I previously did a post on the evaluation of the companies in my portfolio in 3 May 2015 (read here). Think it is time to take a peek at them again.
“An investor’s time is required both to monitor current holdings and to investigate potential new investments.” Seth Klarman
This is the table done in 3 May 2015 (see below).
However this time I shall leave out the profit/loss column (it is depressing looking at it now :p). Also I shall just focus on companies listed in the SGX.
In addition to this, I will add another column (last column) to specify if the recent quarterly or yearly financial results are good. Please see the new table which I just did (see below).
1) P/E ratio. I noticed that the P/E ratios of Golden Agri, Riverstone and SIA are relatively high. SMRT P/E ratio has come down (as compared to the value in May 2015).
Capitaland, Golden Agri and SIA are cyclical stocks. So a better gauge would be the Price to Book ratio. In this case, Golden Agri would appear very under-valued (dropped further from May 2015 value – from 0.47 to 0.39). SIA high P/E warrants some concern, however its P/B is also quite low (less than 1).
Riverstone has a lot of good things going for it recently (low Malaysian currency vs USD, new factory output, etc). Moreover the recent financial results are good. It is a high growth stock, so a high P/E is not unexpected. However, even the good results don’t really warrant such a high P/E.
2) Price to Book: Price to book values of Vicom, Riverstone and Sarine Tech appear high. As compared to May 2015, the high P/B values of Super Group and SMRT have soften. For Vicom and Riverstone, the high Price to Book ratios would be understandable due to their growth stock status.
Sarine Tech high P/B value seems odd because its recent results are not impressive. Nevertheless its P/E is relatively low.
SMRT price to book has probably soften once the allure of the oil price crash and fare hikes fades (now fare going to drop soon). Also the cancellation of SMRT and OMG team up in bidding for Singapore’s 4th telco licence. Moreover SMRT and Super Group recent results are also not impressive.
On the low side: Property stocks (eg. CapitaLand) are generally cheap (low Price to book), and Share price in comparison to Net Asset Value (NAV) is relatively low. However I probably want to stay away from CapitaLand for the moment due to the volatility in the China/Hong Kong market. Golden Agri the perpetual lagger. Well, I can’t foresee what is next for Crude Palm Oil prices (and crude oil price). Very cheap for the moment. However will be looking closely at Golden Agri’s current ratio. SIA price to book value has dropped (as compared to May 2015), however like Golden Agri, I will be looking closely at its current ratio. Both Golden Agri and SIA’s current ratio has dropped (since May 2015).
3) Price to Sales: The lower the ratio, the better since the investor is paying less for each unit of sales. Tricky ratio to evaluate, since PSRs vary greatly from sector to sector. Nevertheless, Vicom, Riverstone and Sarine Tech have relatively high PSRs, while Golden Agri, Colex, SIA and ISOTeam have relatively low PSRs.
4) Dividend Yield: One of the favorite ratio for many investment bloggers (from what I’ve read). I do not really focus on the on high dividend yield when I look at the company financials. I am more concerned about the ability of the company in increasing cash flow / earnings. It is nevertheless an important ratio (esp. for mature slow growth companies). If there is little dividend yield for mature companies, another good sign is share buybacks (provided it is not for issuance of Treasury Shares for their own management/employees later on). I do not have very high dividend yield stocks as you can see. I have no REITs or Business Trusts. On some days, I might consider myself more of a GARP investor.
Nevertheless, the better yielding stocks would be CapitaLand, Vicom, Super Group, SIA, Sarine Tech and SMRT. As compared to May 2015, the new comers which has better dividend yield is Super Group, SIA and SMRT. All 3 of them have seen significant share price drop (esp. for Super Group – which has the highest yield now) which probably explains the better dividend yield this time round. Riverstone drop out from the good dividend yield list probably due to rise in its share price. ISOTeam dividend yield has increased significantly from May 2015. Well, for all the bad news coming out from the recent market volatility, this is one piece of good news (as share price drop, dividend yield tend to increase).
5) Earning per share: Let’s compare the change in the EPS from May 2015 to beginning of Sept 2015 (see below). The best performing stock will be Colex, while the worst will be Golden Agri. The % increase outnumber the % decrease 5 to 4, with CapitaLand EPS remaining the same.
6) Return on Equity: The better performing stocks with high ROE would be Vicom, Riverstone, Sarine Tech and ISOTeam – still the same as in May 2015. Well, technically I consider them as high growth stocks with high ROE. The other figure that one might consider useful is the Compound Annual Growth rate of the EPS (CAGR) – normally can get only 5 years CAGR. A company with both high ROE and high EPS CAGR would be ideal (however not too high eg. >30%, as it would raise questions on its sustainability).
On the other end of the spectrum, the stocks with low ROE are CapitaLand, Golden Agri and SIA – still the same as in May 2015. These are big mature companies with little growth. Esp. for Golden Agri which is facing the commodity slump. Only consolation is that CapitaLand has ok dividend yield.
“If you can follow only one bit of data, follow the earnings — assuming the company in question has earnings. I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.” Peter Lynch
7) Debt/Equity ratio: Each industry has different debt to equity ratio benchmarks. I generally like companies with low or zero debt. As what many value investors would say, what is important is to consider the downside risk first (rather than the potential upside). In the event of any market downturn or any other catastrophic events, a company with little or no debt is very unlikely to go under. CapitaLand and SMRT have relatively high Debt/Equity ratio – still the same as in May 2015. CapitaLand’s high Debt/Equity ratio is understandable as it is a property developer (need to use leverage), and its debt/equity ratio in comparison to its peers in the same industry is acceptable. SMRT needs extra attention.
8) Current ratio: The current ratio is an indication of a firm’s market liquidity and ability to meet creditor’s demands. Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses.
It compares a firm’s current assets to its current liabilities. (Generally the higher the no. is good). Low values for the current or quick ratios (values less than 1) indicate that a firm may have difficulty meeting current obligations. Golden Agri, SIA and SMRT low ratios appear worrisome – same trio as in May 2015. Nevertheless SIA is a very cash rich company (though it is operating in a very competitive industry).
9) Is the recent financial results good? I previously did a post on the quarterly financial results of the companies on 13 August 2015 (read here). ISOTeam was not covered, but you can read here and here for their recent FY2015 results.
“There’s no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or worse, to buy more of it when the fundamentals are deteriorating.” Peter Lynch
In gist, as mentioned earlier, this is just a quick overview.
Golden Agri requires more monitoring (it has 4 yellow boxes, which is more than the others). Hope there will be light at the end of the multi year commodity slump soon.
The other companies with 3 yellow boxes are Riverstone, SIA, Sarine Tech and SMRT.
- Riverstone is more due to it being overvalued (eg. high P/E, Price to Book and Price to Sales). It does have a lot of blue boxes, 6 boxes in fact (good points). So am not too worried about it.
- Hope the crude oil price drop will improve SIA’s margin.
- Sarine Tech low performance is due to the global difficulty in the diamond trade and liquidity issues in India.
- Hope SMRT is “making progress” with the authorities regarding a new rail financing framework.
So the 4 companies to worry about: Golden Agri, SIA, Sarine Tech and SMRT.
I saw you’ve just started your US portfolio. What do you think of GoPro? I’m sure you’ve heard about it and its product. The company’s share is now nearly on a 52-week low due to overreaction to Ambarella’s earning call or some announcement. This company has lots of growth potential. I’m not sure though if this will have an appeal to you since it is a tech company. Any thoughts? Thanks.
Yes I do intend on starting on a US portfolio. However won’t be expanding so soon (actually it could just be one company if I can’t find any good companies whose stocks are undervalued).
Did thought about GoPro in the past.
I did a post on GoPro (read here).
Have you seen this site? It shows bids for ISOTeam’s projects. R&R and A&A look competitive as many companies are bidding. Goverment most of the time awarding lowest bidder and ISOTeam subsidiary is not always the lowest bidder.
Here’s the site: http://www.emservices.com.sg/em/tenders-results.aspx
I did a quick study of the 6 months record form that website. Click here.