United Overseas Bank Ltd (SGX: U11) or UOB is one of the three major banks based out of Singapore.
At the current price of S$24.80 (at the time of writing), United Overseas Bank’s shares are just 4% higher than the 52-week intraday low price of S$23.80. This raises a question: Is United Overseas Bank 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 United Overseas Bank’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).
United Overseas Bank currently has a PB ratio of 1.1, which is similar to the SPDR STI ETF’s PB ratio of 1.1. Its PE ratio is lower than that of the SPDR STI ETF’s (10.7 vs 12.1). Similarly, the bank’s dividend yield of 4.0% is higher than the market’s yield of 3.6%. The higher a stock’s yield is, the lower is its valuation.
In sum, we can argue that United Overseas Bank is priced at a marginal discount to the market average due to its low PE ratio and 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 has recommendations for United Overseas Bank Ltd.