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Is Now An Opportune Moment To Examine China Merchants Port Holdings Company Limited (HKG:144)?

Simply Wall St

China Merchants Port Holdings Company Limited (HKG:144), which is in the infrastructure business, and is based in Hong Kong, received a lot of attention from a substantial price increase on the SEHK over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at China Merchants Port Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for China Merchants Port Holdings

Is China Merchants Port Holdings still cheap?

According to my valuation model, China Merchants Port Holdings seems to be fairly priced at around 19.85% above my intrinsic value, which means if you buy China Merchants Port Holdings today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$8.34, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that China Merchants Port Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will China Merchants Port Holdings generate?

SEHK:144 Past and Future Earnings May 19th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of China Merchants Port Holdings, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? 144 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 144 for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems 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 gel your views on 144 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 China Merchants Port Holdings. You can find everything you need to know about China Merchants Port Holdings in the latest infographic research report. If you are no longer interested in China Merchants Port Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.