Kerry Properties Limited (HKG:683), which is in the real estate business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$34.15 at one point, and dropping to the lows of HK$26.85. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Kerry Properties's current trading price of HK$28.75 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Kerry Properties’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Kerry Properties still cheap?
According to my valuation model, Kerry Properties seems to be fairly priced at around 20% below my intrinsic value, which means if you buy Kerry Properties today, you’d be paying a fair price for it. And if you believe that the stock is really worth HK$35.85, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Kerry Properties’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Kerry Properties generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Kerry Properties, at least in the near future.
What this means for you:
Are you a shareholder? Currently, 683 appears to be trading around its fair value, 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 optimal 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 683 for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears 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 683 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 Kerry Properties. You can find everything you need to know about Kerry Properties in the latest infographic research report. If you are no longer interested in Kerry Properties, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.