Based in Hung Hom, Hong Kong, Greenpro Capital Corp. (GRNQ) offers investment planning, financial and corporate services to small- and medium-sized businesses in Hong Kong, Malaysia, and China. Last week, GRNQ’s Angkasa-X formed a strategic partnership with Silkwave Holdings to develop the world’s first GEO-LEO integrated satellite network. While investors are optimistic about the partnership’s goal of establishing a space technology ecosystem in Malaysia and ushering in a new era of digital transformation in the ASEAN market, its shares are down 13.1% in price over the past month and 62.9% year-to-date. GRNQ is currently trading 81.7% below its 52-week high of $4.15.

Although its strategic investments to promote internet connectivity through Angkasa-X’s “LEO” satellite constellation and intensify its digital transformation journey could strengthen its business portfolio, its negative profit margin could be concerning.

Furthermore, GRNQ’s current valuation is not in sync with its staggering losses and rising expenses. So, here is what we think could influence GRNQ’s performance in the near term:

NFT Investment Can Be Risky

In May, GRNQ released the details of its investment in a 7,700 exclusive series of NFTs, which depicts the 1957 Sputnik satellite launch. The company paid $16 million for the series and 1 ETH each at $2,100. While GRNQ believes that its focus on blockchain investment could help it improve its profitability and create additional shareholder value, there are significant risks associated with NFT investments. The massive volatility and uncertainties in the budding NFT market could be concerning. Furthermore,  given GRNQ’s poor financial health, a highly speculative investment could make investors even more anxious about the stock.

Weak Financials

Although GRNQ’s total revenues increased 97.4% year-over-year to $792,025 in the second quarter, ended June 30, 2021, its operating expenses surged 38.3% from its year-ago value to $1.18 million. In addition, the company reported a comprehensive loss of $773,821, representing an increase of 37.7% from the year-ago value. Also, its loss from operations came in at $489,089 for this period, compared to $538,689 in the prior-year period. GRNQ’s loss per share was  $0.01. The company’s net loss increased 35.8% from its year-ago value to $764,867.

Negative Profit Margin

GRNQ’s 0.15% trailing-12-month asset turnover ratio is 24.1% lower than the 0.2% industry average. Furthermore,  its trailing-12-month levered free cash flow margin, EBITDA margin, and ROTC was negative 297.3%, 113.2% and 14%, respectively. In addition, its negative $2.03 million trailing-12-month cash from operations compares with the $133.55 million industry average. Also, GRNQ’s ROE and ROA stood at negative 81.5% and 39.2%, respectively.

Stretched Valuation

In terms of trailing-12-month EV/Sales, GRNQ is currently trading at 17.30x, which is 467.8% higher than the 3.05x industry average. Its 16.62 trailing-12-month Price/Sales multiple  is 430% higher than the 3.13 industry average. Also, the stock’s 2.79 trailing-12-month Price/Book ratio is 133% higher than the 1.20 industry average.

POWR Ratings Reflect Bleak Prospects

GRNQ has an overall D rating, which translates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. GRNQ has a D grade for Value and Stability. The stock’s higher-than-industry valuation multiples justify the Value grade. Also, its Stability grade indicates that the stock is more volatile than its peers.

Furthermore,  it has a C grade for Growth. This is in sync with the company’s financial weakness  and questionable growth prospects.

In addition to the grades we’ve highlighted, one can check out additional GRNQ ratings for Sentiment, Quality, and Momentum here.

Of the six stocks in the A-rated Financial Services (Enterprise) industry, GRNQ is ranked last.

There are several top-rated stocks in the same industry. Click here to view them.

Bottom Line

Although GRNQ’s joint venture partnership to build a satellite network for the ASEAN market should bode well for the company, its unstable finances and investors’ concerns surrounding its investment could cause  the stock to retreat in price in the near term. Furthermore, GRNQ looks significantly overvalued at its current price level. So, we think the stock is best avoided now.

How Does Greenpro Capital (GRNQ) Stack Up Against its Peers?

While GRNQ has a D (Sell) rating in our proprietary rating system, one might want to take a look at its industry peers Forrester Research, Inc. (FORR), Santander Consumer USA Holdings Inc. (SC), and Fair Isaac Corporation (FICO), which have A (Strong Buy) ratings.

GRNQ shares rose $0.09 (+11.86%) in premarket trading Monday. Year-to-date, GRNQ has declined -56.59%, versus a 19.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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