Man Sang Holding (MHJ) is currently priced at a significantly discounted to its parent company listed in Hong Kong. The disparity presents a great buy opportunity.
Man Sang Holdings is a holding company. The majority of the holding is 49% holding of a Hong Kong listed company Man Sang International (Yahoo stock code: 0938.hk). MHJ also own M.S. Electronic Emporium Ltd, a pearl jewelry e-commerce web site for the China market. Man Sang International is a Hong Kong based company, one of the leading pearl merchants in Greater China engaged in the purchasing, processing, assembling, merchandising and wholesale distribution of pearls and jewelry products.
How can we calculate the value of MHJ? It is hard to judge the value of the e-commerce Web. For sake of calculation, we give a zero value to the site. We take the 49% stake in Man Sang International (Yahoo stock code: 0938.hk) as its only value. We need a little bit math to calculate the 49% stake. First, taking the Market Cap of Man Sang International (0938.hk), multiplying .49 (49%), converting Hong Kong dollars to US, then dividing the number of shares of MHJ, we get the equivalent price per share. As .94 cents in 0938.hk on May 3, 2007, we get $US 9.20 per share for MHJ.
From calculation, each MHJ share represents a value of $9.20 through its holding of the Hong Kong listed company 0938.hk. As today’s MHJ price of $6.73 (May 3, 2007), the stock price of MHJ represents a 36% or more discount. This unique situation represents a great buying opportunity. MHJ historically traded at a premium to its parent company 0938.hk in Hong Kong. Soon or later, the price of MHJ will be in parity with its parent company, or even trades at a premium.
Financially, MHJ has a very strong balance sheet. The stock price is merely traded above its book value or cash value. Man Sang International owns a number of real estate properties: (1) Man Sang Industrial City, a 26-block industrial facility around 80,000 m2 in total area in Shenzhen, PRC; (2) several commercial and residential properties in Hong Kong; and (3) 55% ownership of the China largest pearl and jewellery trading center: China Pearls and Jewellery City. The book value does not include the huge appreciation of its properties held in China and Hong Kong as we know the property value in these areas has skyrocketed in recent years. On the earning front, MHJ is currently traded at reasonable PE of 16. The company poses to huge growth as the middle class of Chinese becomes richer and buys more luxury goods such as pearls. It is expected that the earning growth will greatly accelerate once the China Pearls and Jewellery City opens for business in the first half of 2008.
In summary, MHJ presents a great buying opportunity for a significant discount for its holdings, for a value play, and for a great growth story.
Disclosure: Author is long MHJ
MHJ 1-yr chart