Would Benjamin Graham Buy Hongkong Land Holdings Ltd?

Hongkong Land (SGX: H78) manages around 5m square feet of commercial space in Hong Kong’s Central Business District. In Singapore it has an interest in major developments such as Marina Bay Financial Centre and One Raffles Quay. Here in Singapore, it has around 2m square feet of space.

With operations spreading across Asia, Hongkong Land is one of the region’s leading property investment, management and development groups.

The company is valued at 14 times earnings, which is in line with the valuation for the Singapore market. It should be noted that this valuation is higher than historical measures for Hongkong Land.

The company’s P/E ratio equates to an earnings yield of 7%. In other words, if Hongkong Land paid out all of its profits as dividends, the theoretical dividend yield would be 7%. However, the actual dividend yield is only a 2.6%.

Hongkong Land’s dividend yield is not high when compared to a risk-free investment. The yield on the 10-year US Treasury is currently 2.4%.

The dividend yield might not be especially attractive but the company could have other things going for it. Its price-to-book ratio is an undemanding 0.62. This could provide investors with a decent margin of safety.

The current ratio, which stands at 2.6, is above the desired value of two. That could imply Hongkong Land is in a strong financial position. The ratio calculated as current assets divided by current liabilities suggests that the company is in a strong position with regards to its debt obligations.

More of a worry for investors will be the contraction that Hongkong Land has seen in its net income. Since 2010, the company’s net income has fallen by nearly 70%.

With the rewards currently looking a little uninspiring and, perhaps, unlikely to improve, Hong Kong Land may not prompt followers of Benjamin Graham to reach for their chequebooks.

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.