Hello everyone,
So I went through the financials of every stock in HK, searching for companies that were either incredibly cheap, had great Free Cash Flow and Book Value growth or exceptional shareholder returns.
After sorting through the companies a few times, I started to look at companies qualitative as well.
Today I will show you which ones I passed on, that might be interesting to you.
Most of the time the reason to not buy the stock were me not being knowledgeable about the industry, or me being unable to see the company delivering 20%+ CAGR in the next years.
However there are exceptional companies among those, and some of them are well suited for a more defensive portfolio.
So here are all the companies that I found interesting, but passed on:
$YUMC: It doesn't look expensive compared to US restaurant chain operators, but compared to other Chinese one it is nothing extraordinary. The ROE number looks decent, but nothing out of the ordinary. Their combined share repurchase / dividend program is also bang on average for many Chinese/HK operators. Very defensive company and probably a decent return from here.
$8512.HK. Looks great at first sight until you realize that management pays itself absolutely insane boni. So unless you are certain that management will create more value, than they pay themselves it is probably not interesting to most.
Greentown Management Holdings $9979.HK. Seems like a decent company, but many property companies are similar in terms of shareholder returns and valuation. I want to find the gems in the HK, not one among many.
Travelsky. $696.HK seems like a decent company, but management seem to not really care about shareholders as is so common in HK.
Xinhua Winshare Publishing $811.HK. Less dividends than many others. Low growth.
China Medical System Holdings $867.HK and Kangji Medical Holdings $9997.HK. The numbers all look good, but I have no idea how to assess their market. For someone in the industry, these could be very interesting.
Sun Hing Printing Holdings Limited $1975.HK. Despite having seemingly better fundamentals than Lion Rock Group on the first sight, their largest customer amounts to 72% of all their revenue. A huge risk.
2331.HK Li Ning. Sports is generally quite complicated and given the growth rates, it is hard to get a decent margin of safety with the current market cap. East Asia Stocks recently published a deep dive into it.
$388.HK HK Exchange. The company isn't expensive, but they are hoarding cash and seemingly not worried about returning that too shareholders. Another problem is the SFC which doesn't really help the HK Exchange.
CK Hutchison $001.HK . While the 7% dividend seem enticing, it seem the rest of the company is in a bit of a rut. P/TB also not too cheap. It probably does well from here, but it is below my hurdle rate. An exceptional company for cheap, with the majority of earnings not in China/HK.
BYD $1211.HK . I think that the EV/Hybrid industry will get more and more competitive and as a result drive down margins for everyone - similar to what the car industry already is. I think that BYD will be the winner, but with how much earnings it will emerge I can not predict.
Shandong Weigao $1066.HK. Their growth seems to have stalled and the valuation would be quite expensive for that.
Perfect Medical Health $1830.HK. Growth has stalled, which would mean that their ongoing dilution would seriously start to impact shareholder returns.
China Tobacco $6055.HK decent growth, but margins are nothing special and i don't see how I get a much better return than BTI which is more diversified.
Wasion Holdings. $3393.HK. I expect much more competition coming and their valuation and shareholder returns are nothing to boast about.
Anta Sports $2020.HK. Seems like they have exceptional brands, but they are only cheap if you assume that the revenue growth returns back to a very high level.
Man Shing Global $8309.HK. Difficult industry, stagnation in growth and no shareholder returns.
Sany Heavy Equipment $631.HK Seems to be over earning a bit and shareholder returns are just decent. I have quite a bit of commodity exposure and this is another play on that with heavy machinery - so its a pass.
$327.HK Passing on Pax Global Technology. They have quite a bit of customer concentration in Brazil (which I am exposed to via an ETF). For me the whole payment industry is quite risky. Add that it adds exposure where I already have enough, and I pass
Goldpac Group $3315. Same as with Pax, it is in the payment space, which I find endlessly complicated.
Dream International $1126.HK Seems to have heavily over-earned on their margins and I find it hard to project demand here. Does it increase, does it decrease? No idea
$189.HK they have had tremendous growth, but it seems that is stalling, and chemicals are notoriously cyclical. These could be an opportunity.
$28.HK Tian An China Investments. Too many related party transactions, that make me go mhm..
China Foods $506.HK. There are so many other food/beverage companies that have similar valuations, but better shareholder returns.
Zhejiang Expressway $576.HK Warren Buffett something something toll roads. Me: Not enough upside, but it could be interesting for a defensive investor.
I will publish the ones that I did buy and a few more I passed on soon.