Fraser and Neave Limited (SGX: F99), or F&N for short, is a consumer company with expertise in the food and beverage, and publishing and printing sectors.
At the current price of S$2.09, the company’s stock is just 2.5% higher than a 52-week low of S$2.04. This raises a question: Is the company a bargain now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing F&N’s current valuations with the market’s. 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).
F&N currently has a PB ratio of 1.08, which is marginally lower than the SPDR STI ETF’s PB ratio of 1.28. It’s an even better picture with the PE ratio, as F&N’s earnings multiple of 2.33 is significantly lower than the SPDR STI ETF’s 11.89.
On the other hand, F&N has a lower dividend yield than the SPDR STI ETF (2.20% vs. 2.81%). The lower a stock’s yield is, the higher is its valuation.
There’s one point that investors should note about F&N’s PE ratio, and that is the PE ratio is abnormally low due to fair value gains and one-off events. Excluding these items, F&N’s PE ratio becomes 29 instead.
Putting it all together, we can argue that F&N more richly valued than the market, given its higher adjusted PE ratio, and lower dividend yield.
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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.