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When Should You Buy Hang Lung Properties Limited (HKG:101)?

Simply Wall St

Hang Lung Properties Limited (HKG:101), which is in the real estate business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$18.18 at one point, and dropping to the lows of HK$15.94. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Hang Lung Properties's current trading price of HK$16.88 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hang Lung Properties’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Hang Lung Properties

What is Hang Lung Properties worth?

According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Hang Lung Properties’s ratio of 11x is trading slightly above its industry peers’ ratio of 6.99x, which means if you buy Hang Lung Properties today, you’d be paying a relatively fair price for it. And if you believe that Hang Lung Properties should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Hang Lung Properties’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Hang Lung Properties look like?

SEHK:101 Past and Future Earnings, December 24th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Hang Lung Properties, at least in the near future.

What this means for you:

Are you a shareholder? Currently, 101 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 101, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 101 for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on 101 should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Hang Lung Properties. You can find everything you need to know about Hang Lung Properties in the latest infographic research report. If you are no longer interested in Hang Lung Properties, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.