regression based fair value levels and sector benchmarks suggest the market could eventually settle if sentiment cools.

Explore the SWS fair ratio for Global New Material International Holdings

Result: Price-to-Earnings of 53.3x (OVERVALUED)

However, risks remain, including any sharp de rating toward analyst targets or a slowdown in high double digit earnings growth that currently underpins today’s premium.

Find out about the key risks to this Global New Material International Holdings narrative.

Build Your Own Global New Material International Holdings Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a personalized view in just minutes, Do it your way.

A great starting point for your Global New Material International Holdings research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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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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