Singapore Exchange Limited (SGX: S68) or SGX for short, is the only stock exchange in Singapore.
At the current price of S$6.90 (at the time of writing), SGX’s shares are just nine cents higher than its 52-week low price of S$6.81. This situation raises a question: are shares of SGX 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 SGX’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).
SGX currently has a PB ratio of 6.8, which is higher than the SPDR STI ETF’s PB ratio of 1.1. In addition, its PE ratio of 20.5 is higher than that of the SPDR STI ETF’s PE ratio of 10.7. Yet, the company’s dividend yield of 4.3% is higher than the market’s yield of 3.6%.
In sum, we can argue that SGX is priced at a premium to the market average due to its high PB ratio and high PE ratio. Nevertheless, dividend investors might find the company an interesting idea to explore further due to its high dividend yield.
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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. Motley Fool Singapore has a recommendation for Singapore Exchange Limited.