SembCorp Industries

[specuvestor]

Hi specuvestor, in addition to using the simple pb ratio, for serious investing, it is imperative to do valuation of the company shares ie sum of parts and determine the 'exact' pb and hence margin of safety. Personally i realise that doing this exercise will tend to increase my comfort level to purchasing equities both in a down market as well as in a upswing n will more often than not translate to limiting my downside in these cases.

Hi Paul

Agree totally that's why I use the word "correlated"

But Buffet has said many times in his AR that book value is still the best dirty "guesstimate" of value so that's a baseline to start, and RNAV would be a good refined approach.

In addition, these are just valuing the assets but nothing on the cashflow generated from the assets. If you followed my posts I think of listed equity as at least 3 layered: asset, business and structure. It's still only one layer that we are looking at, but IMHO it's an important indicator to look at when we are talking about DOWNSIDE.

[jjlim84]

I have seen stocks with highly depressed P/B ratios all the way down to 0.3 or 0.4, though with strong fundamentals, the stock prices stagnant for years
Just my humble opinion, this oil price downtrend resembles the one in late year 2008, with the exception that there was a subprime crisis then, though many said that the oil price actually caused the crisis instead of the banking system
When the oil price recovered in 2009, I hopped on the wagon and profited from that. Hope this time round too

[specuvestor]

^^ Clue to highly depressed P/B is to look at the cashflow ie the 2nd layer, or sometimes even the 3rd layer ie what mgt is doing with the cash, or "cash"

[paullow]

Hi specuvestor, in addition to using the simple pb ratio, for serious investing, it is imperative to do valuation of the company shares ie sum of parts and determine the 'exact' pb and hence margin of safety. Personally i realise that doing this exercise will tend to increase my comfort level to purchasing equities both in a down market as well as in a upswing n will more often than not translate to limiting my downside in these cases.

Hi Paul

Agree totally that's why I use the word "correlated"

But Buffet has said many times in his AR that book value is still the best dirty "guesstimate" of value so that's a baseline to start, and RNAV would be a good refined approach.

In addition, these are just valuing the assets but nothing on the cashflow generated from the assets. If you followed my post I think of listed equity as at least 3 layered: asset, business and structure. It's still only one layer that we are looking at, but IMHO it's an important indicator to look at when we are talking about DOWNSIDE.

Hi specuvestor,
agreed about the layered concept. Apart from analysing the sum of parts to determine an acceptable entry price, personally i use dividend analysis as the key n this over a decade history very conveniently sums up the three layered concept which we have discussed.
paul

[specuvestor]

yeah, for the longest time I had been misled by academia on the value of dividends. I saw your dicussion on your personal thread

Cashflow for the business is very different from cashflow for the investor if it doesn't flow out of the structure. Dividends also increase level of comfort on the business's actual cash generation. There is wisdom in the adage "Bird in hand is better than 2 in bush"

There is a big difference between a company paying special dividend and then doing a right s issue, vs a company just doing a bonus issue though academics would say they result in the same thing. Similarly a company that pays off debt and then reissue is different from one that just rollover debt.

But dividend analysis and dividend stocks are boring stuff and not much to write about Dividend history like P/B is a great dirty "guesstimate" but it is a good baseline to start on understanding a company's actual ROIC and cashflow.

[vingaard]

IMHO I observed that how low a stock can go is highly correlated to Price to Book. On the contrary how high it can go has little bearing on Price to Book.

Any expert here can share if the tariffs for electricity will drop? I read somewhere there is big supply onstream esp in Singapore

Short answer: Yes.

Long answer:
Tariffs in Singapore are calculated using the formula A + B x HSFO x USD/SGD; where A is known as the non-fuel component and B is the efficiency factor. HSFO is the price of High Sulphur Fuel Oil 180Cst in USD per MT.

HSFO has a positive correlation with Brent crude prices. You can make your own deduction from here.

There is also a double whammy in that there is additional generation capacity that has come on stream from:
1) the repowering of Senoko, Tuas and Seraya's old steam turbines into combined cycle gas turbines;
2) additional CCGT capacity by Keppel, Sembcorp, Pacific Light and Hyflux
The end result: gencos are fighting hard for market share with their margins squeezed into historical lows or even into negative territory.

[valuebuddies]

Oil price was already on downtrend since 6 months ago, and yet i don't think the electricity tarriffs changed. When public are already comfortable with high price, why would you reduce it voluntarily? IMO, tarriffs would reduced only if someone raise the topic on media or parliament.

[Temperament]

Hi specuvestor, in addition to using the simple pb ratio, for serious investing, it is imperative to do valuation of the company shares ie sum of parts and determine the 'exact' pb and hence margin of safety. Personally i realise that doing this exercise will tend to increase my comfort level to purchasing equities both in a down market as well as in a upswing n will more often than not translate to limiting my downside in these cases.

Hi Paul

Agree totally that's why I use the word "correlated"

But Buffet has said many times in his AR that book value is still the best dirty "guesstimate" of value so that's a baseline to start, and RNAV would be a good refined approach.

In addition, these are just valuing the assets but nothing on the cashflow generated from the assets. If you followed my post I think of listed equity as at least 3 layered: asset, business and structure. It's still only one layer that we are looking at, but IMHO it's an important indicator to look at when we are talking about DOWNSIDE.

Hi specuvestor,
agreed about the layered concept. Apart from analysing the sum of parts to determine an acceptable entry price, personally i use dividend analysis as the key n this over a decade history very conveniently sums up the three layered concept which we have discussed.
paul

Price to Book value changes also because book value changes whenever "fundamentals and what not" related to the company in the market change. So to look at what ever you think you can look at is important.
Asset, business, structure, etc.....

The price can go so much more lower then what the book value says it shouldn't be. Impossible? No?
Don't miss looking at the falling knife market sentiment. Of course you may not want to look at it or miss it because you have all the knowledge of the other "powerful data".
YES!

[pianist]

ya oil price dropped so much why our pub bill still so high?

[valuebuddies]

ya oil price dropped so much why our pub bill still so high?

must complaint first, then action will be taken