City Developments Limited (SGX: C09) is a real estate company. Its segments include property development, hotel operations, rental properties and others.
At the current price of S$9.71 (at the time of writing), City Developments’ shares are just 1.8 percent higher than the 52-week low price of S$9.54. This raises a question: Is City Developments cheap now? This question is important because if the firm’s shares are cheap, it might be a good opportunity for investors.
Unfortunately, there is no easy answer. However, we can still get some insights by comparing City Developments’ current valuations with the market’s valuation. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
City Developments currently has a PB ratio of 0.88, which is lower than the SPDR STI ETF’s PB ratio of 1.11. Yet, City Developments’ PE ratio is higher than that of the SPDR STI ETF’s (17.7 vs 10.4). In addition, the property conglomerate’s dividend yield of 1.23% is lower than the market’s yield of 3.08%. The lower a stock’s yield is, the higher is its valuation.
In sum, we can argue that City Developments is priced at a small premium to the market given its high PE ratio and low dividend yield, partially offset by its low PB 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.