5 Stocks with Positive Intrinsic Value That You Should Pay Attention To

Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, using fundamental analysis. There are many stocks in the market with market value that doesn’t align with their intrinsic value. Knowing the intrinsic value of stocks allows you to search for the hidden investment opportunities. There are different valuation methods that investors can use to determine a company's intrinsic value. Most of which requires a strong understanding of fundamental analysis.

ShareInvestor platform offers three different valuation models: Discounted earnings, Discounted cash flow and Gordon growth. Each of these models uses either the earnings, cash flow or dividend growth to derive the intrinsic value. We also leverage on the comprehensive fundamental database in ShareInvestor to pre-fill some of the parameters for these models.

With that said, let’s look at some stocks with positive intrinsic value against their market value using Discount Cash Flow Model. All data are as of 13th February 2019.

1. HI-P International Limited

Hi-P is an integrated contract manufacturing services provider specialising in precision plastic injection molding, mold design and fabrication, assembly, surface finishing and precision metal stamping.

After the price spike following the hype of possible share deal in November 2018, the pricing has been cruising along the $1 mark with some company share buyback in early January. Let’s look at the intrinsic valuation of the counter.

Based on Discounted Cash Flow Model, the intrinsic value of the counter is $6.811 compared to its market value of $1.06, with a margin of safety of +84.44%. High margin of safety represents that the break-even point is highly less than the actual sales. Therefore, even if there is a decrease in sales, the business will be able to earn profits. So, the higher the margin, the greater are the chances to make profits or responsive to any sudden decline in company’s revenue, thus reducing the risk of losses in business.

With the Free Cash Flow Per Share at $0.285 and Cash Flow Growth Rate of 20% are the pre-fill parameter derived from our database.

Lastly, we will look at the financial analysis of the counter.

2. AEM Holdings Ltd

AEM has established itself to design, develop, manufacture and market a range of organic substrates, printed circuit boards, precision engineering products, equipment, chemicals and provide engineering materials and manufacturing services to the electronics and other high growth industries. AEM has establish its research and development centres and manufacturing plants in Singapore, Malaysia and China with market presence in 20 countries spanning Asia, Europe and United States.

AEM was labelled hot stock in October 2018 when the price went up 6% due to positive Q3 earnings and was upgraded from “reduce” to ‘’hold” by CIMB-CGS analyst. In January 2019, Maybank Kim Eng initiated “buy” for the counter, as it predicts that a recovery in orders and demand from new customers will drive earnings higher in 2020. Let’s look at the intrinsic valuation of the counter.

Based on Discounted Cash Flow Model, the intrinsic value of the counter is $4.218 compared to its market value of $1.05, with a margin of safety of +75.11%. Similar to Hi-P, this counter has high margin of safety.

With the Free Cash Flow Per Share at $0.176 and Cash Flow Growth Rate of 20% are the pre-fill parameter derived from our database.

Lastly, we will look at the financial analysis of the counter.

3. Japan Foods Holdings Ltd

Established in 1997 and listed on the Catalist Board of the Singapore Exchange Securities Trading Limited in February 2009, Japan Foods Holding Ltd is one of the leading F&B groups in Singapore specialising in quality and authentic Japanese cuisine.

In Singapore, the Group operates a chain of more than 40 restaurants serving authentic Japanese fare under various franchise as well as self-developed brands. Japan Foods’ network extends beyond Singapore to Malaysia and Vietnam operated by sub-franchisees and restaurants in China and Hong Kong operated by associated companies.

In December 2018, the company teamed up with a fellow restaurant operator Minor Singapore to run each other's brands in Japan, Thailand and China. The price of the counter took a dip after the announcement before bouncing up in late December, and yet another dip in February. With that said, let’s look at intrinsic value of the counter.

Based on Discounted Cash Flow Model, the intrinsic value of the counter is $0.741 compared to its market value of $0.425, with a margin of safety of +42.64%. The margin of safety is relatively lower compared to counters mentioned earlier.

With the Free Cash Flow Per Share at $0.031 and Cash Flow Growth Rate of 20% are the pre-fill parameter derived from our database.

Lastly, we will look at the financial analysis of the counter.

4. City Developments Ltd

City Developments Limited (CDL) is a leading global real estate operating company with a network spanning 100 locations in 28 countries and regions. The Group is one of the largest companies by market capitalisation in SGX. Its income-stable and geographically-diverse portfolio comprises residences, offices, hotels, serviced apartments, integrated developments and shopping malls.

In September 2018, the company announced they acquired a prime freehold Grade A commercial building in London, and their Whistler Grand condo at West Coast Vale will start to go on sale in October 2018. The stock price started picking since early January 2019. Let’s look at the intrinsic value of the counter.

Based on Discounted Cash Flow Model, the intrinsic value of the counter is $22.235 compared to its market value of $9.48, with a margin of safety of +57.41%. This counter has the highest difference in intrinsic and market value as compared to other counters discussed.

With the Free Cash Flow Per Share at $1.034 and Cash Flow Growth Rate of 18.10% are the pre-fill parameter derived from our database.

Lastly, we will look at the financial analysis of the counter.

5. The Hour Glass Ltd

The Hour Glass Limited is one of the world's leading specialty luxury watch retail groups with an established presence of 40 boutiques in 11 key cities in the Asia Pacific region.

The company saw profit more than double to S$14.3 million for the fiscal first quarter ended June 2018, up from S$7 million in the year-ago period, thanks to gross margin improving to 24.4 per cent from 21.2 per cent previously. Revenue for the quarter was up 10 per cent to S$180.7 million from S$164.4 million, as sentiment improved in some markets in the region.

In November, they reported a net profit of S$13.5 million for the second quarter, 26 per cent higher than S$10.7 million in the corresponding period a year ago. Let’s look at the intrinsic value of the counter.

Based on Discounted Cash Flow Model, the intrinsic value of the counter is $2.535 compared to its market value of $0.64, with a margin of safety of +74.75%. The counter has high margin of safety.

With the Free Cash Flow Per Share at $0.106 and Cash Flow Growth Rate of 20% are the pre-fill parameter derived from our database.

Lastly, we will look at the financial analysis of the counter.

Keep in mind that beside intrinsic value and margin and of safety, there are also other factors to consider such as market conditions, risk tolerance, and even the fundamental prospects for the company.

To gain more insights of stocks using ShareInvestor’s webpro, please visit http://www.shareinvestor.com/sg

Happy investing!

 

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