Plover Bay Technologies is one of the three SEHK stocks that may be trading below their estimated value

Against a backdrop of modest global equity gains and changing market dynamics, the Hong Kong stock market presents unique opportunities as certain stocks appear to be trading below their intrinsic value. In this context, it is critical for investors navigating these conditions to understand the fundamental characteristics that contribute to a stock being considered undervalued – such as strong financials relative to market price.

Top 10 undervalued stocks in Hong Kong based on cash flows

Click here to see the full list of 43 stocks from our Undervalued SEHK Stocks Based on Cash Flows screener.

Here’s a look at some of the choices from the screener

Overview: Plover Bay Technologies Limited, an investment holding company, specializes in the design, development and marketing of software-defined wide area network routers and has a market capitalization of approximately HK$3.57 billion.

Operations: The company generates its revenue from the sale of wired SD-WAN routers (HK$14.59 million), wireless SD-WAN routers (HK$49.39 million), and software licenses, warranty and support services (HK$30.28 million).

Estimated discount to fair value: 43.4%

Plover Bay Technologies trades at HK$3.24, significantly undervalued. Fair value is estimated at HK$5.72 based on discounted cash flows, representing a potential undervaluation of 43.4%. The company’s earnings are expected to grow at 13.82% annually, outperforming the Hong Kong market average of 11.6%. Despite an unstable dividend history, recent share buyback announcements could increase value for shareholders by potentially increasing net asset value and earnings per share.

Overview: Global New Material International Holdings Limited is an investment holding company specializing in the manufacture and sale of pearlescent pigments, functional mica fillers and related products both domestically in the People’s Republic of China and internationally, with a market capitalization of approximately HK$4.82 billion.

Operations: The company generates its revenue primarily from its business activities in the People’s Republic of China and Korea. The individual segments report sales of CNY 961.34 million and CNY 103.11 million, respectively.

Estimated discount to fair value: 23.7%

Global New Material International Holdings is considered undervalued with an estimated fair value of HK$5.10 and a price of HK$3.89. Despite a recent decline in net profit and earnings per share for 2023, the company’s revenue growth forecasts remain strong at 31.1% per year, significantly outperforming the Hong Kong market average. In addition, earnings are expected to grow by 41.85% per year, although the company faces challenges such as shareholder dilution and year-on-year decline in profit margins.

Overview: China East Education Holdings Limited is an investment holding company that provides vocational education services throughout the People’s Republic of China and has a market capitalization of approximately HK$4.71 billion.

Operations: The company’s revenue is mainly generated by New East Culinary Education with CN¥1.87 billion, followed by Wontone Automotive Education and Xinhua Internet Technology Education with revenues of CN¥847.35 million and CN¥744.00 million, respectively, and contributions from Omick Education of Western Cuisine and Pastry with CN¥330.81 million, Cuisine Academy with CN¥49.30 million and Wisezone Data Technology Education with CN¥37.88 million.

Estimated discount to fair value: 19.9%

China East Education Holdings is trading at HK$2.16, below its estimated fair value of HK$2.7, suggesting some undervaluation. The company’s earnings are expected to grow at a CAGR of 20.84%, outperforming the average growth rate of the Hong Kong market. However, the sustainability of the dividend is questionable as it is not well covered by either profits or cash flows. Recent corporate actions include confirming dividends and adopting new articles of association to accommodate regulatory changes.

Make it happen

Ready to venture into other investment styles?

This Simply Wall St article is of a general nature. We provide commentary based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They do not constitute a recommendation to buy or sell stocks, and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

Do you have feedback on this article? Are you interested in the content? Contact us directly. Alternatively, send an email to [email protected]