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Fraser and Neave Limited Is Trading Close To Its 52-Week Low Price: Is It Cheap?

Fraser and Neave Limited (SGX: F99), or F&N for short, is a consumer group with expertise in the food and beverage, publishing and printing sectors.

At the current price of S$1.86 (at the time of writing), F&N’s shares are just two cents higher than the 52-week low price of S$1.84. This raises a question: Is F&N 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 insight by comparing F&N’s 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).

F&N currently has a PB ratio of 0.9, which is lower than the SPDR STI ETF’s PB ratio of 1.1.

Yet, F&N’s PE ratio is higher than that of the SPDR STI ETF’s (30.3 vs 11.2). In addition, the group’s dividend yield of 2.4% is lower than the market’s yield of 3.5%. The lower a stock’s yield is, the higher is its valuation.

In sum, we can argue that F&N is priced at a premium to the market average due to 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.