China Shenhua Energy Co (中國神華能源), HTC Corp (宏達電) and PT Astra International were among 10 Asian stocks expected to double within three years because of higher profit growth and stronger balance sheets, Goldman Sachs & Co (GS) said.
The shares have fallen by an average 46 percent from their 52-week highs and have “attractive” valuations relative to their 10-year history, Goldman Sachs’ Hong Kong analysts, including Paul Bernard, wrote in a note to clients yesterday.
The shares were subject to “indiscriminate selling” in the global rout that drove a measure of Asian stocks outside Japan to the lowest in more than two years last week, the analysts said.
“We fully recognize the continued macro headwinds and concerns over corporate earnings,” they wrote.
“This report does not try to minimize the significance of these near-term pressures but aims to look beyond them to stock ideas that assume ‘normalized’ valuations and earnings over a two- to three-year period,” the note said.
The MSCI Asia Pacific excluding Japan Index has declined 32 percent this year as the global credit crisis dragged on economic growth and corporate profits worldwide.
Shares on the index are valued at an average of 11.9 times reported profit, compared to 19.2 times on Oct. 29, when the index closed at a record, according to Bloomberg data.
Shares of China Shenhua, the country’s biggest coal producer, could climb because the country is short of energy, coal is “underpriced” and the government has more room to raise power tariffs, according to the Goldman report.
Shenhua has declined 50 percent this year in Hong Kong and trades at 15.8 times earnings.
Astra, Indonesia’s biggest auto retailer, is similarly placed as it is a “proxy for two of Indonesia’s mega themes: Strong secular domestic demand growth for cars and motorcycles and the booming commodity resources sector, mainly palm oil and coal mining,” the note said.
The Jakarta-based company’s stock has fallen 32 percent this year, to 11.6 times profit.
The remaining seven stocks on Goldman’s list are Axis Bank Ltd, China Oilfield Services Ltd (中海油田服務公司), Hong Kong Exchanges & Clearing Ltd, Mediatek Inc (聯發科), Suntech Power Holdings Co, Tencent Holdings Ltd (騰訊控股) and Want Want China Holdings Ltd. (中國旺旺).
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