Fair-Value Report — King's Stone Holdings (1943.HK)
Rating-caps box
- EXTENDED (+208% above the 52-week low, 1.7% below the 52-week high): the flag caps conviction at Hold if combined with RUN_UP. The 60-day return of +81% is a run-up in substance. The flag set only lists EXTENDED, but no Buy rating is possible regardless.
- Consistency rule: the base-case FV is below the live price, so no Buy of any kind is allowed.
- Avoid test met: the base case is at least 30% below the live price (−62%). That is the concrete reason required for Avoid.
- Step 1b: no going-concern or audit-qualification language found in the FY2025/26 results. A share placing completed 21 Jul 2026, which is more than 30 days from the DI event of 16 Oct 2026, so the placing cap does not fire. Interim results are due within 60 days and the next-print test is unproven (see Catalysts).
Insider signal
- Buyer: Mr. He Xin, Chairman, Chief Executive Officer and executive director (appointed to the dual role 11 Jul 2025, per FY2025/26 results announcement).
- Reason code: 1101, off-market purchase. Event date 16 Oct 2026.
- Size: about 12.0M shares at an average HK$1.285, roughly HK$15.4M. Long position went from 0.85% to 1.87% (about 22M shares).
- Caveat on the price: HK$1.285 was the 15 Oct close. The stock closed at HK$1.38 on 16 Oct and HK$1.465 on 23 Oct, so the live price is 14% above what he paid. The counterparty is not identified in the data we could verify, so motive is partly opaque.
- Context: before the placing he held only 0.07% (750,000 shares, per the 25 Jun 2026 placing announcement). He has been building the position through the run-up.
This is a genuine open-market-style purchase by a real insider, so it is not skipped. It does not change the valuation conclusion: calibration across our past calls shows founder or executive buying has not protected against paying a high multiple.
Verified snapshot
| FY ended 31 Mar (HK$'000) | FY2025/26 | FY2024/25 |
|---|---|---|
| Revenue (continuing) | 556,314 | 173,388 |
| Gross profit / (loss) | 25,962 | (47,137) |
| Gross margin | 4.7% | (27.2%) |
| Loss for the year | (14,630) | (102,073) |
| Cash and equivalents | 24,355 | 9,673 |
| Trade receivables | 259,537 | 5,920 |
| Inventories | 154,464 | – |
| Trade payables | 400,685 | 25,818 |
| Total equity | 115,164 | 105,564 |
| Borrowings / dividend | nil / nil | nil / nil |
Source: company FY2025/26 results announcement (24 Jun 2026). Reporting currency HKD, so no FX adjustment is needed. Financials are recent (about 7 months old); no staleness flag.
Business
Historically a Hong Kong formwork and construction-services contractor (Construction Services segment, HK$278.8M revenue). In FY2025/26 it added an "intelligent storage" segment (HK$277.5M revenue) that roughly doubled sales but carries very thin margins: group gross margin was only 4.7%, and the cost of inventories sold was HK$239.2M against that segment. Management describes a second growth curve in "computing power infrastructure" and "smart energy" (AI-driven storage, smart industrial parks, battery swapping) using an "investment–construction–operation" model with long payback periods.
Balance-sheet quality is a concern: receivables jumped from HK$5.9M to HK$259.5M and payables from HK$25.8M to HK$400.7M. Equity of HK$115M sits on a working-capital structure of about HK$560M of current assets against HK$446M of current liabilities. Net current assets look comfortable only if those receivables are collected.
Post-year-end moves: a Shenzhen JV (16 Apr 2026, RMB10M capital, 80% owned), a RMB10M limited-partner commitment to a 10-year new-energy partnership (16 May 2026), and a partnership capital increase of RMB35M for about 3.29% of Guangdong New Energy Storage National Research Institute (15 Oct 2026). These are small cash commitments and early-stage minority stakes, not earnings.
Valuation
Method: loss-making, story-pivot company, so asset-based (P/B) plus scenario optionality. No FCF-DCF: there is no positive free cash flow to discount, and a DCF would only encode our assumptions about a business that has not yet shown a margin.
| Scenario | FV (HK$) | vs HK$1.465 | Assumption |
|---|---|---|---|
| Bull | 1.10 | −25% | ~6.7× pro-forma NAV (about 2× the July placing price). Storage/compute-park narrative stays funded, gross margin moves toward 10%, and no further dilution. |
| Base | 0.55 | −62% | ~3.3× pro-forma NAV, essentially the HK$0.5456 price at which six independent placees bought 143M shares on 21 Jul 2026. Pivot optionality is paid for, but the business is still a low-margin contractor losing money. |
| Bear | 0.25 | −83% | ~1.5× NAV after H1 burn and a follow-on placing at a discount. Receivables collection slips, hype fades. Peers trade at 0.1–1.0× book. |
Even the bull case sits below the live price: the market is already capitalising something better than our bull scenario.
Reverse read: what HK$1.465 implies
- Market cap ~HK$1.72bn less pro-forma cash of roughly HK$100M gives EV of about HK$1.6bn, or 2.9× FY2025/26 sales and about 62× FY2025/26 gross profit.
- At a 15× earnings multiple the price needs net profit of about HK$115M, against a HK$14.6M loss last year. At a 5% net margin that means roughly HK$2.3bn of revenue, about 4× the current level, with margins held.
- Equivalent: investors are paying for the energy-storage and data-centre option, not for the contracting business.
Peer table (Yahoo Finance data, 23 Oct 2026; construction peers by sector, storage/solar as pivot references)
| Company | P/B | P/S | ROE |
|---|---|---|---|
| Build King (0240) | 0.57 | 0.13 | 16.4% |
| Wai Kee (0610) | 0.29 | 0.06 | 29.5% |
| Sam Woo (3822) | 0.18 | 0.11 | 11.3% |
| Yau Lee (0406) | 0.17 | 0.02 | −15.8% |
| SOCAM (0983) | 0.11 | 0.04 | 0.6% |
| Tysan (0687) | 0.97 | 0.50 | 4.1% |
| Goldwind (2208), pivot reference | 0.62 | 0.38 | 7.3% |
| Xinyi Solar (0968), pivot reference | 0.48 | 0.90 | −0.3% |
| Median, 8 peers | 0.38 | 0.12 | – |
| King's Stone (1943), pro forma | ~8.9 | ~3.1 | negative |
Peer figures are trailing and taken from a market-data feed; small-cap data can be stale. King's Stone P/S uses market cap over FY2025/26 revenue. Even the base case of 3.3× NAV is far above the peer median, justified only by the July placing print, so we do not stretch further. Price/sales is used for reference only because gross margin is below 30%.
Conclusion
The insider is real and the story (storage, compute parks, RMB35M research-institute stake) is attractive, but the evidence of earnings is missing: FY2025/26 was still a HK$14.6M loss on a 4.7% gross margin, the company raised cash at HK$0.5456 only three months ago, and the stock is now 2.7× that level. A high-priced follow-on placing under the existing mandate would be the rational response by management to this price. We rate the shares Avoid at HK$1.465. This is a price call. If the stock returned to the HK$0.55–0.70 area, or if a reported half-year showed gross margin near 10% with positive operating cash flow, we would revisit.
Catalyst calendar
- By 30 Nov 2026: interim results for six months to 30 Sep 2026 (Listing Rule deadline; the board-meeting date had not been announced as of 23 Oct 2026). This is the key print: gross margin, receivable collection, any impairment.
- Nov–Dec 2026: completion of the RMB35M capital increase in the Guangdong energy storage institute.
- Any time: new placing under general mandate (the last two placings were Sep–Oct 2025 at HK$0.637 and Jul 2026 at HK$0.5456).
- Already past: 18 Jun 2026 profit alert (reduced loss); 24 Jun FY results; 21 Jul placing completion; 17 Sep AGM.
Key risks
- Dilution: two placings in 13 months, and the share price now allows a much larger raise at HK$1+.
- Working capital: HK$260M receivables and HK$154M inventory against HK$401M payables; a collection delay would hit equity quickly.
- Thin margin: equipment trading at 4.7% group gross margin does not support the multiple.
- Momentum risk cuts both ways: an Avoid on a stock +81% in 60 days with an executive buyer can be wrong for a long time. Past Avoid calls in this series averaged gains, which is why the rating rests on the 62% base-case gap, not on "looks expensive".
- Liquidity: average daily turnover about HK$3.9M; exits are slow for size.
What would prove us wrong
- Interim results show gross margin of at least 10% and a positive net profit on a half-year basis without one-offs.
- A named, binding offtake or operating contract for storage/compute projects with disclosed revenue and margin terms.
- Further open-market purchases by the chairman or the controlling shareholder above HK$1.50 combined with no new placing.
Sources
- King's Stone FY2025/26 annual results announcement, HKEXnews, 24 Jun 2026
- King's Stone placing announcement, HKEXnews, 25 Jun 2026; placing completion 21 Jul 2026 (HKEXnews list via etnet)
- Futu / Zhitong Finance reports on He Xin's 16 Oct 2026 off-market purchase and the 15 Oct 2026 RMB35M partnership investment (via Investing.com, SL886)
- Yahoo Finance price history and peer multiples, 23 Oct 2026
- HKEX announcement list for 1943, via etnet
No redactions applied.
Published via wiis. Originals are encrypted at rest; this page reflects the redacted version. report abuse.
Discussion
No comments yet.