Dairy Farm International Holdings Ltd (SGX: D01) is a conglomerate with four main business segments: Food, Health and Beauty, Home Furnishings, and Restaurants. In Singapore, Dairy Farm is the owner of stores such as Guardian, Cold Storage, Giant Hypermarket, and 7-Eleven.
At the current price of S$7.33 (at the time of writing), Dairy Farm’s shares are just 4% higher than their 52-week low of S$7.02. Does that make Dairy Farm cheap now? That’s difficult to answer, but if so, it might be a good opportunity for investors.
We can get some insight by comparing Dairy Farm’s current valuation with the market’s valuation using three common metrics: the price-to-book (P/B) ratio, price-to-earnings (P/E) 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).
Dairy Farm currently has a P/B ratio of 6.9, which is higher than the SPDR STI ETF’s P/B ratio of 1.1. Similarly, its P/E ratio is higher than that of the SPDR STI ETF’s (108.1 vs. 12.4). Also, the conglomerate’s dividend yield of 2.9% is lower than the market’s yield of 3.6%. The lower a stock’s yield, the higher its valuation.
Dairy Farm looks to be priced at a premium to the market average due to its high P/B ratio, high P/E ratio, and low 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 Dairy Farm International Holdings Ltd.