(1) Using Price Earning Ratio (P/E Historical Ratio)

Historical P/E Chart

(2) Using Discounted Earnings Per Shares (10 Years Method)

Intrinsic Value Calculator

The calculated intrinsic value  resulted at: – $19.15 (53.41% from the current price of $8.92 as at 1st Sept 2010)

Followings are the financial information taken from Reuters.

Financial Information

(3) Technical Analysis

Technical Analysis

The P/E is the price-to-earnings ratio. It is used to calculate how expensive or how cheap a stock is relative to its earnings. Using it, an investor can get a sense of whether a stock might be overvalued or undervalued. The ratio is calculated as follows:

P/E = Price per share / Earnings per share

The price per share is the current market price for a single share of stock. The earnings per share is the net income divided by the total number of shares outstanding. You can find net income by looking at a current income statement, which almost all corporations now make available on their company website.

The lower the P/E, the cheaper the stock is. The higher the ratio, the more expensive the stock is relative to its current earnings. However, that does not give you the full picture. The reason why some companies sometime trade at very high price-to-earnings ratios is because they are expected to grow tremendously in the months and years ahead. So, investors are willing to pay more than what the company is currently worth because they feel the company will be worth a lot more in the future.

So, you should not necessarily run away from a company with a high P/E. In fact, those companies are sometimes the best investments, because if their earnings climb tremendously, then the stock will pay a large dividend in the future (for the uninitiated, dividends are a percentage of the profits of a company that are distributed to its shareholders). So, a high P/E ratio can be a very good thing or a very bad thing.

As with a high P/E, a low P/E can also be tricky. If it is low, this could be an indication that the earnings of the company are expected to plummet, causing investors to run away from the stock, resulting in a low share price.

Or, the low ratio might indicate that the company is currently undervalued, making it a good buy because as long as the company is expected to have stable earnings growth in the future, then the share price will go up. It is not easy to discern whether a high or low ratio is good or bad; you need to take into account the expectations for future earnings growth to understand if the P/E ratio is a positive or a negative.

The pitfalls of using the P/E ratio to interpret the relative worth of a stock resulted in analysts coming up with a better measurement, which is known as the PEG ratio. The PEG refers to the price-to-earnings growth ratio. It is calculated like this:

PEG = (P/E) / Annual earnings-per-share growth

The lower the PEG ratio, the more undervalued the company is. A PEG ratio of 1 or less is considered excellent. For example, if a company has a P/E ratio of 30, and annual earnings-per-share growth of 50%, then the PEG would be 0.6, making this company an excellent buy because it is undervalued and the stock price will almost definitely climb. However, if a company has a PEG of 1.5, that means that the stock price is high relative to the earnings growth, which means that unless the company is supposed to grow at a faster rate in the years head, the stock price might not hold up.

So, it is obvious that the PEG is a much more valuable tool for investors to use. It reveals whether the high price of a stock is justified based on whether earnings will grow enough to continue to drive the stock higher.

The P/E falls short in this regard because it does not take into account by what percentage earnings are growing each year. Increasing earnings are the driving force behind an increase in the price of a stock. Therefore, using the PEG, you can truly ascertain whether the price is currently too high and whether it is a good time to buy the stock.

I hope this information has helped you form an understanding of how to evaluate stock prices. Try to set aside some money for investing, and begin to analyze stocks and buy the ones that have a low PEG. They may not go up right away, but in the long run they should increase significantly, unless there is something fundamentally wrong with the company. Research carefully the companies you are going to invest in and you will do fine.

About The Author, Jim Pretin
Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make an HTML form

Comfort Delgro
Recommendation: Buy
Previous close: S$1.55
Fair value:S$1.75
 - 2Q10 revenue came in at S$789.3m (+4.1% y-y) while net profit was up 1.6% y-y to S$58.2m, both were ahead of our expectations
 - Strong performance from its Singapore Taxi and Australia bus business
 - Upgrading our revenue and net profit estimates by 1.2% and 10.8% to reflect the broad based growth and stringent costs management
 - Upgrade to BUY from Hold with a fair value of S$1.75

Oceanus
Recommendation: Hold
Previous close: S$0.305
Fair value:S$0.34
 - 2Q10 results were within expectations, revenue up 40% y-y while net profit up 7%y-y
 - Collaboration with Lobster Harvest to develop commercial lobster production
 - Abalone population back to healthy levels
 - Maintain HOLD recommendation and fair value estimate of S$0.34

Midas
Recommendation: Buy
Previous close: S$0.91
Fair value:S$1.21
Revenue for 2Q10 up 25.8% y-y to S$47.6m, net profit up 17.6% to S$11.1m
 - 2Q10 results was within our expectations
 - On track for another year of record earnings
 - Maintain BUY recommendation and fair value estimate of S$1.21

Wee Hur
Recommendation: Buy
Previous close: S$0.48
Fair value:S$0.56
 - Revenue for 2Q10 dropped 45.8% y-y to S$34.1m while net profit was up 2.9% y-y to S$5.6m
 - Current order book of S$349.7m
 - Construction costs likely to go up from second half of the year Morning note 16 August 2010
 - Maintain BUY rating but lowering our fair value estimate to S$0.56

Sino Grandness Food Industry Group Ltd
Recommendation : Buy
Previous close : $0.345
Fair value : $0.58
 - Revenue doubled to RMB243.8 million, net profit grew 86% to RMB40.9 million on the back of higher orders and penetration of new markets
 - Beverage segment showed strong potential
 - Maintain Buy recommendation

Cambridge Industrial Trust
Recommendation : Hold
Previous close : $0.51
Fair value : $0.52
 - Acquires 2 properties for $37.1 million.
 - Private placement to raise gross proceeds of $40.0 million
 - Maintain hold and fair value of $0.52

Ho Bee
Recommendation: Buy (Unchanged)
Previous close: S$1.65
Fair value: S$1.91
 - 2Q2010 revenue S$235.7m (-68.2% y-y), net profit S$112.3m (-28.6% y-y)
 - Performance in line with expectation, net profit exceeds estimate
 - Maintain Buy with fair value unchanged at S$1.91

SC Global Developments Ltd
Recommendation: Buy (Unchanged)
Previous close: S$1.63
Fair value: S$2.02
 - 2Q2010 revenue S$267.7m (18.2% y-y) and net profit of S$40.4m (417.9% y-y)
 - Positive contributions from all segments as construction progresses
 - AVJ returned to black with full year net profit A$9.6m
 - On track to hit FY2010E estimates
 - Maintain Buy with fair value unchanged at S$2.02

Source: Phillip Securities Research Pte Ltd

The firm recognised higher revenue from its development projects, including The Marq on Paterson Hill, Hilltops and Martin No. 38, where construction had progressed.

Revenue rose 18 per cent in the second quarter to about S$268 million.

Looking ahead, SC Global said the outlook for the Singapore property sector continues to be positive, underpinned by strong economic growth.

In China, the second phase of the group’s residential development project, Kairong International Gardens, is almost completely sold following its launch in the first quarter of this year.

It said prices achieved from the second phase were on average 15 per cent higher than the first phase of the project.

In Australia, its unit AVJ has completed the sale of its Contract Building operations to Sekisui House Australia Holdings.

SC Global said the sale will now allow AVJ to fully focus on its residential developments operations comprising land development, integrated housing and low-rise apartments.

In Singapore, Chairman and CEO Simon Cheong said the company holds a valuable landbank of over 1.1 million square feet of developable gross floor in the prime areas of Orchard Road and Sentosa Cove.

The group’s operations in China and Australia have continued to expand and strengthen.

He said these will continue to underpin the group’s performance going forward.

Baring any unforeseen circumstances, SC Global expects to remain profitable in the next quarter ending 30 September 2010.

That is despite revenue over the period falling 11.3 per cent to S$673 million.

ECS said its second-quarter net profit was lifted by a one-time gain from the dilution and partial disposal of a 20 per cent stake in its Malaysian subsidiary.

This follows ECSICT Berhad’s listing on the main market of Bursa Malaysia Securities on April 15 this year.

Following the sale of shares and the IPO, ECS now holds a 41 per cent equity stake in the Malaysian firm.

It has also ceased to be a subsidiary of Singapore-headquartered ECS.

However, ECS said the deconsolidation of its Malaysian unit led to lower revenues being recorded in the second quarter.

Without the deconsolidation and excluding currency translation effects, revenue in the last quarter would have grown 10.3 per cent year-on-year.

The main contributors are higher sales of printers in the distribution segment, and higher corporate spending on networking products in the Enterprise Systems segment.

This is despite its revenue for the three months rising 17.2 per cent to S$39.2 million.

Metro said its profit fell because the previous corresponding quarter included a gain of S$7.3 million, on the back of an increase in the fair value of its portfolio of short-term investments.

Meanwhile, it said the higher revenue was due to its retail division reporting higher sales and the property division reporting higher rental.

Looking ahead, the group expects rental income of its investment properties to continue to grow steadily, with improved occupancy of EC Mall and Metropolis Tower, in Beijing, and the contribution from Frontier Koishikawa Building in Japan.

It also said the new Metro City Square department store in Singapore will continue to help boost the topline sales performance of its retail division.

It added that while the economies in both Singapore and Indonesia continue to grow, the trading environment for the retail trade is expected to remain competitive.

Revenue for the three months rose 7.6 per cent to S$1.4 billion.

F&N said its property arm registered higher earnings due to strong rental income, recognition of pre-sold projects and recovery in its core residential markets.

Its soft drinks, dairies and breweries segments were also boosted by higher revenue mainly due to higher sales volume.

The group said the economic recovery in Asia Pacific core markets it operates in has been strong, benefiting its market positions there.

Barring any unforeseen circumstances, F&N expects its attributable profit on continuing operations to be higher than that of the previous year. – CNA/ms

Wilmar’s disappointing 15 percent decline in second-quarter profit on Friday came after U.S. group Bunge (BG.N) cut its full-year earnings guidance by as much as 40 percent and Hong Kong-based Noble’s (NOBG.SI) quarterly profit tumbled 65 percent.

“The decline in margins this year is because of stronger raw material prices,” said DBS Vickers analyst Ben Santoso. “In the palm oil market, the supply has been tight, while, for soybean, some farmers have been retaining their output.”

Margins were exceptionally high last year because of the global economic slowdown which pushed down raw material costs, but margins may recover in the second half as edible oil supply improves, analysts said.

A forecast by the U.S. Department of Agriculture published on Thursday about record soybean yields that will push the country’s harvest to the largest on record, could help ease the soybean prices in the later part of this year.

Wilmar, which has a market value of $29 billion, earned $344 million for the quarter ended June, its lowest profit in two years. That was down from $407 million earned last year and lagged analysts forecasts for a profit of $417 million.

The company said second-quarter net profit was also affected by a negative change in valuation of $41.7 million in convertible bonds as its share price slumped.

Wilmar also reiterated it was still in talks to buy a minority stake in a small Indonesian palm oil plantation Kencana Agri Ltd (KCAL.SI). Sources had told Reuters that Wilmar plans to buy a 20 percent stake in Kencana.

The stake-purchase attempt comes as Indonesia plans to impose a two-year moratorium on new permits to clear natural forest from 2011 which could lead to consolidation of the palm oil industry.

Its shares fell as much as 2.7 percent on Friday morning, before cutting the losses to be down 1.8 percent at S$6.16. Around 9.2 million shares changed hands, nearly 20 percent more than the 90-day average traded volume.

The shares are down nearly 5 percent percent since the start of the year, underperforming the broader Singapore market .FTSTI which gained around 1 percent.

An investigation into the company’s tax records by Indonesian authorities have weighed on the shares, analysts said.

Wilmar was set up in 1991 by its CEO Kuok Khoon Hong and Indonesian businessman Martua Sitorus. Kuok, who is ranked fourth on Forbes’ Singapore rich list, is a nephew of Malaysian billionaire Robert Kuok.

The company, which has plantations in Indonesia and Malaysia as well as a number of edible oil processing facilities in China, said it remains positive on the prospects of Asian economies and is planning a major expansion into sugar.

Margins for merchandising and processing of palm oil and related products were lower due to tighter supply of crude palm oil and the uncompetitive pricing of palm oil versus other edible oils, it said in a statement. For Malaysian palm oil prices click.

“The Street will embark on a series of earnings downgrades in the range of 10-20 percent over the next couple of months,” said UBS analyst Andreas Bokkenheuser, who has a “buy” call on Wilmar with a target price of S$8.00. Wilmar’s second-quarter margins were 5.6 percent, below its yearly forecast of 7.5 percent, he said.

Wilmar’s revenue climbed 18 percent to $6.8 billion for the April-June quarter.

SUGAR STRATEGY

Wilmar is making a big bet on sugar with an offer to buy Sucrogen, the sugar assets of Australian conglomerate CSR (CSR.AX) in a $1.5 billion deal.

The acquisition is expected to enable Wilmar to maintain its high growth while also speeding up the development of its 200,000 hectares of land in Indonesia’s Papua, dedicated for sugar plantation.

“The group is planning a major expansion into sugar with the proposed acquisition of Sucrogen Ltd and the development of sugar in Indonesia,” CEO Kuok said in a statement.

“This is expected to be a significant contributor in the long term.”

U.S. retail sales rebounded last month, as did the overall Consumer Price Index for July, but the data pointed to an economy that has slowed considerably in recent months.

Consumer sentiment stabilized this month after a sharp drop in July, the Thomson Reuters/University of Michigan Surveys’ preliminary August reading showed. Meanwhile, the Commerce Department said business inventories rose more than expected in June.

Positive corporate earnings and improved technicals helped the market rally through July and early August. But sentiment soured this week after the Federal Reserve gave a darker assessment of the economy.

The S&P 500 also relinquished its hold on the 200-day moving average that had generated some positive momentum and was trading below its 50-day moving average on Friday.

“No one wants to take a major position right now,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

“Right now the market just needs to ascertain where the macro economic environment is headed. Until there’s more information, it’s going to remain fairly flat.”

The Dow Jones industrial average .DJI edged up 8.02 points, or 0.08 percent, at 10,327.97. The Standard & Poor’s 500 Index .SPX dipped 0.95 points, or 0.09 percent, to 1,082.66. The Nasdaq Composite Index .IXIC eased 6.35 points, or 0.29 percent, to 2,183.92.

The three major indexes were on track for their biggest weekly decline in six weeks and were also in negative territory for the year.

The consumer discretionary index .GSPD weighed on the broader market following the data and disappointing outlooks from upscale retailer Nordstrom Inc (JWN.N) and department store chain J.C. Penney Co Inc (JCP.N).

Nordstrom tumbled 5.9 percent to $31.47 and Penney lost 3.6 percent to $20.05. The consumer index was down 0.6 percent.

The Dow got a lift from Boeing Co (BA.N), up 1 percent at $65.35, after Southwest Airlines Co (LUV.N) said it may add Boeing’s 737-800 planes to its fleet as part of its domestic network.

Education company shares were hit as brokerages cut price targets and the government said it will hire more investigators to prevent fraud by for-profit colleges.

Apollo Group Inc (APOL.O) pressured the Nasdaq, dropping 3.5 percent to $39.04. RBC cut its price target on the stock to $45 from $75.

Eli Lilly and Co (LLY.N) fell 2.4 percent to $35.72 after the drugmaker lost a patent case that cleared the way for generic competition for Strattera, its attention deficit disorder drug.

Sing Holdings
Recommendation: Hold (Downgrade)
Previous close: S$0.33
Fair value: S$0.37
 - 1H2010 revenue of S$40.5m, net profit of S$0.4m
 - Contribution from The Laurels sets in
 - Downgrade to hold and reduce fair value from S$0.46 to S$0.37

Sembcorp Industries
Recommendation: Buy (Unchanged)
Previous close: S$4.10
Fair value: S$5.10
 - 2Q10 revenue of S$2,135m, net profit of S$161m
 - Expect better performances for the next three years
 - Maintain buy recommendation and fair value at S$5.10

SingTel
Recommendation: Hold (Downgraded)
Previous close: S$2.99
 - 1Q11 revenue of S$4,289m, net profit of S$943m
 - Singapore and Australian operations performed strongly while regional mobile associates reported lower earnings
 - Downgrade from buy to hold with fair value unchanged at S$3.43

Economic
Economic Outlook:
− US economy – 2Q10 advanced estimate may be severely revised down – our previous optimism about demand broadening out may take a beating with fresh data
− Treasury yields are in warning zone… even the secular outlook is under threat as spreads narrow for the wrong reasons (i.e. flight to safety)
− Fed’s reinvestment plan is not major QE stuff but tells us that the margin for error for the US economy needs to be widened
− China’s economy continues to slow, but within expectations. Only concern is that China’s import data took a surprise -5.6%m-msa fall, which is not great news for Asia, and markets have taken that to indicate domestic consumption weakening

Equity Outlook:
− Short-medium term outlook on the STI and S&P500 is shifted back to our previously long held cautious-defensive on renewed macro risks (after just 10days of positive), secular outlook remains positive (unchanged), but under threat from narrowing spreads
− We are still long China A-shares thru ETFs (since 15 June), as we think valuations have pretty much priced in the economic downside, but in adding positions we advise to keep in mind the price action (which our TA tells us anticipates further selling) amid a worsening sentiment on stocks in general

Source: Phillip Securities Research Pte Ltd