Undervalued Small Caps With Insider Action In Hong Kong October 2024

In recent weeks, the Hong Kong market has experienced a surge in optimism, with the Hang Seng Index climbing significantly as investors respond to Beijing’s comprehensive support measures. This positive sentiment comes amid global economic fluctuations and geopolitical tensions that have impacted markets worldwide, highlighting the potential opportunities within small-cap stocks that may be overlooked by broader market movements. Identifying promising small-cap stocks often involves looking for those with strong fundamentals and insider activity, which can indicate confidence in their future prospects despite current volatility.

Top 10 Undervalued Small Caps With Insider Buying In Hong Kong

Click here to see the full list of 10 stocks from our Undervalued SEHK Small Caps With Insider Buying screener.

Let’s dive into some prime choices out of from the screener.

Simply Wall St Value Rating: ★★★★★☆

Overview: Beijing Chunlizhengda Medical Instruments is engaged in the manufacture and trading of surgical implants, instruments, and related products with a market cap of CN¥4.08 billion.

Operations: The company’s revenue primarily stems from the manufacture and trading of surgical implants, instruments, and related products, totaling CN¥1.05 billion. The gross profit margin showed a trend of fluctuation over recent periods, reaching 70.00% in the latest quarter ending October 8, 2024. Operating expenses are significant with sales and marketing being a major component at CN¥327.73 million for the same period.

PE: 14.6x

Beijing Chunlizhengda Medical Instruments, a Hong Kong-listed company, is experiencing insider confidence with share purchases throughout 2024. Despite a sales decline to CNY 380 million and net income dropping to CNY 79 million for the first half of the year compared to last year, earnings are projected to grow annually by 19.33%. The firm proposed an interim dividend of RMB 0.83 per ten shares, reflecting potential future value despite its reliance on external borrowing for funding.

Simply Wall St Value Rating: ★★★☆☆☆

Overview: China Lesso Group Holdings is a leading manufacturer and distributor of building materials and interior decoration products, with operations primarily focused on the plastics and rubber segment.

Operations: The company has experienced fluctuations in its net income margin, which was 11.64% in March 2020 and decreased to 6.58% by June 2024. Operating expenses have consistently impacted profitability, with sales and marketing expenses reaching CN¥1.57 billion by June 2024. Gross profit margin showed variability, peaking at around 29.80% in December 2020 before declining to approximately 26.04% by June 2024, indicating changes in cost management or pricing strategies over time.

PE: 6.5x

China Lesso Group Holdings, a smaller player in Hong Kong’s market, has caught attention with insider confidence as Luen Hei Wong acquired 4 million shares for CNY 10.05 million between July and September 2024. Despite a dip in sales to CNY 13.56 billion and net income to CNY 1.04 billion for the first half of the year compared to last year, the company anticipates earnings growth of over 10% annually. However, its reliance on external borrowing poses higher financial risks despite its strong position within its industry context.

Simply Wall St Value Rating: ★★★★☆☆

Overview: Vesync is a company that specializes in the design, development, and sale of smart home appliances and tools.

Operations: The company’s revenue model primarily revolves around its Appliance & Tool segment, with recent figures reaching $604.75 million. A notable aspect of its financial performance is the gross profit margin, which has shown an upward trend, reaching 48.46% as of the latest period. Operating expenses are significant and include sales and marketing costs amounting to $97.52 million and general & administrative expenses at $82.62 million in the most recent report.

PE: 7.6x

Vesync, a small company in Hong Kong, has shown potential for growth with their forecasted 6.61% annual earnings increase and recent inclusion in the S&P Global BMI Index. Despite relying on higher-risk external borrowing for funding, insider confidence is evident as Zhaojun Chen acquired 200,000 shares valued at approximately HK$828,979 in September 2024. The company’s first-half revenue rose to US$296 million from US$277 million year-over-year, driven by increased sales outside Amazon and cost reductions.

Summing It All Up

• Click this link to deep-dive into the 10 companies within our Undervalued SEHK Small Caps With Insider Buying screener.
• Got skin in the game with these stocks? Elevate how you manage them by using Simply Wall St’s portfolio, where intuitive tools await to help optimize your investment outcomes.
• Streamline your investment strategy with Simply Wall St’s app for free and benefit from extensive research on stocks across all corners of the world.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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