Shenzhen International Holdings (SEHK:152) has drawn investor attention after completing a RMB 1,000 million issuance of 5 year medium term notes at a 1.72% coupon, a fresh debt financing that could influence its capital structure.
See our latest analysis for Shenzhen International Holdings.
For context, Shenzhen International Holdings' share price has moved to HK$6.19, with a 1 month share price return of 13.16% but a year to date share price return that is down 28.11%, while the 1 year total shareholder return is down 17.91% and the 3 year total shareholder return is 15.70%. This hints that recent momentum has softened compared with the longer record.
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After Shenzhen International Holdings' recent share price rebound and fresh low coupon funding, the key issue now is how much of any potential re rating is already reflected in HK$6.19 and how much headroom might still be on the table.
Preferred P/E of 6.7x for Shenzhen International Holdings: Is it justified?
On the numbers, Shenzhen International Holdings looks cheap on earnings. The stock trades at a P/E of 6.7x, which sits well below both its peer group and the wider Asian infrastructure sector.
The P/E ratio compares the current share price with earnings per share. For a business like Shenzhen International Holdings that reports positive earnings and has forecasts for profit growth, this is a common way investors frame what they are paying for each dollar of profit.
Here the gap is clear. Shenzhen International Holdings trades at a P/E of 6.7x, while the Asian Infrastructure industry average sits at 13.1x and the peer average is 9.5x. The estimated fair P/E of 9.8x is also higher than where the stock trades today. This points to a level the market could move towards if sentiment and fundamentals line up.
Explore the SWS fair ratio for Shenzhen International Holdings
Result: Price-to-Earnings of 6.7x (UNDERVALUED)
However, Shenzhen International Holdings still faces risks if toll road or logistics volumes soften, or if funding costs shift in a way that reduces the appeal of its current P/E discount.
Find out about the key risks to this Shenzhen International Holdings narrative.
Another view on Shenzhen International Holdings using cash flows
While the P/E of 6.7x makes Shenzhen International Holdings look inexpensive, the SWS DCF model presents an even stronger value picture. On this approach, the stock at HK$6.19 trades about 41.7% below an estimated future cash flow value of HK$10.61. That indicates a larger gap to close if the cash flow assumptions hold up.
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Shenzhen International Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 250 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Given this mix of cautious and optimistic signals around Shenzhen International Holdings, it may be useful to review the data yourself and form your own view. To see both sides of the story in one place, take a closer look at the 3 key rewards and 2 important warning signs
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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