United Overseas Bank Ltd (SGX: U11) or UOB in short, is one of the three major banks based out of Singapore.
After reaching an intra-day peak of S$30.37 this year, UOB’s share price has declined by about 10% to S$27.32 (at the time of writing). Despite the fall in share price, there are many reasons why UOB might be a good investment for investors. I discussed the first three reasons in a previous article. As a quick recap, the reasons are:
1. Strong recent quarterly earnings update;
2. Good financial track record;
3. Stable dividend track record
In this article, I will share another reason.
As investors, we should always invest in shares that are trading at less than their intrinsic values. In other words, that means paying less than a dollar, for a dollar. The lower a stock’s valuation is, the higher the margin of safety as well as potential upside there is.
The recent decline in UOB’s share price has brought its valuation down. At S$27.32, UOB has a price-to-book (PB) ratio of 1.2.
Source: S&P Global Market Intelligence
From the chart above, we can see that UOB’s current PB ratio is in the middle of where the valuation measure has been over the past five years – that also means that UOB has a decent valuation right now.
In sum, there are a few good reasons for investors to be excited over UOB’s shares: Its recent quarterly earnings update was strong; its historical financials are good; it has a respectable dividend track record; and it has a decent valuation.
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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. The Motley Fool Singapore has a recommendation for United Overseas Bank.