What Can We Expect for Tomson Group Limited (HKG:258) Moving Forward?
Tomson Group Limited (SEHK:258), a HK$7.45B small-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios. Real estate analysts are forecasting for the entire industry, a fairly unexciting growth rate of 0.31% in the upcoming year , and a strong near-term growth of 10.15% over the next couple of years. However, this rate came in below the growth rate of the Hong Kong stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether Tomson Group is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for Tomson Group
What’s the catalyst for Tomson Group’s sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. In the past year, the industry delivered growth in the twenties, beating the Hong Kong market growth of 11.05%. Tomson Group leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make Tomson Group a more expensive stock relative to its peers.
Is Tomson Group and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 8.82x, lower than the rest of the Hong Kong stock market PE of 14.11x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry returned a similar 7.99% on equities compared to the market’s 9.56%. On the stock-level, Tomson Group is trading at a PE ratio of 5.97x, which is relatively in-line with the average real estate stock. In terms of returns, Tomson Group generated 9.48% in the past year, which is 1.49% over the real estate sector.
Next Steps:
Tomson Group recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If the stock has been on your watchlist for a while, now may be the time to buy. If you like its proven ability to generate growth, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best opportunity. However, before you make a decision on the stock, I suggest you look at Tomson Group’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 258’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 Tomson Group? 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.
