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25-11-2017, 05:35 PM
A small business, such as SKE, with no or slow growth and no visible growth prospects is usually valued at 6x earnings. Larger businesses generally command higher multiples, for their perceived stability. Faster growing businesses also command higher multiples. So a price to FCF of 12 can be considered generous for SKE.
The trailing P/E of 4.9 is close to 6. If this seems low to you, and you think SKE should be trading at a higher earning multiple, then you'll have to convince other investors that its TTM earnings are sustainable. So far, its records show that it fluctuates. And while a P/B of 0.62 may seem cheap, you need to know what the assets on the balance sheet to determine whether you are truly getting a discount on it. Even then, getting a discount on assets if pointless if the said assets serve operational purposes. It means they will not be sold and shareholders will not get their value realized. I will say $10m is a fair value for SKE, but there will be others who are willing to pay more. Personally, I will move on and look for something else. There are hundreds on SGX.
The trailing P/E of 4.9 is close to 6. If this seems low to you, and you think SKE should be trading at a higher earning multiple, then you'll have to convince other investors that its TTM earnings are sustainable. So far, its records show that it fluctuates. And while a P/B of 0.62 may seem cheap, you need to know what the assets on the balance sheet to determine whether you are truly getting a discount on it. Even then, getting a discount on assets if pointless if the said assets serve operational purposes. It means they will not be sold and shareholders will not get their value realized. I will say $10m is a fair value for SKE, but there will be others who are willing to pay more. Personally, I will move on and look for something else. There are hundreds on SGX.