KUALA LUMPUR: The recent listing of two Chinese companies in Hong Kong could trigger a re-rating of China-based stocks listed in Malaysia. It may even change investor perception on these stocks here.
Listed in the fourth quarter of 2011, China Outfitters Holdings Ltd (COH) and Active Group Holdings Ltd (AGH), are trading at higher valuations than China-based stocks listed on Bursa Malaysia. They are trading at a price-to-earnings ratio (PER) of about three times more than their Malaysian-listed peers that have hit rock-bottom PER of around two times, according to CIMB Research in a report last week.
CIMB said the recent listing of the two small-and mid-cap stocks in Hong Kong could help towards an upward re-rating of Malaysia-listed Xingquan International Sports Holdings Ltd.
COH and AGH provide a good comparison to Xingquan as they are all in the same business category — the production and sale of casual wear products in China.
Xingquan sells apparel and shoes, while COH sells men’s casual wear and AGH men’s casual footwear.
Even though Xingquan is in a similar business, it is trading at a huge discount compared with them.
Xingquan’s CY12 PER is around two times, while COH and AGH have PER of six and seven times respectively. Ex-cash, Xingquan’s PER stands at 0.8 times compared with five times for COH and 5.8 times for AGH, CIMB said.
On a price to book value (P/BV) basis, Xingquan is also at a huge discount to the two firms with a P/BV of 0.5 times against COH’s 2.1 times and AGH’s 1.5 times.
According to CIMB, among the three, Xingquan has the highest net cash per market capitalisation ratio at 0.7 times, which means that 70% of the share price is supported by its net cash.
If valuations of Xingquan and other China shoe companies listed on Bursa do not narrow, CIMB said it may be only a matter of time before they are taken private and listed on other markets.
The local research house said with the Hong Kong listing of small- and mid-cap retail stocks such as COH and AGH, Xingquan should be more than qualified to list there in the near future, where it should fetch a much higher valuation.
This article appeared in The Edge Financial Daily, February 13, 2012.
Listed in the fourth quarter of 2011, China Outfitters Holdings Ltd (COH) and Active Group Holdings Ltd (AGH), are trading at higher valuations than China-based stocks listed on Bursa Malaysia. They are trading at a price-to-earnings ratio (PER) of about three times more than their Malaysian-listed peers that have hit rock-bottom PER of around two times, according to CIMB Research in a report last week.
CIMB said the recent listing of the two small-and mid-cap stocks in Hong Kong could help towards an upward re-rating of Malaysia-listed Xingquan International Sports Holdings Ltd.
COH and AGH provide a good comparison to Xingquan as they are all in the same business category — the production and sale of casual wear products in China.
Xingquan sells apparel and shoes, while COH sells men’s casual wear and AGH men’s casual footwear.
Even though Xingquan is in a similar business, it is trading at a huge discount compared with them.
Xingquan’s CY12 PER is around two times, while COH and AGH have PER of six and seven times respectively. Ex-cash, Xingquan’s PER stands at 0.8 times compared with five times for COH and 5.8 times for AGH, CIMB said.
On a price to book value (P/BV) basis, Xingquan is also at a huge discount to the two firms with a P/BV of 0.5 times against COH’s 2.1 times and AGH’s 1.5 times.
According to CIMB, among the three, Xingquan has the highest net cash per market capitalisation ratio at 0.7 times, which means that 70% of the share price is supported by its net cash.
If valuations of Xingquan and other China shoe companies listed on Bursa do not narrow, CIMB said it may be only a matter of time before they are taken private and listed on other markets.
The local research house said with the Hong Kong listing of small- and mid-cap retail stocks such as COH and AGH, Xingquan should be more than qualified to list there in the near future, where it should fetch a much higher valuation.
This article appeared in The Edge Financial Daily, February 13, 2012.
