UOLGY is a real estate property management company that specializes in hotels. As the economy turns, this beaten down stock will profit from increasing revenue. At the same time, the stock is deeply discounted to versus the industry and the stock market on average. The stock is trading at a single digit EPS ratio.
What is the right price you would pay to acquire a share of UOL Group? For most investors, it would be the price that gives them a wide margin of safety to have minimal downside risk. In other words, most investors are always looking for undervalued stocks. Even if the
future performance is not entirely as expected, the loss of holding it is minimized, and the downside risk is negated. Please read more on our
stock advisor page.
How important is UOL Group's Liquidity
UOL Group
financial leverage refers to using borrowed capital as a funding source to finance UOL Group Ltd ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. UOL Group 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 UOL Group's 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 UOL Group's 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 UOL Group's total debt and its cash.
What is driving UOL Group Investor Appetite?
UOL Group is a property and development company. The company focuses on management of properties in the hotel management industry. They are mostly located in Singapore and Hong Kong.
Property has been declining in China and Singapore of late. But, that trend is likely to wane since the economy in the United States is improving as it is. Keep in mind that China is the manufacturing capitol of the world. As the economy in the United States improves, so will the economy of China, which has already shown signs of strong growth over the past two quarters. Plus, the economy of Singapore has been improving even more during the same period. This will allow UOL to increase its revenues and earnings, shown here, respectively:
2012: $920,609 / $3.38
2013: $844,632 / $3.26
2014: $1,071,240 / $2.77
2015: $927,963 / $1.43
Revenues have remained mostly steady despite a larger than expected slowdown in the economy of Asia. UOL has weathered that storm well. They earnings per share are trading at a very low ratio, however. 2016 is slated to come in about the same as 2015, however, the share price is trading at $4.09. That puts the return on investment, all else equal, at 38 percent for 2017 should the numbers remain steady. However, the industry average for earnings per share ratio is above 25. You would be able to purchase this stock at a significant discount to the industry while earning a positive EPS.
All the while, the economies of the world are about to show significant increases. This would position this company to see large gains in the stock. The EPS alone, assuming the company were trading about average, would see an increase of nearly ten times if the stock were trading at the average. Even half of that move would be a significant increase in the stock price to $20.00 per share.
But, there have been hesitations in getting involved in stocks like this simply because of the slower growth in China. However, another factor affecting other traders driving the price of this stock up, and other stocks, is that the housing crisis has kept many investors on the sidelines for fear of a repeat of what had happened previously with the financial meltdown. But, the economy is improving with some strength but not enough to be an amount that would be a bubble. Something like that is a long ways off.
So, the market is offering this opportunity out of fear. However, this kind of investment does not take a lot of guts to get involved in. This is a company with earnings. This is a company with solid revenue and low costs; loans they have locked in are set at low interest rates. This is a company with strong upside potential when you consider the economy of the world, and especially the economy of Asia. UOLGY has costs, but they are mainly in the management of hotel property ownership. A lot of the costs associated with this company are borne by another source, the hotel management. This enables UOLGY to run on a smaller number of employees.
With the EPS ratio at such an incredibly low level, and considering how the prospects of an Asian property management company will do, this stock looks ripe to increase. All that is needed is for larger traders to get involved and start pushing this stock up. What is likely to get these traders involved is the fact that bargains are increasingly difficult to find. Yet, this company is available for your portfolio right now.
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David Taylor is a Senior Member of Macroaxis Editorial Board - Sector Analysis. David is a professional writer who writes for multiple investment news outlets. His primary focus is dynamic movements in financial markets and effects of economic volatility on North American industries and sectors. David has many years of experience in financial service industry including working with major banks as a FX trader. In his free time, he does a lot of outdoors type activities including rock climbing, mountain biking, hiking, mountaineering and kayaking in the summer, and snowboarding in the winter.
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