Friday, January 26, 2007

Value Investment on Singapore Stock Exchange - Valuation Report of Singapore Exchange (revised)

Value Investment on Singapore Stock Exchange - Valuation Report of Singapore Exchange (revised on 28-Jan-2007)

As correctly pointed out by 3 blog readers (thanks folks!), the original post contains several data errors. Thus this posting is revised (original values in red, revised values in blue) to reflect a more accurate valuation. After correcting the data errors, the final word and conclusion is the same as the previous stand.

Evaluated on 25-Jan-2007 and I am currently not invested in this company.

About the company:

  1. Core Business: SGX owns and operates the only integrated securities exchange and derivatives exchange in Singapore and their related clearing houses.
  2. Date of Listing: Nov-2000
  3. What I like about this company: Its has monopoly over the singapore exchange! It is also diversifying its revenue sources, in terms of product types and geographical areas.
  4. What I do not like about this company: My personal opinion is that the current market is rallying, without much fundamental reasons. Thus, I am quite worried about when the next downturn will come about.
  5. Competitive advantage (if any): Of course! It is the only 'player' locally!

Valuation Statistics (base on 1H07 financial report)

  1. Earning Per Share: $.021 (projected, excl once-off gains) (correct value is $0.21)
  2. Price/Earnings ratio : 63.80 (annualized value is 32.14)
  3. Operating Profit: 58.6%
  4. Return on Equity Ratio: 38.9 (annualized)
  5. Current Ratio: 0.31 (correct value should be 1.68)
  6. Debt/Total Equity Ratio: 0.39 (correct value should be 0.78)
  7. Net Tangible Assets: $0.452 (correct value should be $0.5425)


  1. Price: $6.75 (25-Jan-07)
  2. Intrinsic Value: $0.981 (highly subjective) (revised to $1.60)
  3. Maximum Price I would purchase at: $0.785 (highly subjective) (revised to $1.28)
  4. Current Price to Max price I would buy at: 688% !!! (revised to 421%)
  5. Final word: At a 688% or 421% price to IV ratio, it must be one of the most pricey stock! I would defintely hesistate to purchase at this point in time.

Information sources

  1. SGX company website at
  2. SGX Financial Statements for the Quarter Ended 31 December 2006 at (pdf file)

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.


Aragorn said...

Intrinsic Value: $0.981 ?

Is there a typo error?


Gung Ho said...

It sure looks like a super pricey stock. Anyway, I shared your sentiments and I had been waiting for some minute form of correction coming up. Probably not as strong as the one in May/June 06 but something along similar concept.

Anonymous said...

Where u get the earnings per share?

Lim Fu Chin said...

Dear Aragorn and anonymous,

You are both correct, there is some data errors in this positng. Thanks for pointing it out!

Thus, I have revised the original post (with original and revised values) to reflect a more accurate valuation.

The main source of data is also included, it is from the 2Q Financial report from SGX. See the end of the revised posting for the link.

Thanks for pointing them out! :)

Have fun investing! :)

Warm regards,
Fu Chin
Value Investment Blog: URL:

mike said...


Interesting valuation on SGX but could you enlighten how you derive the intrinic value of 0.981?

I did my only analysis and came out with intrinsic value of 3.54 (based on 1H2007 and forecasted 2H2007 figures)

Agree that current PE is very high and will probably correct to historical PE of between 16-20.

Care to share as I am also new in value investing. Thanks

Do chk out OCBC research analyst's report on SGX.

Michael Cheng

Fu Chin said...

Hi Mike,

Thanks for your comments and queries.

The link that you have sent to me does not show the Net Asset Value?

The link seems to be very much focused on growth and the methodology I use does not favour growth very much.

The methodology details I use (pls view as reference and sceptism) can be found at:

In essence, I take the current EPS, multiply it by 5 (assuming limited growth) and add the NAV to it. Using the base value, I apply a discount to it...That is how I derive the fair price of less than $1 for this one.

Of course, as I always point out, this is only my personal view. There are many other view out there which could be more accurate / more right than mine. :)

Have fun investing! :)

Warm regards,
Fu Chin
Value Investment Blog: URL:

Anonymous said...


I was the anon up there,
anway, your intrinsic value is rather low if measured in terms of PE... esp. for a monopoly.

btw, how you get ur Price to IV ?
6.75/1.6 = 421%


Fu Chin said...

Dear anonymous,

Yes you are right.

There is a mistake to the calculations. I will update it.

Also, you likely to be right that using just PE may not do justifications to the monopoly.

So, I looked into its price trend and realized that it was trading between $1.78 - $2.94 during Jan-Dec 2005. By Dec 2006, its price shot up to $5.80, about 100% increase. Of course, to be balanced, I looked at its revenue and profit. Revenue increased 48%, profit before tax increased 76%.

Finally, I re-looked at its PE. Its PE during 1H-05 is about 15.3, its current PE is 32.14.

So, it seemed the price run-up appears to be justified?

Okay, let us look at its revenue source, its main revenue comes from the market activities. Ya?

When a downturn comes about, with little sell/buy activities in the market, its earning will drop. Ya?

So, if the above theory is true and I am given a choice, I rather buy it when its earning drop, when the stock would be at its cyclic low?

Anyway, I just realized yesterday from a meeting with Singapore Value Club, that I still have a lot to learn and probably should just keep my mouth shut... for a long while...

Happy investing. :)

Fu Chin

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