Exploring Kinetic Development Group and two other undervalued small caps with insider activity in Hong Kong

Against a backdrop of global economic changes and market volatility, the Hong Kong stock market has developed a dynamic all its own. As investors search for value in a complex environment, it is particularly interesting to identify undervalued small-cap stocks like Kinetic Development Group.

Top 10 undervalued small caps with insider buying in Hong Kong

Click here to see the full list of 16 stocks from our Undervalued Small Caps with Insider Buying screener.

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

Simply Wall St Value Rating: ★★★☆☆☆

Overview: Kinetic Development Group is a real estate investment, development and management company with a market capitalization of approximately CNY 1.07 billion.

Operations: The company recorded a significant increase in gross profit margin from 9.05% in September 2013 to 59.07% in December 2024, due to improved efficiency or higher margin products. During the same period, revenue increased from CN¥102.90 million to CN¥4745.07 million, indicating significant business expansion and increased market presence.

SPORTS: 4.2x

Navigating a landscape of strategic corporate adjustments and financial distributions, Kinetic Development Group recently approved significant changes to its governance structures and reduced its annual dividend to HK$0.05 per share. As part of these changes, it also announced a special dividend of HK$0.03 per share, underscoring its ability to create value despite using external borrowing as its sole source of funding – a higher-risk strategy that requires careful management. This series of decisions reflects a nuanced approach to maintaining liquidity while bolstering shareholder confidence, particularly evident through insider buying in recent months, signaling strong confidence in the Company’s trajectory.

Simply Wall St Value Rating: ★★★★☆☆

Overview: Transport International Holdings is primarily engaged in the franchise bus business with complementary interests in real estate ownership and development. The company’s business presence is characterized by diverse revenue streams.

Operations: Franchised bus operations are the largest contributor of revenue at HK$7.57 billion, followed by much smaller segments in property ownership and development and other sources. Gross profit margin showed an upward trend, increasing from 22.29% to 27.93% in the latest reporting periods, reflecting improved efficiency or pricing strategies in the main business areas.

SPORTS: 11.4x

Transport International Holdings, which has a differentiated investment profile, recently sparked insider confidence when Winnie J. Ng purchased 124,000 shares, suggesting a possible undervaluation of the company. Despite a decline in net profit margins from 8.3% to 5.1% last year and a 14.1% annual earnings decline, the company is sticking to its dividend commitment of HK$0.50 per share, confirmed in May 2024. Leadership changes include the appointment of Ms. LAU Man-Kwan as Deputy Director, strengthening the company’s strategic direction with her extensive experience in urban planning.

Simply Wall St Value Rating: ★★★★☆☆

Overview: China Overseas Grand Oceans Group is primarily engaged in real estate investment and development, but also has interests in real estate leasing and other sectors, and has a market capitalization of approximately CNY 19.33 billion.

Operations: The company generates revenue from real estate investments and developments, which contribute CN¥56.08 billion to total revenue, and from property rentals, which generate an additional CN¥242.46 million. The gross profit margin was variable over the periods under review, reaching a notable level of 25.72% at the last data point.

SPORTS: 2.9x

China Overseas Grand Oceans Group Limited remains a focus for those keeping an eye on the potential of Hong Kong’s smaller players, despite recent changes in auditors and management. A recent insider purchase signals confidence, but the company’s financial health is under scrutiny due to high levels of debt and reliance on external loans – considered riskier than customer deposits. In addition, contracted sales figures show a downward trend, with a 29.8% decline compared to the same period last year (as of May 2024). This backdrop presents both challenges and opportunities for growth-oriented investors seeking undervalued prospects.

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This Simply Wall St article is of a general nature. We comment solely on historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does 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.

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