Straco Corporation Ltd Is Down 20% From Its 52-Week High Price: Is It Time To Buy Now?
Straco Corporation Ltd (SGX: S85) is a tourism asset operator with operation in China and Singapore. In China, the company owns the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Carattractions. As for Singapore, Straco bought a majority stake in the iconic Singapore Flyer – one of the largest observation wheels in the world – in late 2014.
At the current price of S$0.72 (at time of writing), the company’s stock is trading at 20% lower from its 52-week high price of S$0.90. This raises a question: Is Straco Corporation cheap now? This question is important because if the firm’s shares are cheap, it might be a good opportunity for investors.
Unfortunately, there is no easy answer. However, we can still get some insights by comparing Straco’s current valuation with the market’s valuation. 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).
Straco currently has a PB ratio of 2.4, which is higher than the SPDR STI ETF’s PB ratio of 1.1. In addition, Straco’s PE ratio is higher than that of the SPDR STI ETF (14.7 vs 11.3). On the other hand, Straco’s dividend yield of 3.5% is comparable to the market’s yield of 3.5%.
In sum, we can argue that Straco is priced at a premium to the market average due to its high PB and PE ratio. Yet, income investors might still be interested in the company given its high dividend yield.