MENU

Where’s The Value In Dairy Farm International Holdings Ltd?

Singapore’s ten largest consumer services stocks by market capitalisation cover seven different business streams and some of Singapore Stock Exchanges most popular blue chip stocks.

Two of the larger ones are Jardine Cycle & Carriage Limited (SGX: C07) and Dairy Farm International Holdings Limited (SGX: D01).

Neither is traditionally considered value shares and a quick look illustrates why. Jardine has a price-to-earnings multiple of 26, yet even that looks cheap when compared to Dairy Farm’s PE which stands at nearly 37.

Dairy Farm’s price-to-book ratio similarly makes it look like an expensive investment. It is valued at around ten times book. Whilst Jardine may seem cheaper at around three times its book value, it is still far from what one would consider good value.

The saving grace for the two companies and what might keep value investors interested are their healthy dividend yields, with Jardine’s yield of 3.2% slightly more appetising than Dairy Farms yield of 2.4%

So what of the other consumer services titans?

Singapore Airlines Limited (SGX: C6L) trades just below its book value and pays out an acceptable yield of just over 2%. However, investing in airlines might not be to everyone’s taste. Warren Buffet described the airlines industry as a “death trap for investors”, even going as far as to describe his own foray into US Airways as “temporary insanity”. This, despite the fact he actually profited off the investment.

If the opinions of one of the most successful value investors does not discourage others sharing in his philosophy, then Singapore Airlines sky-high earnings multiple of 43 might do, though.

Mandarin Oriental International Limited (SGX: M04) is the parent company of Mandarin Oriental Hotel Group. The company has enjoyed rising net income in recent times. And with 19 of its 44 hotels in Asia, it could be positioned to take advantage of China’s growing middle class looking to travel abroad.

The dividend yield on offer stands close to 4% and is better than the other top ten Consumer Services Stocks, bar Singapore Press Holdings Limited (SGX: T39) that offers a very generous 9.5%.

But a price to book of close to two and an earnings multiple of 26 that pushes close to twice the market average makes Mandarin Oriental also look expensive to value investors.

The Motley Fool's purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock -- Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock -- Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.

Like us on Facebook to keep up-to-date with our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.