Keppel Corporation Limited (SGX: BN4) is a conglomerate with major business segments include offshore and marine, property, infrastructure, and investment.
At the current price of S$5.87, Keppel Corporation’s stock price is down more than 35% from its 52 weeks high of S$8.92. This raises a question: Is Keppel Corporation cheap now? This question is important because if the firm’s shares are cheap, it might be a good opportunity for investors.
Unfortunately there is no easy answer; However, we can get some insight by comparing Keppel Corporation’s current valuations with the market’s valuation. 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).
Keppel Corporation currently has a PB ratio of 0.9, which is lower than the SPDR STI ETF’s PB ratio of 1.1. Also, the conglomerate’s dividend yield of 4.1% is higher than the market’s yield of 3.6%. The higher a stock’s yield is, the lower is its valuation. On the other hand, its PE ratio is higher than that of the SPDR STI ETF’s (32.0 vs 11.1).
In summary, we can argue that Keppel Corporation is priced at a discount to the market average due to its low PB ratio and high dividend yield, offset partially by its high PE 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.