Top undervalued small caps with insider action in Hong Kong, July 2024

While the global economic landscape is sending mixed signals, with cooling labor markets and fluctuating manufacturing indices, the Hong Kong market has proven resilient, particularly in the small-cap sector. This backdrop provides an interesting stage for investors looking for value in undervalued small caps, where insider actions could indicate unrecognized potential. In such a market environment, identifying stocks that have strong fundamentals but remain undervalued by the broader market could offer significant opportunities.

Top 10 undervalued small caps with insider buying in Hong Kong

Click here to see the full list of 21 stocks from our Undervalued SEHK Small Caps with Insider Buying screener.

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Simply Wall St Value Rating: ★★★★☆☆

Overview: Xtep International Holdings is a company specializing in the design, development, manufacturing and marketing of sportswear products with a market capitalization of approximately CNY 11.95 billion.

Operations: The company generates its revenue mainly in three segments: mass market with CN¥11.95 billion, fashion sports with CN¥1.60 billion and professional sports with CN¥0.80 billion. During the periods studied, there was a fluctuating gross profit margin with an interesting upward trend, which peaked at 44.31% at the end of 2019 and stabilized at around 42% in the following years.

SPORTS: 10.8x

Xtep International Holdings, a prominent player in the small-cap equity space in Hong Kong, recently acquired 2 million shares for HK$14.15 million through insider Shui Po Ding, indicating strong insider confidence. This move is in line with a robust earnings forecast of 14.03% growth per year despite the company relying on riskier external borrowings as its sole source of funding. The recent leadership changes aim to increase focus on financial strategy and investor relations, positioning Xtep for potential growth despite operational adjustments such as dividend increases and charter changes to be announced in May 2024.

The story goes on

Simply Wall St Value Rating: ★★★★☆☆

Overview: Sany Heavy Equipment International Holdings is a company specializing in the manufacture and sale of heavy machinery and equipment with a market capitalization of approximately 5.43 billion Chinese yen.

Operations: The Company’s gross profit margin has shown a fluctuating trend over the years, ranging from 0.15% to 0.31%, reflecting changes in manufacturing costs and sales dynamics. The net profit margin has also fluctuated significantly, indicating changes in operating efficiency and cost management.

SPORTS: 7.7x

Amid a challenging financial environment, Sany Heavy Equipment International Holdings recently demonstrated resilience with its first-quarter earnings. Despite a slight decline in revenue to CNY5.13 billion and net profit down to CNY516 million, the company’s strategic adjustments and insider confidence – underlined by recent share purchases – indicate a strong belief in its future prospects. In addition, the company’s commitment was underlined by a generous dividend of HK$0.19 per share and proactive changes to the company’s charter, positioning it well within Hong Kong’s undervalued investment opportunities.

Simply Wall St Value Rating: ★★★★★☆

Overview: Ferretti specializes in the development, construction and marketing of yachts and sports boats.

Operations: In 2023, the company generated revenues of €1.23 billion and net profits of €83.05 million. The gross profit margin was 37.08%, reflecting the cost of goods sold of €773.32 million and the gross profit after taking into account these costs of €455.82 million.

SPORTS: 11.6x

Ferretti, a lesser-known company in Hong Kong’s investment landscape, recently confirmed its revenue forecast for 2024. The company is targeting growth of between 9.8% and 11.6% and expects revenue of up to €1.24 billion. This outlook was announced during the first quarter earnings call and reiterated at the UniCredit Italian Investment Conference. Key executives have recently purchased shares, underscoring their confidence in the company’s direction while also making operational improvements such as charter changes to cancel repurchased shares. With dividends set to be paid on June 26, Ferretti appears to be financially robust as the company continues to navigate the competitive market.

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This Simply Wall St article is of a general nature. We comment solely on the basis of 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.

Companies discussed in this article include SEHK:1368, SEHK:631 and SEHK:9638.

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