Fraser and Neave Limited (SGX: F99), or F&N for short, is a consumer group with expertise in the food and beverage (F&B), and publishing and printing sectors. As at 12 December 2016, Thai Beverage Public Company Limited (SGX: Y92) had a 28.53% stake in F&N.
At its current price of S$1.70 (at the time of writing), F&N’s shares are down by 16% from its 52-week high price of S$2.02. Personally, the very first question that I have in mind is whether the stock is cheap now. This question is important because if the firm’s shares are cheap, I might take some time to learn more about the company’s future prospects.
Clearly, there is no easy answer. However, we can still get some insight by comparing F&N’s current valuations with the market’s valuations. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Fraser and Neave currently has a PB ratio of 0.9, which is lower than that of the SPDR STI ETF’s PB ratio of 1.0. Yet, its trailing PE ratio is 20.2, much higher than the SPDR STI ETF’s PE ratio of 10.5. Similarly, its current dividend yield of 2.7% is lower as compared to the market’s yield of 3.8%. The lower a stock’s yield is, the higher its valuation.
In sum, I don’t think F&N is cheap enough for me to carry out the next step of my normal research process. Yet, investors who are already interested in the company may be enticed by its current low share price (the lowest its been compared to any other time since January 2018).
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.
Motley Fool Singapore 2019