I came across this article by Motley Fools, “The Battle to Be the Better Instant “Kopi” Stock” (read here), and was thinking about the comparison between the four companies: Super Group Ltd, Food Empire Holdings Limited, Old Town Bhd & Nestlé (Malaysia) Berhad.
When I first bought shares of Super Group Ltd, my studies were confined to the comparison between companies listed in the SGX, so am glad I came across this article.
Subsequently, I have went online into POEMS or Yahoo Finance to download the key statistics of these four companies (see below):
Base on the above table, I can basically eliminate Food Empire Holdings Limited (shaded in light grey). Its statistics are mostly N.A. and negative values. In addition, its Total Debt / Equity ratio is the highest among the 4 companies.
So we are left with the trio: Super Group Ltd, Old Town Bhd & Nestlé (Malaysia) Berhad.
In terms of growth and profitability (esp. important for GARP investors looking for growth companies), the two companies that stand out are Old Town Bhd & Nestlé (Malaysia) Berhad.
Nestle stands out for its outstanding ROE, ROA and ROI, while Old Town Bhd managed to edge out in the Revenue and EPS growth rates (4 yrs). If I am not wrong, Old Town Bhd was only listed in July 2011, so there is no 5 years growth rate data available.
Between the two (Nestlé (Malaysia) Berhad & Old Town Bhd), Nestle’s valuation is extremely high. Although the Management Effectiveness (ROE, ROA and ROI) of Nestle is great, and EPS growth rates are relatively good, one need to consider the price of the stock as well, to determine if the stock is over or under priced.
Perhaps we can do a quick study on their trailing PEG to gauge if their current stock price is undervalued in relation to the growth rates. For interest, I have also included Super Group Ltd in the study.
1) Trailing PEG of Super Group Ltd
- P/E: 13.3
- Dividend Yield (%): 3.78
- EPS compound growth rate: 10.52%
The trailing PEG of Super Group Ltd will be 13.3/(3.78+10.52) = 0.93. Which is good (< 1).
2) Trailing PEG of Nestlé (Malaysia) Berhad
- P/E: 24.85
- Dividend Yield (%): 3.3
- EPS compound growth rate: 9.36%
The trailing PEG of Nestlé (Malaysia) Berhad will be 24.85/(3.3+9.36) = 1.96. Which is not good (> 1).
3) Trailing PEG of Old Town Bhd
- P/E: 14.72
- Dividend Yield (%): 3.87
- EPS compound growth rate: 21.8%
The trailing PEG of Old Town Bhd will be 14.72/(3.87+21.8) = 0.57. Which is good (< 1).
Although, the study is in no ways conclusive or accurate, it does give one a quick idea to see if the stock price is over or undervalued in relation to the growth rate. And it appears that Nestlé (Malaysia) Berhad stocks do seem to be over priced, while Old Town Bhd stocks appear to be undervalued.
Incidentally it is not uncommon to bump into an Old Town cafe in Singapore (definitely more common than Super Group’s OWL Cafe, of which there are only 3 islandwide – click here). It is notable that Jack Neo and Mark Lee have also helped to bring the chain to Singapore (read here, item 4). Base on the company’s website, it states that there are 10 outlets islandwide (read here).
Nevertheless one need to study deeper into the numbers and the narrative behind the companies to have a better evaluation. As I did not invest in Nestlé (Malaysia) Berhad stocks nor Old Town Bhd stocks, I did not follow the news of these two companies closely.
I reckon from the start when I was evaluating Super Group, at that time, Old Town wasn’t listed for long relatively (lack of historical data), while I could have felt that Nestle is too big a company (to evaluate comprehensively or grow fast).
In terms of size, Nestle is the biggest, followed by Super Group then Old Town. Nestle’s Market Capitalization is USD 3.87B (SGD 5.47B). Super Group’s Market Capitalization & Enterprise Value are SGD 914.38M & SGD 841.71M respectively. OldTown Berhad’s Market Capitalization & Enterprise Value are MYR Ringgit 717.84M (SGD 236.55M) & MYR Ringgit 548.94M (SGD 180.89M) respectively.
The recent news / earnings of Super Group Ltd have not been great. Balance sheet is still good. Management Effectiveness, Profitability Ratio and Growth Ratio are so-so (mediocre at best). Not great.
Nevertheless,, Super Group’s stock price has taken a huge beating and there appears to be some value in the stock. P/E is at a low of 13.3, almost reaching the level in 2010 (see below).
Moving forward, I do hope the fortunes of Super Group will turn for the better.