Thai Beverage Public Company Limited (SGX: Y92), also known as Thai Bev, is a food and beverage company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages.
At its current price of S$0.82 (at the time of writing), Thai Bev’s shares are almost flat as compared to a year ago. This brings us to the main focus of this article: Is Thai Bev cheap now? This question is important because if the firm’s shares are cheap, it might be an opportunity for investors to consider it for their retirement portfolio.
Is it cheap?
Here, I would like to stress the importance of buying stocks at a low valuation, which will give us a good margin of safety. This is even more important for those who are buying stocks for your retirement portfolio as they should not overpay for stocks to avoid permanent impairment of capital. Though there are other factors (such as a good business, honest and able management, strong balance sheet etc.) that a retiree should consider before investing in any company, we will focus mainly on the valuation aspect of Thai Bev for now.
So is it cheap now? Unfortunately, there is no easy answer. However, we can still get some insight by comparing Thai Bev’s current valuation 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). Thai Bev currently has a PB ratio of 5.6, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.1. Similarly, its PE ratio is much higher than that of the SPDR STI ETF’s (37.3 vs 12.1). Moreover, the conglomerate’s dividend yield of 1.5% is lower than the market’s yield of 3.6%. The lower a stock’s yield is, the higher is its valuation.
In sum, we can argue that Thai Bev is priced at a premium to the market average due to its high PB ratio, high PE ratio, and low dividend yield. Thus, investors who are considering buying this stock for their portfolio should cautiously evaluate the company’s long-term prospects before investing.
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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.