Hongkong Land Holdings Limited (SGX: H78) is one of the companies related to the web of Jardines companies.
Hongkong Land is currently trading close to its 52-week low price. This raises a question: is the company trading at a bargain price now?
Unfortunately, there is no easy answer to this but I will hope to answer that question by looking at its valuation. To do so, we will compare Hongkong Land’s current valuation to the market in terms of three perspectives, namely, price-to-book (PB) ratio, price-to-earnings (PE) ratio and dividend yield. This should give us some hints whether the company is trading at a bargain price.
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).
Hongkong Land currently has a PB ratio of 0.5 times, which is lower than the SPDR STI ETF’s PB ratio of 1.3. This makes Hongkong Land 60% cheaper than the market based on the PB ratio.
Moreover, Hongkong Land’s PE ratio of 3.2 is 73% cheaper than that of the SPDR STI ETF’s 11.6.
As for dividend yield, Hongkong Land has a lower dividend yield of 2.75% as compared to the market’s yield of 2.9%. For dividend yield, the lower the number, the higher the valuation. On that basis, Hongkong Land is currently trading at a marginal premium of 5% to the market’s yield.
Putting all together, we can argue that Hongkong Land is probably trading at a bargain price, mainly due to its low PB ratio and low PE ratio, but offset slightly by its low dividend yield, as compared to the market.
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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. Motley Fool Singapore has a recommendation for Hongkong Land Holdings Limited.