- Investing in value stocks is completely different than investing in growth or penny stocks.
- Value investing is for people who are patient and want minimum risk on their investment.
- Commitments have been provided by the banking partners of THL for debt funding of around $225 million, consisting of numerous tranches maturing between September 2021 and July 2022.
- With the ease in lockdown restrictions, KMD’s business might witness positive impacts moving forward.
Investors are exposed to several risks and the present scenario is the perfect example. Some investors invest in penny stocks, while some of them invest in growth stocks for better returns. This is done with the help of several methodologies and valuations. The understanding of the company’s business is utmost important before making an investment decision. Several market players conduct fundamental analysis to gain an in-depth knowledge about the company.
Value Investing is one popular methodology often followed by the investors to gain maximum returns on their investment. Value investing is when an investor makes an investment that seems to trade at a value lower than their intrinsic value.
Value investing seeks to maximise returns by finding stocks that are undervalued by the market. Generally, investors tend to assess the intrinsic value of a stock through a valuation method like discounted cash flow analysis and compare that value with the stock price.
The four stocks covered in the article can be considered as value stocks.
Tourism Holdings Limited (NZX: THL)
The stock is currently trading at a P/E multiple of 10.470x. The gross dividend yield stood at 8.576% and the company has ROE of 4.4%.
FY20 Earnings and Debt Guidance
The company anticipates reporting an underlying net profit after tax of $17.5 million to $19 million for FY20. This guidance eliminates the effect of the partial Togo exit undertaken in March 2020, or any potential impairments or any other non-ordinary items. Net debt is expected to be approximately $140 million to $145 million.
Because of the company’s attention on debt reduction, inherent uncertainty in operating environment as well as new funding requirements, the company’s Board has determined that no final dividend would be declared for FY 2020.
The stock of THL closed the day’s trading at NZ$1.930 per share on 7th July 2020, down by 1.03% on an intraday basis. The company has a market capitalisation of around $285.669 million. The stock has corrected ~17.8% in the time period of one month.
Argosy Property Limited (NZX: ARG)
The stock is currently trading at a P/E multiple of 8.400x. The gross dividend yield stood at 5.931% and the ROE figure stood at 11.4%.
The company ended FY20 with solid momentum. However, economic circumstances since 31 March have changed significantly. The company’s focus on addressing residual expiries within the portfolio and guaranteeing that the tenant retention rate stays high, is unchanged.
The stock of ARG closed the day’s trading at NZ$1.220 per share on 7th July 2020, up by 0.83% on an intraday basis. The company has a market capitalisation of around $1.013 billion. The stock has corrected ~12.85% in the time period of six months.
Kathmandu Holdings Limited (NZX: KMD)
The company’s stock is currently trading at a P/E multiple of 7.660x. The gross dividend yield of the company is 9.461% and the ROE figure stood at 1.5%.
Guidance for FY20
The company is expected to report FY20 adjusted EBITDA of more than $70 million. Kathmandu only gross margin is anticipated to be at the lower end of 61%- 63% target range.
In April, the company managed to complete NZ$207 million equity raising to strengthen the balance sheet as well as liquidity position in response to coronavirus pandemic. Considering the company’s current assessment of operating environment and outlook, available liquidity in excess of $300 million has been anticipated at the end of the financial year.
The stock of KMD closed the day’s trading at NZ$1.240 per share on 7th July 2020, up by 0.81% on an intraday basis. The company has a market capitalisation of around $879.162 million. The stock has corrected ~47.1% in the time period of six months.
Summerset Group Holdings Limited (NZX: SUM)
The company’s stock is currently trading at a P/E multiple of 8.730x. The gross dividend yield stood at 2.083%.
Outlook for FY20 and Beyond
The company is not expecting underlying profit growth in 2020, largely due to the investment in care wages and development margins returning to the medium-term guidance of 20% to 25%. However, the company expects to return to profit growth in FY21 and beyond.
The company’s aged care and retirement village operations were considered as an essential service. All of the villages of the company were operational under the Alert level 4 self-isolation requirements.
The stock of SUM closed the day’s trading at NZ$6.750 per share on 7th July 2020, down by 0.30% on an intraday basis. The company has a market capitalisation of around $1.538 billion. The stock has corrected ~23.9% in the time period of six months.