Is Grand Field Group Holdings Limited (HKG:115) Still A Cheap Real Estate Stock?

Grand Field Group Holdings Limited (SEHK:115), a HKDHK$273.43M small-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios as an asset class. Real estate investments typically display unique and attractive investment characteristics relative to other stocks and bonds, especially over a long time horizon. Real estate analysts are forecasting for the entire industry, a somewhat weaker growth of 0.32% in the upcoming year , and a strong near-term growth of 21.36% over the next couple of years. However, this rate came in below the growth rate of the Hong Kong stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the real estate sector right now. Today, I will analyse the industry outlook, as well as evaluate whether Grand Field Group Holdings is lagging or leading its competitors in the industry. See our latest analysis for Grand Field Group Holdings

What’s the catalyst for Grand Field Group Holdings's sector growth?

Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. In the past year, the industry delivered growth in the twenties, beating the Hong Kong market growth of 11.29%. Grand Field Group Holdings lags the pack with its negative growth rate of -93.79% over the past year, which indicates the company will be growing at a slower pace than its real estate peers. As the company trails the rest of the industry in terms of growth, Grand Field Group Holdings may also be a cheaper stock relative to its peers.

Is Grand Field Group Holdings and the sector relatively cheap?

Real estate companies are typically trading at a PE of 7x, below the broader Hong Kong stock market PE of 14x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.60% on equities compared to the market’s 10.06%. On the stock-level, Grand Field Group Holdings is trading at a PE ratio of 6x, which is relatively in-line with the average real estate stock. In terms of returns, Grand Field Group Holdings generated 6.34% in the past year, which is 4% below the real estate sector.

What this means for you:

Are you a shareholder? Grand Field Group Holdings has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of Grand Field Group Holdings, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Grand Field Group Holdings fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If Grand Field Group Holdings has been on your watchlist for a while, now may be the best time to enter into the stock. It delivered lower earnings growth compared to its real estate peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector.

For a deeper dive into Grand Field Group Holdings's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.