Performance in the real estate sector generally tracks the economic cycle. During periods of high growth and inflation, real estate investments usually post strong returns. However, during an economic bust, these investments tend to underperform. Currently, Pan Hong Holdings Group and OUE Commercial Real Estate Investment Trust are real estate companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Investors can profit from the difference by investing in these cyclical stocks as the current market prices should eventually move towards their true values. If capital gains are what you’re after in your next investment, I’ve put together a list of undervalued stocks you may be interested in, based on the latest financial data from each company.
Pan Hong Holdings Group Limited (SGX:P36)
Pan Hong Holdings Group Limited, an investment holding company, engages in the investment and development of residential and commercial properties in the People’s Republic of China. Founded in 2005, and now led by CEO Lam Ping Wong, the company provides employment to 295 people and with the market cap of SGD SGD52.77M, it falls under the small-cap stocks category.
P36’s stock is currently trading at -100% less than its true value of ¥21.68, at a price of S$0.10, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. Moreover, P36’s PE ratio is currently around 9.34x compared to its Real Estate peer level of, 9.54x implying that relative to other stocks in the industry, you can buy P36’s shares at a cheaper price. P36 is also in good financial health, as current assets can cover liabilities in the near term and over the long run. It’s debt-to-equity ratio of 15.41% has been falling for the past few years revealing its capability to pay down its debt. More detail on Pan Hong Holdings Group here.
OUE Commercial Real Estate Investment Trust (SGX:TS0U)
OUE C-REIT is a Singapore real estate investment trust listed on the Main Board of Singapore Exchange Securities Trading Limited. Founded in 2013, and run by CEO Shu Tan, the company provides employment to 48 people and with the stock’s market cap sitting at SGD SGD1.08B, it comes under the small-cap stocks category.
TS0U’s stock is currently floating at around -58% under its actual level of $1.68, at a price of S$0.70, based on my discounted cash flow model. This mismatch indicates a chance to invest in TS0U at a discounted price. What’s even more appeal is that TS0U’s PE ratio is trading at around 8.02x relative to its REITs peer level of, 15.04x implying that relative to its competitors, we can buy TS0U’s stock at a cheaper price today. TS0U is also a financially robust company, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 68.77% has been diminishing over time, showing TS0U’s capacity to pay down its debt. More detail on OUE Commercial Real Estate Investment Trust here.
Ascendas India Trust (SGX:CY6U)
Ascendas India Trust (“a-iTrust” or the “Trust”) was listed in August 2007 as the first Indian property trust in Asia. Ascendas India Trust was formed in 2004 and has a market cap of SGD SGD1.09B, putting it in the small-cap group.
CY6U’s stock is now trading at -78% less than its intrinsic level of $4.75, at a price of S$1.05, based on my discounted cash flow model. This mismatch signals an opportunity to buy CY6U shares at a discount. In addition to this, CY6U’s PE ratio is trading at around 5.19x while its Real Estate peer level trades at, 9.54x suggesting that relative to its peers, you can buy CY6U’s shares at a cheaper price. CY6U is also robust in terms of financial health, as near-term assets sufficiently cover liabilities in the near future as well as in the long run.
Interested in Ascendas India Trust? Find out more here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.
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.