First Resources Ltd (SGX: EB5) is an integrated palm oil producer. It manages over 210,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia.
Currently, First Resources’ stock price of S$1.76 is just a sliver higher than a 52-week low of S$1.72. This may raise a question among investors: Is First Resources a bargain now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing First Resources’ current valuations with the market’s. 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).
First Resources currently has a PB ratio of 2.15, which is higher than the SPDR STI ETF’s PB ratio of 1.31. It’s a similar story with the PE ratio and dividend yield too. First Resources’ PE ratio is higher than the SPDR STI ETF’s (15.2 vs 11.7), and its dividend yield is lower (2.0% vs 2.91%). To the latter point, the lower a stock’s yield is, the higher is its valuation.
Putting it all together, we can argue that First Resources is trading at a premium to the market, given its higher PB and PE ratios, and lower dividend yield.
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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.