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(24-07-2024, 01:40 PM)ghchua Wrote: So different IFAs have their own in-house methodology in computing those numbers. But the main issue is that - Is our companies too small and our stock market too weak to justify taking those adjustments, when comparing with companies in similar sector trading in different markets? Food for thought.
Hi ghchua,
I have been thinking about your observation too. It seems to me that this is just another demonstration of market reflexivity. Cheap market valuations can make every participant worst off (whether is it investors OR the companies' performance). What i mean is - market valuations are a reflection (effect) of companies' performance (cause). But at a certain point, the "effect" can influence on the "cause".
For example, a company with poor efficiency (low ROIC and ROE) will probably result in low share price. The low share price discourages talented employees to stay on as their share options (if there are any) will not be very rewarding. A low share price will encourage the controlling shareholder to monetize their efforts via large salaries OR an eventual goal to squeeze out minorities. All of these will affect the company's performance negatively.
The Singapore market is small, no doubt about that, although I always argue that it has always been punching above its weight. So I think there are still enough outliers. If there are not enough outliers, then one has to make the decision whether to wait for more fish in the pond, or consider neighboring lakes. After all, the fishing skills we learnt ourselves, stay with us and is transferrable.