HK 第3部分; Dollars trading for Pennies
The Hong Kong stock exchange fosters a large number of absurdly cheap stocks, of profitable, dividend-paying companies. On January 12th, 2024, I started writing about some of them. Today part 3.
Introduction
The Hong Kong stock exchange fosters a sizable number of absurdly cheap stocks, of profitable, dividend-paying companies. In a series of write-ups, I will take you through my journey turning over the rocks / stocks / stonks. Below you find a summary of the write-ups thus far, with a link to the full posts.
Dollars trading for Pennies; On January 12th, 2024, I introduced two handsful of stocks of mostly profitable businesses trading below their combined net cash and financial assets value (FAV).
The most absurd value situation among them was Tianjin Development ($882.hk). It traded at only about 36% of its net cash position. If you include some of the investments in firms like Otis China (Yes, THAT Otis), and Tianjin Ports Development ($3382.hk), it traded at less than 20% of FAV. I think it was fair to say you could buy HK$ 1 for less than 20 cents. Traditional valuation multiples did not look half bad either, with a 3-4x P/E and c6% dividend yield.
HK stocks 第2部分; Anxian Yuan and Fu Shou Yuan introduces two new names, both operating in the Chinese death care industry. Those of you who may be concerned about investing in a country with a declining population, may want to consider this industry. The age group of 80 years and older is expected to increase more than four-fold from 32 million in 2020 to 135 million in 2050, giving a CAGR of c5%. This development should drive a growing number of mortalities, and thus a solid industry tailwind for many years to come.
Fu Shou Yuan ($1448.hk) is one of the industry consolidators, with a HKD 11bn market cap (cUSD 1.4bn), and moderate-looking valuation. Atmos Invest just did an extensive post on it.
Anxian Yuan was only 3% the size of Fu Shou in terms of market cap, vs 10% the size in revenues. While a HKD 344m (USD 44m) Mickey Mouse stock is probably not for everyone. Its absurd valuation did make it awfully tempting. Net cash was almost equal to the market cap, and it offered c15% dividend yield on a 12 month trailing basis.
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