How Kerry Properties’ 63% Rally in 2024 Shapes the Valuation Debate for 2025

If you are standing at the crossroads with Kerry Properties, you are not alone. After all, just look at those numbers: in the past year, the stock has soared by 63.1%, and it is up 42.0% year to date. For anyone who has been watching the property sector recover and take off in 2024, Kerry Properties has certainly been an intriguing player. Was this surge due to optimism around the broader Hong Kong property market, or does it reflect something changing fundamentally in Kerry’s business? The recent 8.2% rise in just the last week suggests that sentiment is shifting. Investors suddenly seem more willing to take on what they see as reduced risk, or perhaps they are spotting more growth on the horizon.

But before jumping aboard, it is important to take a closer look beneath the surface. With a value score of 0 out of 6, meaning Kerry did not pass any of the six undervaluation checks, the numbers are telling us that this stock may not be a traditional value pick at first glance. Still, headline numbers do not always tell the whole story. Let’s dig into the main valuation approaches and see what they reveal, as well as explore an even smarter way to look at whether the shares are worth your attention.

Kerry Properties scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Kerry Properties Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future free cash flows and discounting them back to their present value. This approach helps investors understand what a company’s business could be worth today based on expected future cash generation.

For Kerry Properties, the latest reported Free Cash Flow (FCF) was HK$9.1 Billion over the last twelve months. Analysts provide explicit FCF forecasts for the next few years, projecting a decline, with 2027’s FCF estimated at HK$663 Million. Beyond these years, calculations are extended using in-house projections, and by 2035 the FCF is expected to drop to about HK$216 Million.

The DCF model values Kerry Properties shares at HK$5.23 each. However, with the company’s current share price standing far above this level, the model indicates that Kerry Properties is around 316.4% overvalued. This large gap suggests that, purely from a cash flow perspective, shares are considerably more expensive than what the fundamentals justify.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kerry Properties.

Our Discounted Cash Flow (DCF) analysis suggests Kerry Properties may be overvalued by 316.4%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Kerry Properties Price vs Earnings

The Price-to-Earnings (PE) ratio is often the preferred metric for measuring the value of profitable companies like Kerry Properties, since it quickly tells you how much investors are paying for each dollar of profit. Typically, companies with higher expected growth or lower risk will trade at a higher PE ratio. In contrast, those with more uncertainty or limited growth tend to have a lower PE.

Kerry Properties currently trades at a PE ratio of 49.97x. For context, the average for its real estate industry peers is 15.74x, while the industry as a whole is even lower at 13.23x. This substantial premium suggests that the market may be expecting greater growth or sees less risk in Kerry compared to its rivals.

However, to get a more tailored assessment, Simply Wall St’s proprietary “Fair Ratio” offers a deeper view. The Fair Ratio adjusts for factors such as Kerry’s earnings growth prospects, risk profile, profit margin, industry context, and market cap. While peer and industry averages help set the scene, the Fair Ratio aims to capture built-in advantages or concerns that may not be obvious in headline comparisons alone.

For Kerry Properties, the Fair Ratio is 35.93x. This is notably below the company’s current PE multiple of 49.97x, reinforcing the idea that the shares are trading at a hefty premium even after adjusting for company-specific strengths and risks.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kerry Properties Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives make investing personal by letting you frame your own story behind the numbers. You can define your fair value estimate and forecast future revenue, earnings, and margins based on your perspective of a company.

A Narrative connects what you believe about Kerry Properties to a financial forecast, and from there, to a fair value you can actually use. Narratives are available directly on Simply Wall St’s Community page and are designed to be accessible to everyone, not just financial experts. This tool empowers you to compare your fair value against the current price so you know if you think the stock is worth buying or selling.

Because Narratives update instantly when new data or news arrives, your view can stay current without any manual effort. For example, one investor’s Narrative might value Kerry Properties at the low end based on falling cash flows, while another sees future recovery and values it much higher. With Narratives, you decide the story, the forecast, and the fair value that matters for you.

Do you think there's more to the story for Kerry Properties? Create your own Narrative to let the Community know!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com