HK 第8部分; Dollars trading for Pennies
Part 8 of the Hong Kong stock series provides stock updates, and a new absurd-cheap HK stock
Introduction
It is raining Positive profit alerts this week on the Hong Kong stock exchange. … and guess what? Stock prices are responding positively! There is life in HK stocks after all. 😅 First Pacific was up 14% on the day, just on the results announcement of MPIC, one of its major investee companies.
Fingers crossed for Benjamin #2 (paid), for which I expect such an alert in about a week from now. Benjamin #2 is an hidden gem. It generates 20% ROICs and solid FCF, and it only trades for roughly the value of its net cash position.
Today’s topics:
HK 第部分 news & insights, with updates on Ajisen, Asia Cement, and First Pacific
A new absurd cheap HK 第部分; It’s a well-known consumer brand trading at a roughly 6x trailing P/E, over 8% dividend yield, and holding roughly 60% of its market cap in financial assets; cash and investment properties.
HK 第部分
Did DirtCheapStocks just suggest that a Warren Buffett style of investing would be to buy a bucket of absurd-cheap Hong Kong stocks? I agree with you Dirt.
“In the early 2000’s, Buffett invested almost all of his personal money in a bunch of Korean stocks. He deployed $100MM on a Sunday afternoon just flipping through stocks and buying simple businesses at 2-3x earnings.”
Ajisen (China) Holdings $538.hk provided a positive profit alert on 2024/03/04. This was received with a 7% share price increase. Actually, the guided Net profit for Owners of RMB 160-220m did not even look that great to me. It just helps when the valuation (and expectations) are absurdly low.
The profit range suggests earnings per share (EPS) of HKD 0.16-0.22 for the full year 2023, implying a 5-7x P/E including one-off gains. You have to remember that $538 reported HKD 0.13 over 2023H1. That HKD 0.13 included (a RMB 70m or) a circa HKD 0.05 per share one-off gain on investment re-valuations. Second half profit may include further such investment gains.
In June 2023, financial assets covered the (current) share price roughly 2.5x! Now that $538 is profitable again, investors may finally build the courage to pick up some shares.
On 2024/03/04, I elaborated on Benjamin #2 (paid), for which I expect a positive profit alert by mid March. Cross fingers 🤞for an even better share price response.
Asia Cement (China) Holdings $743.hk reported FY2023 results, showing - as expected - that the cement industry is still under pressure, exacerbated by intensified price competition. Despite poor market conditions, the balance sheet further strengthened, and the company continues to pay out (deminishing) dividend payments; c2% yield on the 2023 dividend declaration.
