At RM0.48, Is UEM Sunrise Berhad (KLSE:UEMS) Worth Looking At Closely?

UEM Sunrise Berhad (KLSE:UEMS), is not the largest company out there, but it received a lot of attention from a substantial price increase on the KLSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on UEM Sunrise Berhad’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for UEM Sunrise Berhad

What's the opportunity in UEM Sunrise Berhad?

According to my valuation model, the stock is currently overvalued by about 35%, trading at RM0.48 compared to my intrinsic value of MYR0.36. This means that the opportunity to buy UEM Sunrise Berhad at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that UEM Sunrise Berhad’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from UEM Sunrise Berhad?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of UEM Sunrise Berhad, it is expected to deliver a highly negative revenue growth over the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? If you believe UEMS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on UEMS for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 2 warning signs for UEM Sunrise Berhad (1 can't be ignored!) and we strongly recommend you look at these before investing.

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This article by Simply Wall St is general in nature. 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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