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Possible flash in the pan for Heeton as STI stays resilient

The Edge Singapore
The Edge Singapore 8/6/2021 09:07 PM GMT+08  • 2 min read
Possible flash in the pan for Heeton as STI stays resilient
Heeton Holdings' price surge could indicate a value trap despite its undervaluation based on a price/NAV of 0.33x.
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Heeton Holdings, a modest sized developer, turned out to be a top volume stock and a top gainer on Aug 6. The chart shows prices surged on heavy volume, reaching pre-pandemic prices of 30.5 cents. Its net profit turned around from a loss of $8 million a year ago, to record a profit of $1.7 million in 1HFY2021. The miniscule profit belies the developer’s net asset value of 90 cents per share. And at 30.5 cents, the stock is trading at just a third of its NAV.

However, this could be a value trap. In FY2020, Heeton’s ROE was negative and its annualised ROE based on 1HFY2021 earnings is barely 1%. Meanwhile its weighted average cost of equity and weighted average cost of capital based on Bloomberg’s data are 9.23% and 2.92% respectively.

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