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Undervalued Small Caps With Insider Buying In Hong Kong October 2024
As global markets navigate the complexities of rising U.S. Treasury yields and mixed economic signals, Hong Kong's small-cap sector presents intriguing opportunities amid broader market fluctuations. With the Hang Seng Index experiencing a slight decline, investors may find potential in small-cap stocks that demonstrate strong fundamentals and insider confidence, particularly those that can weather current economic challenges while capitalizing on local market dynamics.
Top 5 Undervalued Small Caps With Insider Buying In Hong Kong
Overview: China Lesso Group Holdings is a leading industrial group that manufactures and sells building materials and interior decoration products, with a focus on the plastics and rubber segment, which generated CN￥29.13 billion in revenue.
Operations: The company generates revenue primarily from its Plastics & Rubber segment, with recent figures showing CN￥29.13 billion in revenue. The cost of goods sold (COGS) for this period was CN￥21.55 billion, leading to a gross profit margin of 26.04%. Operating expenses amounted to CN￥3.44 billion, while non-operating expenses were reported at CN￥2.23 billion, impacting the net income margin which stood at 6.58%.
PE: 6.0x
China Lesso Group Holdings, a smaller player in Hong Kong's market, is drawing attention for its potential value. Despite facing a decline in sales and net income for the first half of 2024, with sales dropping to CNY 13.56 billion from CNY 15.30 billion and net income falling to CNY 1.04 billion from CNY 1.49 billion year-over-year, insider confidence is evident as an individual purchased four million shares valued at approximately CNY 10 million this year, reflecting belief in future growth prospects despite high debt levels and reliance on external borrowing for funding.
Overview: Lee & Man Paper Manufacturing is engaged in the production of packaging paper, tissue paper, and pulp, with a market capitalization of HK$11.02 billion.
Operations: The company generates revenue primarily from packaging paper and tissue paper, with packaging paper contributing the largest share. Over recent periods, the gross profit margin has shown a downward trend, declining to 10.03% as of December 2023. Operating expenses have remained significant relative to gross profit, impacting overall profitability.
PE: 7.2x
Lee & Man Paper Manufacturing has shown insider confidence with Ho Chung Lee purchasing 483,000 shares for HK$1.1 million, increasing their holdings by over 122% recently. The company repurchased 13.5 million shares from January to May 2024 for HK$28.1 million, signaling management's belief in its potential. Despite relying on external borrowing, the company's net income surged to HK$805.69 million for the first half of 2024 from HK$359.9 million a year ago, reflecting strong operational improvements and positioning it attractively within Hong Kong's small-cap landscape.
Overview: Gemdale Properties and Investment is engaged in property development and property investment and management, with a focus on real estate projects, and has a market capitalization of CN￥5.69 billion.
Operations: The company generates revenue primarily from Property Development and Property Investment and Management, with the former contributing significantly more. Over recent periods, the gross profit margin has shown fluctuations, reaching 0.1057% by December 2023 after being negative earlier in March 2023 at -0.0004%. Operating expenses have been rising alongside non-operating expenses, impacting net income margins which turned negative in early 2024.
PE: -1.9x
Gemdale Properties and Investment, a smaller player in Hong Kong's market, has seen significant insider confidence with Non-Executive Director Lian Huat Loh purchasing 10 million shares recently. Despite earnings declining by 29.5% annually over the past five years and a volatile share price in recent months, the company's contracted sales from January to September 2024 reached RMB 14.18 billion. However, they reported a net loss of CNY 2.18 billion for the first half of 2024 compared to net income last year, highlighting financial challenges alongside growth opportunities in sales performance.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SEHK:2128 SEHK:2314 and SEHK:535.
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