There are many ways to hunt for investments.
It all depends on your investment objectives and risk appetite.
If you’re going for growth, you can look for stocks that are reporting strong rises in both revenue and net profit.
Income-seeking investors will gravitate towards dividend-paying stocks such as REITs that generate a passive source of income.
Yet another method is to search the bargain bin for undervalued gems that are trading at cheap valuations.
A caveat, though.
It’s important to ensure that these businesses have a solid track record and strong brand name, or you could be looking at a potential value trap.
Here are three undervalued stocks that you can consider for your investment watchlist.
Hongkong Land Holdings Limited (SGX: H78)
Hongkong Land Holdings Limited, or HKL, is a property investment, development and management group.
The group owns and manages more than 850,000 square metres of prime office and luxury retail in Hong Kong, Singapore, Beijing, and Jakarta.
For the first half of 2021 (1H2021), HKL saw a slight 4% year on year fall in its net asset value (NAV) to US$14.75 per share.
At the group’s last traded share price of US$4.78, its shares are trading at a 68% discount to NAV.
For 1H2021, underlying net profit (excluding fair value losses) rose by 12% year on year to US$394 million despite the challenges brought on by the pandemic.
HKL kept its interim dividend constant at US$0.06 per share.
The group’s office properties in Hong Kong and Singapore continue to remain resilient, with the vacancy rate at 5.5% and 2.1%, respectively, on a committed basis.
Luxury retail sentiment remained buoyant in China, with tenant sales exceeding the levels chalked up in 2019 and 2020.
Construction has commenced on HKL’s prime mixed-use project in Shanghai and is scheduled to complete in phases up till 2027.
On the development front, the group managed to secure three residential sites in Nanjing and Wuhan, China, despite fierce competition.
And in Singapore, HKL snagged two joint venture projects — an executive condominium site in the Tengah area and a residential site at Northumberland Road.
Investors who own shares of HKL can count on its well-situated and high-quality property portfolio to keep the group afloat during this tough period.
Valuetronics Holdings Limited (SGX: BN2)
Valuetronics is an electronic manufacturing service provider that serves two main divisions — consumer electronics, and industrial and commercial electronic products.
The group’s headquarters is in Hong Kong but it has manufacturing facilities in both China and Vietnam.
Some of its customers include Dutch conglomerate Philips (AMS: PHIA) and car manufacturer Delphi.
For the fiscal year ended 31 March 2021 (FY2021), Valuetronics reported a slight 3.1% year on year fall in revenue to HK$2.3 billion.
Operating profit, however, inched up 6.3% year on year and net profit rose 4.6% year on year to HK$187.1 million.
Earnings per share for FY2021 stood at HK$0.43 or S$0.07478.
At the last traded share price of S$0.57, Valuetronics’ shares are trading at just 7.6 times earnings.
The group also declared a total annual dividend of HK$0.21, or S$0.0365.
Trailing dividend yield stands at 6.4%, and the group has a clean balance sheet with zero debt and cash of HK$1.1 billion.
Valuetronics has reported no sign of a slowdown caused by the pandemic but warned that a global components shortage may affect its ability to meet orders.
The group’s construction of its Vietnam plant is on track to be completed by the current fiscal year, and it can now fully shift its operations from China to Vietnam because of increasing Sino-US tensions.
The Hour Glass (SGX: AGS)
The Hour Glass, or THG, is a leading luxury watch retailer with 45 boutiques located in 12 cities in the Asia-Pacific region.
Some of the Swiss brands it carries include Cartier, Rolex and Patek Philippe.
The group has a long track record of generating free cash flow.
For FY2021, THG reported a sharp jump in free cash flow from S$94.2 million to S$161.9 million despite the pandemic.
Free cash flow per share stood at S$0.23.
At THG’s latest share price of S$1.55, its shares trade at a price to free cash flow of just 6.7 times.
The group is slowly expanding its business with its maiden entry into New Zealand early last year with the purchase of Mansors Jewellers and two retail and commercial properties for NZ$80 million.
Late last year, it purchased a four-storey retail and commercial building in Melbourne, Australia, for around S$67.3 million.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.