- Asia Standard International is a small under-followed Hong Kong real estate developer/manager that is currently selling for only 4% of its appraised net assets or at EV/EBITDA=2.
- This investment represents a very asymmetrical risk/return possibility. The downside is minimal due to strong asset protection and upside is enormous as investors have potential to make 5-8x their money.
- Market price is depressed due to concerns about Hong Kong/China property bubble. The company currently trades at largest P/BV discount historically and potential property declines seem to be already priced-in.
- Due to defensive nature of assets (income generating, prime locations and mainly Hong Kong land based) and very low leverage company’s BV seems to be resistant to sharp valuation declines.
- There are multiple ways to realize the upside including increase in dividends, sale of development projects, reduction in discount, continued growth in BV and earning power of the assets.