Is the Singapore Stock Market Cheap or Expensive Right Now?
- Original Post from The Motley Fool Sg

Knowing how cheap the stock market currently is, can help us to simplify our investing decision.
There are two methods to find out if Singapore stocks are a steal or are in an overheated territory right now.
The first method is to compare the market’s current price-to-earnings (PE) ratio to the market’s long-term average PE ratio.
The second method is to determine the number of net-net stocks in the market.
With that, let’s check out if the local stock market is cheap or expensive.
The first method
The local stock market can be represented by the Straits Times Index (SGX: ^STI), or STI for short. It consists of the 30 biggest stocks in Singapore.
Since it is difficult to get the past daily PE ratios of the index, the PE ratios of SPDR STI ETF (SGX: ES3) can be used as a proxy. The SPDR STI ETF is an exchange-traded fund (ETF) that replicates the performance of the STI.
As of 14 May 2018, the SPDR STI ETF had a PE ratio of 11.6. Here are some of the other important PE ratios that we need:
1) The long-term average PE ratio: The STI’s average PE ratio from 1973 to 2010 was 16.9;
2) An instance of a high PE ratio for the STI: Back in 1973, the index’s PE ratio hit 35; and
3) An instance of a low PE ratio for the STI: At the start of 2009, the index was valued at 6 times its trailing earnings.
Based on the data above, it is realistic to say that stocks in Singapore are cheaper than average now.
The second method
In this method, we will look at the number of net-net stocks available in the local market.
A net-net stock is a stock with a market capitalisation that is lower than its net current asset value. The net current asset value can be calculated using the following formula:
Net current asset value = Total current assets – Total liabilities
In theory, a net-net stock is a steal as investors can get a discount on the company’s current assets, such as cash, after stripping off all liabilities. Moreover, the company’s fixed assets, such as properties, are thrown into the mix for free.
Logic holds that if a large number of net-net stocks than usual can be found in a stock market at a certain point in time, then stocks would likely to be cheap at that moment.
The following is a chart that shows the net-net stock count in Singapore since 2005:

Source: S&P Global Market Intelligence
Two things are worth noting about the chart.
Firstly, the second-half of 2007 saw the net-net stock count fall to a low of below 50. This was when the STI reached a peak before the Great Financial Crisis struck.
Secondly, the first-half of 2009 was when the net-net stock count hit a high of nearly 200. It was during this time that the STI reached its bottom during the crisis.
We can observe an inverse relationship from the chart – when the STI is at a peak, the net-net stock count is low, and when the STI is at a low, the net-net stock count is high.
As of 14 May 2018, there were 92 net-net stocks. This is comfortably between the net-net stock count’s peak-and-trough from 2005 till today.
A Foolish takeaway
We’ve walked through two ways to find out the state of Singapore’s stock market right now, and they both point to a similar conclusion. That is, stocks here are not that expensive, but they not in a deep bargain region either.
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Recommended & Related Posts

Is SATS A Bargain Now?
- Original Post from The Motley Fool Sg

SATS Ltd (SGX: S58)is a Singapore-listed company with a market capitalisation of S$5.52 billion. As a quick background, SATS is the leading provider of gateway services and food solutions in the region.


It caters to the needs of the aviation sector and a host of other businesses in hospitality, food, healthcare, freight, and logistics industries besides governments. SATS can be seen almost everywhere at Singapore’s Changi Airport, where it manages most of the gateway services for airlines.


Between from 1 Jan to 31 Dec 2018, SAT’s total return, which includes reinvested dividends, underperformed the STI Index (SGX: ^STI), with the former registering a negative 7.2% return, compared to a negative 6.5% return for the latter.


Has the pullback in SATS’ shares made it a bargain at current prices?


To decide we will use four metrics, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and the net-debt-to-equity ratio.


SATS has a trailing twelve months (TTM) earnings per share of S$0.23. At the current share price of S$4.91, the P/E ratio is 21.3, which is in line with its one-year historical PE ratio of 21.


Looking at the earnings per share between 2015 and 2018, (SAT’s fiscal year ends in March) gives a range of S$0.175 to S$0.232. This means that SAT’s TTM EPS is at the high end of its historical range.


At the end of the third quarter of 2018, SATS reported a Net Asset Value of S$1.44. At the current share price, this results in a P/B ratio of 3.41. Looking at its NAV over the past four years, we see a rising trend with NAV coming in at S$1.30 in FY2015 and S$1.46 in FY2018.


At the end of September 2018, SATS had a net debt of S$96.8 million and equity of S$1.6 billion, indicating a net-debt-to-equity-ratio of 0.06. This indicates that SATS is very conservative about taking on too much debt to fuel its growth. Looking at the debt to equity ratio for the past four years, it quickly becomes clear that SATS has consistently been conservative with a stable ratio of 0.07.


Lastly, SATS’ dividend has consistently increased over the last four years, moving up from S$0.14 in 2015 to S$0.18 in 2018. Assuming the company pays out a dividend at the same rate as 2018, this would imply a yield of 3.7% at current prices.


Looking at the four metrics, SATS seems to be attractively priced. Its EPS is at the top end of the range, NAV is rising, debt-to-equity is conservative, and the dividend payout has been increasing.


This suggests that SATS is worthy of further investigation.


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Institutional Investors Have Been Buying These 3 Singapore Blue Chip Stocks
- Original Post from The Motley Fool Sg

There are many ways to find investment insights. Some useful ways are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue.


Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they are doing, as a way to generate ideas.


In this article, I will look at three Singapore stocks (among the top ten stocks) that have seen the highest net purchases in dollar value by institutional investors for the week ended 11 January 2019. They are DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11) andOversea-Chinese Banking Corp Limited (SGX: O39).



Source: Singapore Exchange; SGX Stock Facts


From the above, we can see that institutional investors have been excited about the local banks, buying up all three companies’ stocks in the past week. There are many good reasons that might have driven the recent purchase. For one, the local banks have been delivering solid results in the last few quarters.


Let’s start with DBS Group. For the quarter ended 30 September 2018, DBS Group reported that income grew by 10% from a year ago to S$3.4 billion. Net interest income (income from loans) improved by 15% year-on-year to S$2.3 billion, driven by improvement in net interest margin and loan volume growth. As a result, net profit jumped 72% to S$1.4 billion due to higher income and lower allowances.


Similarly, UOB reported that total income grew by 8% from a year ago to S$2.3 billion. Net interest income (income from loans) grew 14% year-on-year to S$1.6 billion, driven by improvement in net interest margin and loan volume growth. Higher total income, as well as lower allowances, resulted in a higher net profit of 17% year-on-year to S$1.0 billion.


Now let’s move on to OCBC. Similar to its peers above, OCBC reported that total income grew by 5% from a year ago to S$2.5 billion. Net interest income (income from loans) grew 9% year-on-year to S$1.5 billion, driven by improvement in net interest margin and loan volume growth. Moreover, higher total income resulted in net profit up by 12% year-on-year to a record S$1.25 billion!


The banks are expected to report the last quarter result for 2018 in the coming next few weeks. Despite all negative macro news, such as trade war and Brexit, there’s no clear indication that the banks are going to report weaker performance anytime soon.


Another compelling reason that suggests the current purchase of the local banks’ stocks is their valuation. For example, OCBC’s share price of S$11.66, is trading at 1.2 price-to-book (PB) ratio, price-to-earnings (PE) ratio of 10.5 and a dividend yield of 3.4%. The DBS share price of S$ 25.03, on the other hand, is trading at price-to-book (PB) ratio of 1.3, price-to-earnings (PE) ratio of 11.9 and a dividend yield of 4.9%.


Comparatively, the market average’s PB ratio, PE ratio and dividend yield is at 1.1 times, 11.5 times and 3.5% respectively. If we useSPDR 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).”


Overall, we can see that the banks trading at a valuation that is comparable to the market average.


Conclusion:


Looking at what institutional investors are doing could be a useful tool in your toolkit when sourcing for investment ideas. But do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.


$STI(^STI.IN) $DBS(D05.SI) $STI ETF(ES3.SI) $OCBC Bank(O39.SI) $UOB(U11.SI)

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Institutional Investors Have Been Buying These 3 Singapore Blue Chip Stocks
- Original Post from The Motley Fool Sg

There are many ways to find investment insights. Some useful ways are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue.


Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they are doing, as a way to generate ideas.


In this article, I will look at three Singapore stocks (among the top ten stocks) that have seen the highest net purchases in dollar value by institutional investors for the week ended 11 January 2019. They are DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11) andOversea-Chinese Banking Corp Limited (SGX: O39).



Source: Singapore Exchange; SGX Stock Facts


From the above, we can see that institutional investors have been excited about the local banks, buying up all three companies’ stocks in the past week. There are many good reasons that might have driven the recent purchase. For one, the local banks have been delivering solid results in the last few quarters.


Let’s start with DBS Group. For the quarter ended 30 September 2018, DBS Group reported that income grew by 10% from a year ago to S$3.4 billion. Net interest income (income from loans) improved by 15% year-on-year to S$2.3 billion, driven by improvement in net interest margin and loan volume growth. As a result, net profit jumped 72% to S$1.4 billion due to higher income and lower allowances.


Similarly, UOB reported that total income grew by 8% from a year ago to S$2.3 billion. Net interest income (income from loans) grew 14% year-on-year to S$1.6 billion, driven by improvement in net interest margin and loan volume growth. Higher total income, as well as lower allowances, resulted in a higher net profit of 17% year-on-year to S$1.0 billion.


Now let’s move on to OCBC. Similar to its peers above, OCBC reported that total income grew by 5% from a year ago to S$2.5 billion. Net interest income (income from loans) grew 9% year-on-year to S$1.5 billion, driven by improvement in net interest margin and loan volume growth. Moreover, higher total income resulted in net profit up by 12% year-on-year to a record S$1.25 billion!


The banks are expected to report the last quarter result for 2018 in the coming next few weeks. Despite all negative macro news, such as trade war and Brexit, there’s no clear indication that the banks are going to report weaker performance anytime soon.


Another compelling reason that suggests the current purchase of the local banks’ stocks is their valuation. For example, OCBC’s share price of S$11.66, is trading at 1.2 price-to-book (PB) ratio, price-to-earnings (PE) ratio of 10.5 and a dividend yield of 3.4%. The DBS share price of S$ 25.03, on the other hand, is trading at price-to-book (PB) ratio of 1.3, price-to-earnings (PE) ratio of 11.9 and a dividend yield of 4.9%.


Comparatively, the market average’s PB ratio, PE ratio and dividend yield is at 1.1 times, 11.5 times and 3.5% respectively. If we useSPDR 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).”


Overall, we can see that the banks trading at a valuation that is comparable to the market average.


Conclusion:


Looking at what institutional investors are doing could be a useful tool in your toolkit when sourcing for investment ideas. But do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.


$STI(^STI.IN) $DBS(D05.SI) $STI ETF(ES3.SI) $OCBC Bank(O39.SI) $UOB(U11.SI)

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Are Singapore Shares Cheap or Expensive Right Now?
- Original Post from The Motley Fool Sg

Since the start of January 2019, the Straits Times Index (SGX: ^STI) has increased by 4.7%. With the recent stock market rally, investors might be wondering if Singapore shares are still as attractively priced as before.


There are two methods to determine if Singapore shares are cheap or expensive right now.


The first method is to compare the market’s current price-to-earnings (PE) ratio to the market’s long-term average PE ratio. The second approach involves looking at the number of net-net stocks in the stock market.


PE valuation method


Since it is difficult to get the past daily PE ratios of the Straits Times Index, the PE ratios of SPDR STI ETF (SGX: ES3) can be used as a proxy. The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the fundamentals of the Straits Times Index.


As of 15 January 2019, the SPDR STI ETF had a PE ratio of 11.6. Here are some of the other important PE ratios that we need:


1) The long-term average PE ratio: The STI’s average PE ratio from 1973 to 2010 was 16.9;


2) An instance of a high PE ratio for the STI: Back in 1973, the index’s PE ratio hit 35; and


3) An example of a low PE ratio for the STI: At the start of 2009, the index was valued at 6 times trailing earnings.


Based on the data above, we can see that Singapore stocks are cheaper than average currently.


Net-net stocks method


In this method, we will look at the number of net-net stocks available in the local stock market. To know what a net-net stock is, you can head to the explanation here. If there is a large number of net-net stocks than usual in the stock market, it could mean that stocks are cheap at that moment.


The following is a chart that shows the net-net stock count in Singapore since 2005:



Source: S&P Global Market Intelligence


When the Straits Times Index is at a peak (such as in the second half of 2007), the net-net stock count is low. The reverse is also true: When the Straits Times Index is at a low (like in the first half of 2009), the net-net stock count is high. In the second half of 2007, the net-net stock count was below 50 while in the first half of 2009, the figure was at the peak of almost 200.


As of 15 January 2019, there were 112 net-net stocks. This is comfortably between the net-net stock count’s peak-and-trough from 2005 till today.


The Foolish takeaway


Based on the two different valuation methods, we can safely say that stocks in Singapore are not that expensive, but they not in extreme bargain territory either.


$STI(^STI.IN) $STI ETF(ES3.SI)

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Are Singapore Shares Cheap or Expensive Right Now?
- Original Post from The Motley Fool Sg

Since the start of January 2019, the Straits Times Index (SGX: ^STI) has increased by 4.7%. With the recent stock market rally, investors might be wondering if Singapore shares are still as attractively priced as before.


There are two methods to determine if Singapore shares are cheap or expensive right now.


The first method is to compare the market’s current price-to-earnings (PE) ratio to the market’s long-term average PE ratio. The second approach involves looking at the number of net-net stocks in the stock market.


PE valuation method


Since it is difficult to get the past daily PE ratios of the Straits Times Index, the PE ratios of SPDR STI ETF (SGX: ES3) can be used as a proxy. The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the fundamentals of the Straits Times Index.


As of 15 January 2019, the SPDR STI ETF had a PE ratio of 11.6. Here are some of the other important PE ratios that we need:


1) The long-term average PE ratio: The STI’s average PE ratio from 1973 to 2010 was 16.9;


2) An instance of a high PE ratio for the STI: Back in 1973, the index’s PE ratio hit 35; and


3) An example of a low PE ratio for the STI: At the start of 2009, the index was valued at 6 times trailing earnings.


Based on the data above, we can see that Singapore stocks are cheaper than average currently.


Net-net stocks method


In this method, we will look at the number of net-net stocks available in the local stock market. To know what a net-net stock is, you can head to the explanation here. If there is a large number of net-net stocks than usual in the stock market, it could mean that stocks are cheap at that moment.


The following is a chart that shows the net-net stock count in Singapore since 2005:



Source: S&P Global Market Intelligence


When the Straits Times Index is at a peak (such as in the second half of 2007), the net-net stock count is low. The reverse is also true: When the Straits Times Index is at a low (like in the first half of 2009), the net-net stock count is high. In the second half of 2007, the net-net stock count was below 50 while in the first half of 2009, the figure was at the peak of almost 200.


As of 15 January 2019, there were 112 net-net stocks. This is comfortably between the net-net stock count’s peak-and-trough from 2005 till today.


The Foolish takeaway


Based on the two different valuation methods, we can safely say that stocks in Singapore are not that expensive, but they not in extreme bargain territory either.


$STI(^STI.IN) $STI ETF(ES3.SI)

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