Stock Valuation: China Jinmao Holdings Group Ltd (817)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
Real Estate – Real Estate Services – Real Estate – General HKD3.56
@ 02 Oct 2018
COMPANY PROFILE China Jinmao Holdings Group Ltd is a real estate company which is engaged in developing city complexes, properties and land. It also engaged in leasing of office and retail commercial premises; and provides hotel accommodation services.

China Jinmao Holdings is a state-owned general real estate company. The company’s strategy focuses on property development and property holdings. The vast majority of the company’s revenue is generated by contract sales, followed by hotel and rental revenue. The company is focused on the property market in China. The company considers merger and acquisition investment as a potential component of its operational growth strategy. In terms of square meters, the company’s city and property developments are the largest.

Stock Code 817
Stock Valuation Below

China Jinmao Price to Sales

The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.
At the price of HKD3.56 as at 02 Oct 2018, China Jinmao Holdings Group Ltd is trading at a Price to Sales Ratio of 0.8 times last 12 months sales.  This is a 14.0% discount to current fair Price to Sales Ratio of 0.9 times.
Is the stock undervalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from or Estimates are from – Thomson Reuters.
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