Interested In The Real Estate Industry? Take A Look At Suncity Group Holdings Limited (HKG:1383)
Suncity Group Holdings Limited (SEHK:1383), a HKDHK$2.80B small-cap, is a real estate company operating in an industry which displays attractive investment characteristics relative to other sectors, especially over time. Real estate analysts are forecasting for the entire industry, a somewhat weaker growth of 0.32% in the upcoming year , and a robust short-term growth of 21.36% over the next couple of years. However, this rate came in below the growth rate of the Hong Kong stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Suncity Group Holdings is a laggard or leader relative to its real estate sector peers. View our latest analysis for Suncity Group Holdings
What’s the catalyst for Suncity Group Holdings’s sector growth?
Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. In the previous year, the industry saw growth in the twenties, beating the Hong Kong market growth of 11.30%. Suncity Group Holdings lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Suncity Group Holdings may be trading cheaper than its peers.
Is Suncity Group Holdings and the sector relatively cheap?
Real estate companies are typically trading at a PE of 7x, lower than the rest of the Hong Kong stock market PE of 14x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.60% on equities compared to the market’s 10.00%. Since Suncity Group Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Suncity Group Holdings’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Suncity Group Holdings has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of Suncity Group Holdings, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Suncity Group Holdings fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Suncity Group Holdings has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its real estate peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Suncity Group Holdings’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Suncity Group Holdings’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.
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.
