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Vicom Limited Is Trading Close To Its 52-Week Low: Is It Cheap Now?

Vicom Limited (SGX: V01) is a leading provider of vehicular and non-vehicular related technical testing and inspection services with operations primarily in Singapore. The company is majority-owned by land-transport giant, ComfortDelgro Corporation Limited (SGX: C52).

In this article, we will try to answer a simple question about Vicom. Is the company’s current valuation cheap, fair or expensive?

Unfortunately, there is no easy answer to this since there are many ways to look at valuation. Still, we will try to answer the above question by comparing Vicom’s current valuation to the market in terms of three metrics, price-to-book, price-to-earnings and dividend yield.

Here, the proxy that we will use to the market is the STI ETF (SGX: ES3), an exchange traded fund that tracks the fundamentals of the Straits Times Index (SGX: ^STI).

Price-to-book ratio (P/B)

*Source: Google Finance at price of $5.67

As we can see from the chart above, the P/B ratio for Vicom is about 2.7 times that of the STI ETF.

As such, assuming everything else is equal and that P/B ratio is used as the sole criterion for valuation, Vicom is 2.7 times more expensive than the market average.

Price to earnings ratio (P/E)

*Source: Google Finance at price $5.67

From the chart above, we can see that Vicom’s P/E ratio is trading at about 134% of the market average.

This suggests that if P/E ratio is used as a sole metric for valuation, Vicom is again trading at a premium to the market average.

  Dividend yield

*Source: Google Finance at price $5.67

Lastly, we will compare the dividend yields. Here, we can see that Vicom’s dividend yield of 2.9% is marginally higher than that of the market of 2.8%.

Dividend yield is an inverse of valuation, thus, the higher the yield, the lower the valuation. On that basis, we can see that Vicom is trading at a valuation that is on par with the market average.

Conclusion           

Based on what we have seen above, we may argue that Vicom is currently priced at a premium to the market average, taking into account Vicom’s high P/B ratio and P/E ratio.

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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.