The real estate sector performs relatively in-line with the wider economy. Prosperous periods bring about high growth and inflation, leading to strong returns in real estate investments. Currently, Chen Xing Development Holdings and Wah Ha Realty are real estate companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Investors can benefit from buying these cyclical companies while they are discounted, because they gain when the market prices move towards the stocks’ true values. Below is a list of stocks I’ve compiled that are deemed undervalued based on the latest financial data.
Chen Xing Development Holdings Limited (SEHK:2286)
Chen Xing Development Holdings Limited, an investment holding company, engages in the development and sale of residential and commercial properties in Mainland China. Started in 1997, and headed by CEO Wukui Bai, the company now has 183 employees and with the company’s market capitalisation at HKD HK$855.00M, we can put it in the small-cap category.
2286’s stock is currently floating at around -94% lower than its actual value of ¥27.89, at a price of HK$1.71, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. In terms of relative valuation, 2286’s PE ratio is around 4.35x while its Real Estate peer level trades at, 6.89x indicating that relative to other stocks in the industry, 2286 can be bought at a cheaper price right now. 2286 is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 40.26% has been declining for the last couple of years signifying its capacity to reduce its debt obligations year on year. More on Chen Xing Development Holdings here.
Wah Ha Realty Company Limited (SEHK:278)
Wah Ha Realty Company Limited, an investment holding company, invests in, develops, and manages properties in Hong Kong. The company currently employs 20 people and with the stock’s market cap sitting at HKD HK$1.02B, it comes under the small-cap category.
278’s shares are currently floating at around -71% under its actual level of $28.51, at a price tag of HK$8.40, according to my discounted cash flow model. This discrepancy gives us a chance to invest in 278 at a discount. Additionally, 278’s PE ratio is trading at 3.92x against its its Real Estate peer level of, 6.89x implying that relative to its competitors, we can invest in 278 at a lower price. 278 is also in great financial shape, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. 278 has zero debt on its books as well, meaning it has no long term debt obligations to worry about. Interested in Wah Ha Realty? Find out more here.
Midland Holdings Limited (SEHK:1200)
Midland Holdings Limited, an investment holding company, provides property agency services in the People’s Republic of China. Founded in 1973, and currently headed by CEO Tsz Wa Wong, the company size now stands at 7,452 people and with the company’s market cap sitting at HKD HK$1.50B, it falls under the small-cap group.
1200’s stock is currently trading at -62% under its intrinsic level of $5.52, at the market price of HK$2.09, according to my discounted cash flow model. signalling an opportunity to buy the stock at a low price. Also, 1200’s PE ratio is currently around 7.76x while its index peer level trades at, 12.44x meaning that relative to its comparable set of companies, we can purchase 1200’s shares for cheaper. 1200 also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities. More detail on Midland Holdings here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.