Thursday, January 4, 2007

Valuation of STRAITS TRADING COMPANY LTD (STR.SG)

  1. Date of evaluation: 28-Dec-06
  2. Price: $3.50
  3. Current Ratio: 0.9
  4. Debt/Total Equity Ratio: 0.5
  5. Operating Profit: 9.8%
  6. PE ratio: 17.8
  7. Net Tangible Assets: $3.62
  8. Earning Per Share: $0.37 (projected)
  9. What I like about this company: It has a capable management team with broad and in-depth experience in its core business. Also, the last land valuation of its main building was done in 2003. The next revaluation (2006, to be reported in 2007) should see a higher valuation, and thus an increase in NTA.
  10. What I do not like about this company: 70% of its income comes from its core Tin mining business, although in recent years, it is diversifying in to property & hotel.

Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.

2 comments:

wei han. said...

Hi Fu Chin. Nice of you to share your experience in investing and your thoughts with us. i was wondering is your blog for inexperienced and un-knowledgable investors or for the wiser investors?

As a lesser experienced investor, I may know the the relationship between current debt to equity ratio. I might not understand how this and current ratio will affect at which price should we buy the "undervalued" stock. And at wat price is a stock undervalued.

But if its more for the wiser, experienced investors, probably they might give 2 thumbsup for sharing.

That's my take.

weihan

Lim Fu Chin said...

Hi Wei Han,

Thanks for the encouragements. :)

This blog is for you and your friends, at any levels of investing experience.

For the beginners, hopefully they can benefit by learning my experiences and the wiser experienced investors can read and correct any mis-conceptions published in the blog.

You can consider me as a beginner, still having much to learn!

The current ratio is a good check of the company's liquidity, i.e. how well can it meet the current year's debts with its current year's assets.

The "current year's assests" should include cash in bank, short term investments, receivables, etc but exclude buildings, plant, equip, etc.

You can find the current ratio by dividing the total current assets by the total current liabilities.

For example, if a company has $100 million in current assets and $50 million in current liabilities, the current ratio would be 2 (10/5 = 2).

Well, if the company has very low current ratio, e.g. < 1.0, it may be a symptom of bigger problems or opportunities. E.g. whether the business is going bust soon (run-out-of cash) or its expansion program (to increase future non-current assets and growth) is well underway! More research will have to be done to determine the reason(s).

Thanks again for the queries and happy investing! :)

Warm regards,
Fu Chin
Value Investment Blog:
URL: http://valueinvestmentonsgx.blogspot.com/