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At present, small-cap stocks in Asian stock markets generally lag behind blue-chip stock prices, but small-cap stocks such as Cosmax and Man Wah HoldinGS Limited have risen by about 25%.
Sometimes, the development of small things may eventually produce a major result.
In the past year or so, although the overall increase in Asian stock market blue-chip stocks exceeded 16%, the overall price of small-cap stocks in the region lags behind the broader market blue-chip, net worth, and information stocks. As of now, the overall increase of small-cap stocks is only about 12%, but this situation may change in the future.
In an interview with Barron's Weekly, John Choi, an analyst from Japan's Daiwa Securities Group, said that there are some very rare cases in the current Asian stock market. Small-cap stocks lag behind the big-cap blue-chip stocks. He believes that this year, small businesses in Asia will have strong earnings growth and will create new earnings records.
He also pointed out that the stock valuation of these small companies is still low. For some small companies listed in Hong Kong, the average price-earnings ratio of their stocks is about 11 times, while the average price-earnings ratio of large-cap blue-chip stocks is about 12 times. John Choi believes that the performance of these small-cap stocks in 2017 will exceed the performance in 2016, and as the blue-chip stocks continue to rise, investors may be more concerned about small-cap stocks with relatively low stock prices.
Considering that small businesses have a small number of stock transactions, and their inherent risks are also higher. This inherent risk makes institutional investors less willing to choose stocks issued by small companies, but small-cap stocks are therefore more susceptible to large fluctuations in the stock market.
As time goes by, investors may be more willing to take on the risks of small-cap stock trading. There may be many risk events in mid-2017, such as the European election. Considering that Trump will not provoke a "China-US trade war," investors can safely look for high-risk investment opportunities in the small business stocks.
However, John Choi also advises investors not to adopt a one-size-fits-all approach to investment in the small cap sector . Since small businesses have more or less problems with corporate governance, investors must carefully study and adopt a bottom-up stock picking approach.
John Choi said: "If investors choose the right small cap stocks at the right time, they will definitely bring a rich return on their investment." The Barron Weekly also pays special attention to the investment opportunities of the following four Asian small business stocks:
1. Beijing Urban Construction (Beijing UrBA n Construction)
Beijing City Construction's customers are very exotic. The company's recent design and construction projects include the subway project in Tehran, the capital of Iran.
Beijing Urban Construction is also a leader in the Chinese railway construction market, which accounts for about 30% of the mainland market. This year, the company's share price has risen by 9%, which may benefit from its public construction projects and private construction projects in the Mainland. These projects are in the planned start-up phase, the most typical of which belongs to the railway network construction project from Kunming to Zunyi.
In addition, China plans to integrate the Beijing-Tianjin Wing into a large-scale metropolitan area, which includes the corresponding railway construction projects.
Considering China's large-scale infrastructure prospects, its stock price has been underestimated by about 11 times compared to the company's long-term earnings expectations. Since its first IPO three years ago, its share price has been lower than its average valuation. Some brokers believe that the actual value of the company's stock should be around 6.50 Hong Kong dollars per share, this valuation has been about 38% higher than its current share price.
2, Cosmax (Cosmax)
This year, the Korean cosmetics industry has experienced major setbacks. As South Korea plans to deploy the “Sade†system on the Korean peninsula, this controversial plan has caused Chinese consumers to have some resistance to Korean products. China is the main consumer market for Korean cosmetics.
Even so, the share price of Cosmax has risen against the market. Since the beginning of the year, its share price has risen by nearly 14%. Compared with Kosme, another Korean cosmetics brand Amorepacific shares fell 12%. The main reason is that Kosme is more focused on the production of cosmetic raw materials, while other companies' products also use the raw materials produced by Kosme. In the next two years, the company's share price is expected to show strong growth, and its increase may even reach 40%.
On the surface, in the next 12 months, the earnings per share of Kosme's poetry may rise to about 28 times the current earnings. But compared to its five-year average valuation, which is expected to be 34 times its share price, this figure is in fact seriously underestimated.
3. Man Wah Holdings
Man Wah Holdings is a sofa manufacturer from Hong Kong. Since the beginning of this year, the company's share price has risen by 18%, and its future share price increase is expected to soar to 25%.
Man Wah Holdings has been committed to the production of "La-Z-Boy-type" multi-functional sofa products, and its products account for more than 10% of the US market. The company not only operates its own branded products, but is also a third-party manufacturer of Cheers and other international brands. Man Wah Holdings’ sales in the US market account for more than half of its global sales. Some brokers believe that during Trump's tenure as president, demand for products such as sofas in the United States will increase.
Some analysts believe that with the recent increase in dividend payout ratio by Man Wah Holdings, its stock dividend yield is approaching 4%. The company also recently relaunched the stock repurchase action, which will further protect its share price. Compared with the expected price-earnings ratio of 13 times, the company's stock valuation is much lower than its international counterparts, such as Select Comfort (SCSS), a bedding manufacturer from the United States.
4. Best Pacific International Holdings (Best Pacific International)
As a Hong Kong-listed company, Chaoying International Holdings is the world's largest manufacturer of undergarment fabrics, with sales of one-third of the global market. The company's customers include many well-known underwear brands, such as Victoria's Secret and Calvin Klein.
As Chaoying International Holdings extends its business to the sportswear sector, the company's earnings in the next few years are likely to outpace other rivals. Chaoying International Holdings' customers in the field of sportswear include some of the world's most popular brands, such as the outdoor clothing brands Under Armour (UA) and Lululemon Athletica (LULU). Recently, Chaoying International Holdings also successfully incorporated the German sports brand Puma (PUM) into its customer base.
Analysts from Barron's Weekly believe that SuperShare International Holdings' current share price is at a lower level than its 12x P/E ratio. In the next two years, the average earnings growth of this company should reach about 20%. Analysts from Daiwa Securities Group believe that the shares of Chaoying International Holdings are stocks with higher equity returns. He expects that the company's future share price increase should reach 30% to the level of 7.80 Hong Kong dollars per share. (double knife)
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