Haw Par Corporation Ltd (SGX: H02) is the maker of the Tiger Balm brand of ointment. Other than its healthcare arm, it also has strategic stakes in UOL Group Limited and United Overseas Bank Ltd.
At a current price of S$12.22, Haw Par’s stock price is 4.8% higher than its 52-week low of S$11.65. Is Haw Par cheap now? If so, it might be a good opportunity for investors to start or add to a position in the stock.
There is no easy answer to the question “Is this stock cheap?”, but we can get some insight by comparing Haw Par’s current valuation with the market’s valuation using three common metrics: the price-to-book (P/B) ratio, price-to-earnings (P/E) 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).
Haw Par currently has a P/B ratio of 0.9, which is lower than the SPDR STI ETF’s P/B ratio of 1.1. However, its P/E ratio is higher than that of the SPDR STI ETF — 15.6 vs. 11.3. Also, Haw Par’s dividend yield of 2.0% is lower than the market’s yield of 3.5%. The lower a stock’s yield, the higher its valuation.
Haw Par looks to be priced at a premium to the market average thanks to its high P/E ratio and low dividend yield, offset slightly by its low P/B ratio.
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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. The Motley Fool Singapore recommends United Overseas Bank Ltd.
Motley Fool Singapore 2019