In my previous articles here and here, I looked at the merits of Sheng Siong as an investment for your retirement portfolio Overall, the conclusion was that Sheng Siong is a robust candidate worthy of consideration for your retirement portfolio. Nevertheless, despite all those reasons provided, there is one risk that investors should take into account as well before investing in the company now.
As investors, we always try to buy something at less than its value. In simple terms, that means paying less than S$1 for each dollar of assets. This is important since a great company might end up being an unsatisfactory investment if we overpay for it.
One way to gauge Sheng Siong’s valuation (overvalued, fair, or undervalued) is to compare its price to earnings (PE) ratio, price to book (PB) ratio and dividend yield to the market. Here, I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market.
Source: Yahoo Finance
From the above, we can see that Sheng Siong is trading at a premium to the market average on all three metrics. As investors, we need to consider whether it’s prudent to purchase the company’s stock at the current valuation.
In sum, Sheng Siong is a good candidate for consideration for your retirement portfolio due to its stable financial and dividend track record, as well as its solid balance sheet strength.
Yet its current high valuation as compared to the market average means that investors should still carefully evaluate the company’s long-term prospects before investing in it at its current price.
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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 recommended the shares of Sheng Siong Group Ltd.