Shares of postal and e-commerce logistics services provider Singapore Post Limited (SGX: S08) have fallen by nearly 16% over the last 12 months to S$1.635 currently. That?s a hefty double-digit fall.
What might the great Benjamin Graham think of Singapore Post now? For those of you who are unaware, Graham?s a figure who deserves a spot in the pantheon of investing greats.
As a fund manager, Graham had racked up average annual returns of around 20%. As an educator on the subject of investing, he taught at Columbia Business School and counts billionaire investor Warren Buffett as one of his students….
Shares of postal and e-commerce logistics services provider Singapore Post Limited (SGX: S08) have fallen by nearly 16% over the last 12 months to S$1.635 currently. That’s a hefty double-digit fall.
What might the great Benjamin Graham think of Singapore Post now? For those of you who are unaware, Graham’s a figure who deserves a spot in the pantheon of investing greats.
As a fund manager, Graham had racked up average annual returns of around 20%. As an educator on the subject of investing, he taught at Columbia Business School and counts billionaire investor Warren Buffett as one of his students. As an investing author, he had penned two highly influential texts, Security Analysis and The Intelligent Investor.
Unfortunately, it’d be impossible to get a direct answer to my question above regarding Singapore Post – Graham had sadly passed away in 1976. But, during his career, he did develop a 10-point investing checklist. So, let’s run Singapore Post through the checklist to see what the company might look like through Graham’s lens (all data from S&P Global Market Intelligence, unless otherwise stated):
1. An earnings-to-price yield at least twice the triple-A bond rate
With a trailing earnings per share of S$0.0771 (based on its latest financials for the 12 months ended 31 December 2015) and a current aforementioned share price of S$1.635, Singapore Post has an earnings-to-price yield (earnings per share divided by share price) of 4.7%.
Meanwhile, a Singapore government 10-year bond has a yield of 1.99%, according to the Monetary Authority of Singapore. At the moment, Singapore has a triple-A credit rating from a few credit rating agencies.
In comparing the numbers here, Singapore Post has an earnings-to-price yield that’s slightly more than twice the triple-A bond rate.
2. P/E ratio that is 40% or less than the highest P/E ratio the stock has had over the past five years
Singapore Post’s highest P/E ratio in the last five years was 32.0, and it occurred in early 2015. Singapore Post has a P/E ratio of 21 currently and that’s just 65% of the peak P/E.
3. A dividend yield of at least two-thirds the triple-A bond yield
With a dividend of S$0.07 per share in its last completed fiscal year (12 months ended 31 March 2015), Singapore Post has a dividend yield of 4.28%. That’s higher than the triple-A bond rate we’ve seen earlier.
4. A stock price that’s below two-thirds of the tangible book value per share
Singapore Post currently has a tangible book value per share of S$0.43, which is way lower than its current stock price.
5. A stock price below two-thirds of net current asset value (total current assets minus total liabilities)
With total current assets of S$453 million and total liabilities of S$879 million, Singapore Post has a negative net current asset value.
6. Total debt less than tangible book value
Singapore Post’s total debt is merely 38% of its tangible book value of S$938 million at the moment.
7. Current ratio (total current assets divided by total current liabilities) greater than two
Given the total current liabilities of S$548 million and the total current assets seen earlier, Singapore Post has a current ratio of just 0.83.
8. Total debt less than twice of net current asset value
Singapore Post has a positive total debt number but a negative net current asset value, as we’ve seen.
9. Compound annual earnings growth rate of 7% over past 10 years
In fiscal 2005 (year ended 31 March 2005), Singapore Post had earnings per share of S$0.0579. 10 years later in fiscal 2015, the company’s earnings per share was S$0.0685, which translates to an annual compound growth rate of merely 1.7%.
10. Stability of earnings: No more than two years of declining earnings of 5% or more over the past 10 years.
From fiscal 2005 to fiscal 2015, there were three years when Singapore Post’s earnings per share had slipped by over 5%. Those years were fiscal 2012 (11.5% decline), fiscal 2013 (13%), and fiscal 2015 (27%).
Of the 10 criteria in Graham’s investing checklist, Singapore Post had met only three. As such, Graham would likely have little interest in Singapore Post. But, it’s important to note that it is completely fine for investors to have a completely different opinion on Singapore Post if they have different investing preferences when compared to Graham.
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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.