Kasen International Holdings Limited (SEHK:496), a HK$2.07B small-cap, is a consumer discretionary company operating in an industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy big-ticket durable items. Consumer discretionary analysts are forecasting for the entire industry, a strong double-digit growth of 17.30% in the upcoming year , and an enormous growth of 47.63% over the next couple of years. This rate is larger than the growth rate of the Hong Kong stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Kasen International Holdings is lagging or leading in the industry. See our latest analysis for Kasen International Holdings
What’s the catalyst for Kasen International Holdings’s sector growth?
E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. In the past year, the industry delivered growth in the teens, though still underperforming the wider Hong Kong stock market. Kasen International Holdings lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its household durables peers. As the company trails the rest of the industry in terms of growth, Kasen International Holdings may also be a cheaper stock relative to its peers.
Is Kasen International Holdings and the sector relatively cheap?
Household durables companies are typically trading at a PE of 15.55x, in-line with the Hong Kong stock market PE of 13.21x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 9.62% on equities compared to the market’s 10.17%. Since Kasen International Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Kasen International Holdings’s value is to assume the stock should be relatively in-line with its industry.
Kasen International Holdings has been a household durables industry laggard in the past year. If Kasen International Holdings has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its consumer discretionary peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Kasen International Holdings’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has 496’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Kasen International Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.