Thursday, June 20, 2019

HollySys Undervalued (Maybe Significantly), But Confounding

HollySys (HOLI) is a case-in-point to what I’m talking about when I say that some otherwise undervalued opportunities just aren’t worth the hassle. Although HollySys has significant growth potential serving China’s automation and rail markets, consistent growth has always been elusive and management’s communication with investors is tragically bad. Considering all of that, and ongoing risks to China’s near-term economic health, I’m not all that surprised that the shares are down more than 10% from my last update on the company.

So is HollySys worth the hassle now? The shares are looking more than 30% undervalued to me, and I do believe the company has strong core capabilities in areas like control technology. I believe there are opportunities for HollySys to take share from the likes of Honeywell (HON), Emerson (EMR), and Yokogawa (OTCPK:YOKEY), while also expanding its portfolio and addressable markets. All of that said, the risks here are high, as management has earned the “doubt of benefit” and really needs to establish credibility with analysts and investors to prosper.

Click here to continue:
HollySys Undervalued (Maybe Significantly), But Confounding

No comments: