Escape to the Orient
|Written by GSCR Staff|
|Wednesday, 29 April 2015 05:59|
We started off the week with somewhat of a gloomy outlook for U.S. stocks as we predicted that the summer sell off season ‘may’ start early.
Add in yet another city under turmoil with police confrontation and riots, and getting away could be in order.
Don’t look now but the Far East has been on fire in 2015. For the most part this includes China and several emerging markets. Below is a small sample of some of these markets using ETF’s as proxies.
Sample Asian and Chinese ETF 2015 YTD Performance
We may have found an undervalued stock based in China listed here in the U.S. that could be a cheap way to get in on a run that does not appear to be losing steam. Highpower International, Inc. (NASDAQ – HPJ - $4.37) is a solid industrial product play. The Company manufactures and trades in nickel metal hydride rechargeable batteries used to power various portable electronic devices. It produces consumer batteries in A, AA, and AAA sizes in blister packing, as well as chargers and battery packs, and industrial batteries, which are designed for electric bikes, power tools, and electric toys. The Company also manufactures lithium-ion and lithium polymer rechargeable batteries for applications in laptops, digital cameras, and wireless communication products. In addition, it recycles scrap battery materials through outsourcing and resells the recycled materials.
For starters our forward vs. trailing P/E metric is in check with the numbers coming in at 9 and 24 respectively. Additionally, an Enterprise Value to EBITDA of 12 indicates value for investors as well as any buyers. An operating margin of over 2% may seem trivial, but it is 100% more than the industry average. Finally, on the technical front, HPJ has broken back to the 50 Relative Strength Index value from an overbought signal.
Asian emerging markets including China are forecast anywhere from 5% to 7% GDP growth for 2015. Highpower is set to capitalize on this growth. Consensus analysts’ estimates are for nearly 25% growth in top line revenue for this year. We think HPJ can bounce back to 52-week highs near $8 this year.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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