Real estate is going to be the next big move and here is a company that will profit from that.

Real estate in China has taken a hit over the past several years.  This stock has also seen the same kind of damage selling off over the past several years.  Now, however, the company’s stock has stabilized along with the earnings and the real estate market in China.  

But, this company primarily focuses its ventures in Hong Kong and has largely been immune to the epic building that has happened in mainland China.  Instead, Hong Kong’s real estate market, which has come off of its highs prior to the financial collapse, the market has stabilized and economic activity has been expanding again.  

Published over a year ago
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Reviewed by Rifka Kats

Real estate in China has been hit hard.  However, that is mainland China.  In Hong Kong, real estate is improving even more.  Here is a development and management company that has positive earnings and is traded well below average.  

Out of tens of thousands of stocks, funds, and ETFs that trade on global exchanges each represent an individual company which you can analyze using comparative analysis. To determine which one of the two entities, such as Hopewell or GMS is a better fit for your portfolio, analyzing a few basic fundamental indicators is a good first step.

How important is Hopewell Holdings's Liquidity

Hopewell Holdings financial leverage refers to using borrowed capital as a funding source to finance Hopewell Holdings Limited ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Hopewell Holdings financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Hopewell Holdings' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Hopewell Holdings' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Hopewell Holdings's total debt and its cash.

Correlation Between Hopewell and GMS Inc

In general, Pink Sheet analysis is a method for investors and traders to make individual buying and selling decisions. Pink Sheet correlation analysis is also essential because it can help investors realize that they may not be as diversified as they think. Risk management strategies are usually required to make sure all portfolios are properly aligned against their risk tolerance level. You can consider holding Hopewell Holdings together with similar or unrelated positions with a negative correlation. For example, you can also add GMS to your portfolio. If GMS is not perfectly correlated to Hopewell Holdings it will diversify some of the market risks out of the positively correlated stocks in your portfolio. However, the disadvantage of this sort of hedging is that it can potentially affect your investment returns throughout market cycles. When Hopewell Holdings, for example, performs excellent and delivers stable returns, the negatively correlated position you locked in as a hedge may drag your returns down.
Are you currently holding both Hopewell Holdings and GMS in your portfolio? Please note if you are using this as a pair-trade strategy between Hopewell Holdings and GMS, watch out for correlation discrepancy over time. Relying on the historical price correlations and assuming that it will not change may lead to short-term losses. Please check pair correlation details between HOWWY and GMS for more information.

Another Outlook On Hopewell Holdings

Hopewell Holdings Limited is a Hong Kong-based real estate investment and management company.  HOWWY is involved in ownership and management of properties, holding of hotels, property development and investments in power plants.  The stock is traded at $3.60.  

Real estate in China has taken a hit over the past several years.  This stock has also seen the same kind of damage selling off over the past several years.  Now, however, the company’s stock has stabilized along with the earnings and the real estate market in China.  

But, this company primarily focuses its ventures in Hong Kong and has largely been immune to the epic building that has happened in mainland China.  Instead, Hong Kong’s real estate market, which has come off of its highs prior to the financial collapse, the market has stabilized and economic activity has been expanding again.  

But, investors are loathe to get back into real estate stocks, and perhaps even more so in Asia, especially China.  A lot of investors have gotten burned in real estate and are wary of getting back in.  This has left REITs and other real estate type investments undervalued.  

The earnings from the past several years in HOWWY had declined in 2013, along with economic activity around the world.  But, since then, earnings have improved and are continuing to increase.  

Here are the earnings over the past several years:

2012:  $1.80

2013:  $0.20

2014:  $0.42

2015:  $0.41

Earnings are to come in relatively the same as 2015.  The EPS ratio is roughly 9 at the time of this writing.  The industry average, however is nearly three times that level at 25.  This makes a company that has positive, and increasing, earnings below market value.  And, the Price/Book is also quite low comparatively, 0.50 versus 2.05.  

An investor could purchase this stock at $3.60 per share, then, if the earnings returned the same amount, theoretically the investor would earn a more-than 10% return on investment for the year.  

But, there are two things that I really wanted to point out.  

First, the economy is expanding around the world.  The economy in the United States is increasing above baseline, above 2%.  Inflation came in for the month of January at 2.50%.  All of that money that was printed by central banks to prop up the economies of the world is starting to show up in prices.  Interest rates are heading higher because of this.  And, in any inflationary scenario hard assets, of which real estate qualifies, is the best investment.  

The other thing I wanted to point out is that the world’s stock markets are priced at variables that are high when looked at historically.  Eventually, there will not be any buyers to buy at these levels.  Instead, investors are going to want to find value.  A real estate investment is a wise choice for the above mentioned reasons.  

This stock will eventually catch up to the industry average.  That would push this company’s stock upward from $3.60 to roughly $9.00 per share.  Once investors start looking deeper for these kinds of opportunities this stock will be one of those that are going to head much higher.  

HOWWY is a solid investment simply because of the EPS ratio and what you get for investing into the company.  The fact that you can buy this stock with these earnings is a major opportunity, one you would not want to pass up at this time.  Over the course of the rest of this year there are going to be further asset increases.  This company is well positioned to profit from that. 

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and David Taylor do not own shares of Hopewell Holdings Limited. Please refer to our Terms of Use for any information regarding our disclosure principles.

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