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The Valuation Of United Overseas Insurance: Now and The Past

United Overseas Insurance Limited (SGX: U13), or UOI in short, is an insurance company that focusses on the underwriting of general insurance business and reinsurance. General insurance covers a broad spectrum of insurances, amongst which are fire, marine, motor, engineering, general accident and liability business.

Last week, UOI appeared on my radar, as it was trading close to its 52-weeks low. As such, the next logical question is whether it is cheap?

There is no simple answer to this. Nevertheless, we will try to answer the above question by comparing UOI’s current valuation with its historical valuation. For this exercise, we will look at 3 ratios – price-to-book, price-to-earnings and dividend yield.

Price-to-book

In the last 5 years, UOI has traded at a relatively stable price-to-book ratio of between 0.9 to 1 times.

At today’s price of $ 4.76, UOI is trading at the price to book ratio of 0.93 times. This means that as compare to the past, the current book ratio is at the lower end of the range.

Price-to-earnings

1

Source: Internal Calculations

Here, we see that the company TTM p/e ratio is higher than the highest p/e ratio for the past 5 years. This may suggest that the company is trading at a premium over its historical multiples.

Dividend Yield

2

Source: Internal Calculations

Using the dividend yield, UOI seems to be trading at a relatively rich valuation since current dividend yield of 3.15% is lower than the 5 years average of 3.64%.

Based solely on dividend yield, investors can hardly conclude that UOI is cheap as compare to its historical valuation.

Conclusion:

As a whole, it seems that UOI is not cheap when we compare its current ratios with the past 5 years. So despite trading at around its 52-weeks low, UOI may not seem to be trading at very appealing valuations in relation to its past.

It may be useful, therefore, to compare UOI’s valuation to its peers for a better picture.

Lastly, it is important to understand that valuation is only one of the many aspects that investors should consider before committing to an investment. Other qualitative factors such as future growth potential and quality of management must also be considered before an investment decision is made.

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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.