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Is There Value In Hutchison Port Holdings Trust?

The slowing growth rate of China’s economy is an important issue facing investors in current financial markets. Recent data suggests that economic growth in China is at its weakest levels for the last five years.

With uncertainty facing the country, reluctance from investors to seek opportunities in China-focussed companies could make those very same companies interesting value opportunities.

The Singapore Stock Exchange lists many companies with a focus on China. Here we focus on some of the industrial stocks with a market value of over S$250m.

The largest of the bunch with a market capitalisation of over S$7.5 billion is Hutchison Port Holdings Trust (SGX: NS8U). The Business Trust by its quirky status is able to pay out dividends even in the absence of bottom-line profits. The current dividend yield on offer is a market-beating 7.7%. With a price to book of just 0.7 and cash on its balance sheet, the only thing stopping Hutchison being a stand out value opportunity is an astronomical earnings multiple of over 50. But that is the nature of a Business Trust beast.

Yangzijiang Shipbuilding Holdings Limited (SGX: BS6) is the second largest in terms of market capitalisation. It has a market value of just over S$4 billion. The yield on offer is less generous than Hutchison’s at around 4.5%. However, this is still a decent return that beats the risk-free rate of return that investors can expect in current markets. Unlike Hutchison, Yangzijiang trades at a 10% premium to its book value but its earnings multiple of just 7.4 could make it appear cheap in the eyes of some investors.

Finally, China Merchants Holdings Pacific Limited (SGX: C22) could be worth a gander. The toll-road company, which focusses on investing and managing toll roads in China, trades at 14 times its earnings. This is in line with the Singapore market average.

However, its dividend yield of 9.5% is above average and could be hard to beat. With cash on its book and trading at a 20% discount to its book value, China Merchants Holdings might be worth closer inspection, as it appears to offer the best value amongst the largest industrials with a China focus.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.