How To Read This Table

Foreword from ShareInvestor

This article “How To Read This Table” by Cai HaoXiang was first published in The Business Times on 28 Jan 2013 and is reproduced in this blog in its entirety.

The following table displays all 30 component stocks making up the Straits Times Index (STI), Singapore’s benchmark index..

These are the largest and most liquid stocks traded on the Singapore Exchange and span the property, financial, industrial and services sectors. The stocks are arranged according to alphabetical order.

“Last price” refers to the last traded price of the stock before this newspaper went to print. This would be the price of the stock on Friday, January 25 after markets closed at 5pm.

“12m Dvd” refers to the 12-month dividend yield of the stock. This refers to the total dividends per share that have been paid out by the company over the last 12 months, divided by the last price of the stock. It is a measure of the return one would get from owning the stock. Dividends are typically paid by companies that have stable businesses with solid cashflows. Most, if not all companies on the STI would fall under this category.

“Market cap”, or market capitalisation, refers to the total valuation of the company that the market gives to it. It is calculated by multiplying the share price by the total number of outstanding shares of the company. This figure is used as a measure of the company’s size. SingTel is the largest stock on the Singapore market, with a market capitalisation of $55 billion.

Large cap companies are usually defined as companies with a market value of $10 billion or more. Small cap usually refers to stocks with a market value of under $2 billion. Most stocks on the STI would fall under the “large cap” category.

The next two measures are ways to value companies to find out whether they are cheap or expensive, and hence undervalued or overvalued. However, they have to be used with care.

“PE Ratio” stands for price to earnings ratio. It is calculated by dividing the share price with a company’s earnings per share over the last 12 months. It is a measure of how pricey the company is, relative to its profit per share.

A high PE ratio suggests investors expect the company to be more profitable in the future. It also shows how much they are willing to pay per dollar of earnings. For example, a PE of 24.8 for Genting Singapore means that investors are willing to pay almost $25 for every $1 of profit it generates.

The historical PE ratio of the STI is around 12 to 14 times its earnings. Analysts have noted in recent months that the STI is trading close to this earnings multiple, and have remained neutral on whether the Singapore market would go up or down.

A company that is recovering from a downturn in its earnings but is otherwise regarded as stable can trade at a very high PE. SIA, for example, has been struggling with declining profitability amid difficult global economic conditions that affected demand for air travel. Nevertheless, its PE ratio is at 49.2, suggesting that the investment community expects its earnings to recover.

When social media giant Facebook went public last year, it had reported earnings of US$1 billion but was valued at US$100 billion – a PE ratio of 100. If its earnings does not increase fast enough to justify its expensive valuation, investors would lose confidence and take flight – which was what happened to Facebook soon after its initial public offering.

A low PE ratio, meanwhile, can either suggest that the company is not expected to do well in the future, or that it is undervalued. The PE ratio, overall, has to be used carefully as its underlying metric, net profit per share, can be manipulated by companies through accounting adjustments. Huge one-off gains or losses can also distort the ratio.

Here, our PE ratio is calculated based on earnings history over the last year. This is commonly used as it is based on actual earnings. Another way to calculate the PE ratio is the “forward PE ratio”, based on earnings estimates.

“P/B Ratio”, or price to book ratio, is calculated by dividing stock price by a company’s book value per share. This can be calculated by subtracting total liabilities from total assets from the company’s most recent balance sheet, and dividing the remainder by shares outstanding. This gives some idea of what an investor would get from the company if it was bankrupt.

This can give a clue to whether investors are overpaying for a stock, or whether the stock is undervalued and thus a good buy.

Loss-making stocks, stocks with a dim future or undervalued stocks typically trade at below their book values, meaning a ratio below 1.

Typical ratios vary by industry. Real estate investment trusts, for example, typically have a long-term P/B ratio of 1 – meaning they are priced at exactly what their net assets would be worth.

Unlike property companies, service providers like SGX or ST Engineering typically cannot be valued by just their tangible assets alone – hence their higher P/B ratios. StarHub has an abnormally high P/B ratio because of how a substantial amount of its assets are reported at the company level instead of the group level.