The recent pullback in SITC share price seems overdone.
SITC International Holdings Company Limited (1308). Price 25/3/2022: HKD 27.65
SITC is a US$10 billion market cap transport and logistics company, quoted in Hong Kong, doing business (i.e. shipping goods), from China 39%, South East Asia 31.2% and Japan 24.8%. They have 96 vessels delivering to 74 ports, including ports in Russia.
Shipping and logistics companies typically trade at a discount to the general market due to the uncertainties of world trade. The Russian invasion of Ukraine has added to these uncertainties. All companies, shipping companies included, not only have to adhere to the sanctions, but also have to contend with the additional difficulties incurred when dealing in non-sanctioned goods. These include problems with payments for goods (money transfers) and reputation risk.
This week's heavy fall in the SITC share price no doubt was triggered by these uncertainties. Given the solid fundamentals of SITC, the fall seems over-done.
Good Fundamentals
Low Price Earnings ratio (6.47e),
High yield (11.3%e),
Growing turnover (+78.8% yoy, +19%f).
High margin (43% e).
Improving analyst forecasts
Analysts have been improving their forecasts of the current year(2022) earnings per share (EPS). In September 2021 the forecast was around US$0.37, by December 2021 it was around US$0.40. By the end of February 2022 analysts had increased their forecast EPS to US$0.50. On 7th March 2022, SITC announced its full year 31/12/2021 results showing sales up 78%, and Earnings per share tripled. In the following days analysts raised their forecast of the 2022 EPS to $US0.59.
Sound financial situation
The financial position seems sound with current assets of $1.18 billion (including cash of $919 million), exceeding current liabilities of $785 million. Long term liabilities are modest at $415 million and are nearly covered by the net current assets.
Too cheap
Most stocks quoted in Hong Kong are trading at a significant discount to the rest of the world. Whilst the reasons for under-weighting China and Hong Kong are well known, the question is how much discount is too much? With a prospective p/e ratio of 6.47x, a dividend yield in double digits, and solid forecast growth, SITC seems rather cheap. That's why I am buying some shares.
SITC is a US$10 billion market cap transport and logistics company, quoted in Hong Kong, doing business (i.e. shipping goods), from China 39%, South East Asia 31.2% and Japan 24.8%. They have 96 vessels delivering to 74 ports, including ports in Russia.
Shipping and logistics companies typically trade at a discount to the general market due to the uncertainties of world trade. The Russian invasion of Ukraine has added to these uncertainties. All companies, shipping companies included, not only have to adhere to the sanctions, but also have to contend with the additional difficulties incurred when dealing in non-sanctioned goods. These include problems with payments for goods (money transfers) and reputation risk.
This week's heavy fall in the SITC share price no doubt was triggered by these uncertainties. Given the solid fundamentals of SITC, the fall seems over-done.
Good Fundamentals
Low Price Earnings ratio (6.47e),
High yield (11.3%e),
Growing turnover (+78.8% yoy, +19%f).
High margin (43% e).
Improving analyst forecasts
Analysts have been improving their forecasts of the current year(2022) earnings per share (EPS). In September 2021 the forecast was around US$0.37, by December 2021 it was around US$0.40. By the end of February 2022 analysts had increased their forecast EPS to US$0.50. On 7th March 2022, SITC announced its full year 31/12/2021 results showing sales up 78%, and Earnings per share tripled. In the following days analysts raised their forecast of the 2022 EPS to $US0.59.
Sound financial situation
The financial position seems sound with current assets of $1.18 billion (including cash of $919 million), exceeding current liabilities of $785 million. Long term liabilities are modest at $415 million and are nearly covered by the net current assets.
Too cheap
Most stocks quoted in Hong Kong are trading at a significant discount to the rest of the world. Whilst the reasons for under-weighting China and Hong Kong are well known, the question is how much discount is too much? With a prospective p/e ratio of 6.47x, a dividend yield in double digits, and solid forecast growth, SITC seems rather cheap. That's why I am buying some shares.