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India Equity Research Reports, IPO and Stock News
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Asia Equity Strategy -------------------------------------------------------------------------------------------
New report: Cheapest ten stocks ... four still from Korea; IOC from India
● Our basket of the cheapest ten published on 5 January
outperformed MXASJ by 3.3%. While past performance is not
necessarily a good guide to future performance, Figure 2
highlights that the basket of the cheapest 10 last published on 5
January 2011 has outperformed MXASJ (MSCI Asia ex-Japan) by
3.3%. We note that this comes on top of outperformance of 21%,
6.1% and 2.1%, respectively, for the basket of the cheapest ten
previously published on 5 October 2009, 5 October 2010 and 16
November 2010. Indian Oil is the 8th most undervalued
● Four of the cheapest ten are still from Korea. Despite the KOSPI
rising to above its 2007 high, four of the cheapest ten stocks are
still from Korea – namely Kia Motors, Hyundai Mobis, Hyundai
Motors and Hyundai Heavy. We note that Hyundai Heavy is the
only stock that has made our cheapest ten basket on all five
occasions. Samsung Electronics drops out, and has been
replaced by Hyundai Mobis in the cheapest ten.
● Three Chinese banks are in the cheapest ten. While Chinese
banks have looked undervalued on our P/B versus ROE valuation
models for a while now, we note that China Construction Bank
now joins the cheapest ten.
Cheapest ten stocks – Four still from Korea
While past performance is not necessarily a good guide to future
performance, Figure 2 highlights that the basket of the cheapest ten
last published on 5 January 2011 has outperformed MXASJ (MSCI
Asia ex-Japan) by 3.3%. We note that this comes on top of
outperformance of 21%, 6.1% and 2.1%, respectively, for the basket
of the cheapest ten previously published on 5 October 2009, 5
October 2010 and 16 November 2010.
Despite the KOSPI rising to above its 2007 high, four of the cheapest
ten stocks are still from Korea – namely Kia Motors, Hyundai Mobis,
Hyundai Motors and Hyundai Heavy. Kia Motors is the cheapest stock
using our P/B versus ROE valuation methodology for the Top 100
stocks by market capitalisation. Kia Motors is currently trading at 61%
discount. Hyundai Mobis is currently the third most undervalued stock
within the Top 100 by market capitalisation and it trades at a 53%
discount to the region.
While investors may be concerned that these large discounts are
based on peak ROEs, we note that the 61% discount uses current
ROE of 24.8%. We estimate implied ROE for Kia Motors to be 16%.
For Hyundai Mobis, we estimate implied ROE to be 17% versus
current ROE of 24.4%.
Hyundai Heavy is the fourth most undervalued stock amongst the top
100 stocks by market capitalisation. We note that Hyundai Heavy is
the only stock that has made our cheapest 10 basket on all five
occasions. For Hyundai Heavy, the current 52% discount uses current
ROE of 25.7%. But we estimate implied ROE to be 18.5%. And
Hyundai Motors is the sixth most undervalued stock amongst the Top
100 stocks by market capitalisation on our price-to-book versus ROE
valuation methodology. Hyundai Motors’ 50% discount uses current
ROE of 19.5%. But we estimate implied ROE to be around 12%.
While Chinese banks have looked undervalued on our P/B versus
ROE valuation models for a while now, the three that make the
cheapest ten stocks are Bank of Communications, China Citic Bank
and China Construction Bank (CCB). The current 48% discount for
Citic Bank is close to the biggest discount it ever traded at of 60%
seen on 31 December 2008.
The other three in the cheapest ten basket are Sinopec, Telstra
Corporation and Indian Oil. Telstra is the second-most undervalued
stock among the top 100 by market capitalisation using our P/B
versus ROE valuation methodology. Telstra’s discount of 56% uses
current ROE of 27.4%. We estimate implied ROE to be 20%.
Indian Oil is the 8th most undervalued and Sinopec (China Petroleum
& Chemical Corporation) is the ninth most undervalued on the same
basis. Sinopec’s 44% discount uses current ROE of 16.3%. But we
estimate implied ROE to be 10%. We are not suggesting that value
always works and that is why we suggest using a basket of the
cheapest ten stocks. Investors should also look at other factors such
as industry fundamentals before making their investment decisions.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia Equity Strategy -------------------------------------------------------------------------------------------
New report: Cheapest ten stocks ... four still from Korea; IOC from India
● Our basket of the cheapest ten published on 5 January
outperformed MXASJ by 3.3%. While past performance is not
necessarily a good guide to future performance, Figure 2
highlights that the basket of the cheapest 10 last published on 5
January 2011 has outperformed MXASJ (MSCI Asia ex-Japan) by
3.3%. We note that this comes on top of outperformance of 21%,
6.1% and 2.1%, respectively, for the basket of the cheapest ten
previously published on 5 October 2009, 5 October 2010 and 16
November 2010. Indian Oil is the 8th most undervalued
● Four of the cheapest ten are still from Korea. Despite the KOSPI
rising to above its 2007 high, four of the cheapest ten stocks are
still from Korea – namely Kia Motors, Hyundai Mobis, Hyundai
Motors and Hyundai Heavy. We note that Hyundai Heavy is the
only stock that has made our cheapest ten basket on all five
occasions. Samsung Electronics drops out, and has been
replaced by Hyundai Mobis in the cheapest ten.
● Three Chinese banks are in the cheapest ten. While Chinese
banks have looked undervalued on our P/B versus ROE valuation
models for a while now, we note that China Construction Bank
now joins the cheapest ten.
Cheapest ten stocks – Four still from Korea
While past performance is not necessarily a good guide to future
performance, Figure 2 highlights that the basket of the cheapest ten
last published on 5 January 2011 has outperformed MXASJ (MSCI
Asia ex-Japan) by 3.3%. We note that this comes on top of
outperformance of 21%, 6.1% and 2.1%, respectively, for the basket
of the cheapest ten previously published on 5 October 2009, 5
October 2010 and 16 November 2010.
Despite the KOSPI rising to above its 2007 high, four of the cheapest
ten stocks are still from Korea – namely Kia Motors, Hyundai Mobis,
Hyundai Motors and Hyundai Heavy. Kia Motors is the cheapest stock
using our P/B versus ROE valuation methodology for the Top 100
stocks by market capitalisation. Kia Motors is currently trading at 61%
discount. Hyundai Mobis is currently the third most undervalued stock
within the Top 100 by market capitalisation and it trades at a 53%
discount to the region.
While investors may be concerned that these large discounts are
based on peak ROEs, we note that the 61% discount uses current
ROE of 24.8%. We estimate implied ROE for Kia Motors to be 16%.
For Hyundai Mobis, we estimate implied ROE to be 17% versus
current ROE of 24.4%.
Hyundai Heavy is the fourth most undervalued stock amongst the top
100 stocks by market capitalisation. We note that Hyundai Heavy is
the only stock that has made our cheapest 10 basket on all five
occasions. For Hyundai Heavy, the current 52% discount uses current
ROE of 25.7%. But we estimate implied ROE to be 18.5%. And
Hyundai Motors is the sixth most undervalued stock amongst the Top
100 stocks by market capitalisation on our price-to-book versus ROE
valuation methodology. Hyundai Motors’ 50% discount uses current
ROE of 19.5%. But we estimate implied ROE to be around 12%.
While Chinese banks have looked undervalued on our P/B versus
ROE valuation models for a while now, the three that make the
cheapest ten stocks are Bank of Communications, China Citic Bank
and China Construction Bank (CCB). The current 48% discount for
Citic Bank is close to the biggest discount it ever traded at of 60%
seen on 31 December 2008.
The other three in the cheapest ten basket are Sinopec, Telstra
Corporation and Indian Oil. Telstra is the second-most undervalued
stock among the top 100 by market capitalisation using our P/B
versus ROE valuation methodology. Telstra’s discount of 56% uses
current ROE of 27.4%. We estimate implied ROE to be 20%.
Indian Oil is the 8th most undervalued and Sinopec (China Petroleum
& Chemical Corporation) is the ninth most undervalued on the same
basis. Sinopec’s 44% discount uses current ROE of 16.3%. But we
estimate implied ROE to be 10%. We are not suggesting that value
always works and that is why we suggest using a basket of the
cheapest ten stocks. Investors should also look at other factors such
as industry fundamentals before making their investment decisions.
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