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Old 06-11-2013, 03:31 PM   #31
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I use PE as one of the gauges and 15 as it is the median for S&P 500. (e.g there are earnings approach, asset based approach and cashflow approaches to valuation) I will also look at sectoral PE across the board if I find something interesting about their business case.

I prefer to err on the side of safety. Ideally, I hope to accumulate companies like Boustead that has a nice CGAR as well as a good dividend policy but other than outright winners, I would prefer to wait it out and hold some boring stocks like CM Pacific and NSL. But then again, if Boustead hits around $2.5, I would consider exiting especially if it runs up too fast without the numbers justifying the valuation (based on earning of 0.17)


If RMG corrects to an attractive level, I might consider entering. Been looking at healthcare for a while hence my comments to OP. I have just one REIT, maybe it is just me but I dun really like REITS in general; other than FEHT which I got at IPO, many years ago, I had Ascendas when it IPO and sold it after a year.
You talk about using average PE of S&P 500, so do you know what is the PE for the health sector?
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Old 06-11-2013, 08:13 PM   #32
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You talk about using average PE of S&P 500, so do you know what is the PE for the health sector?
http://www.msci.com/resources/factsh...-usd-gross.pdf

Yup, I know what you are driving at. But I think the current sectoral PE is still high in my point of view. We can agree to disagree on this.

PE is simply a reflection of what people are willing to pay; if everyone is willing to pay that price (e.g the relative PE), it does not mean I am willing to mah.

My friend, who visited used car dealers asked one of them, why he is selling a particular brand/model/age of car at a price which is 10K above the paper value if scrapped. The dealer replied that it was "market price" (sector PE) which all the dealers are selling at and had closed at. If a dealer was able to sell you at 6k above paper instead of 10k, do you feel you are getting a 4k discount?

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Old 07-11-2013, 09:03 AM   #33
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http://www.msci.com/resources/factsh...-usd-gross.pdf

Yup, I know what you are driving at. But I think the current sectoral PE is still high in my point of view. We can agree to disagree on this.

PE is simply a reflection of what people are willing to pay; if everyone is willing to pay that price (e.g the relative PE), it does not mean I am willing to mah.

My friend, who visited used car dealers asked one of them, why he is selling a particular brand/model/age of car at a price which is 10K above the paper value if scrapped. The dealer replied that it was "market price" (sector PE) which all the dealers are selling at and had closed at. If a dealer was able to sell you at 6k above paper instead of 10k, do you feel you are getting a 4k discount?
Not disagreeing with you on anything.

I just think that you are comparing in a un-analytical manner. One shouldn't compare a single company's ratios to a broad index ratio. Sector indices are fair game. If the health sector has always been above 20x PE, who's to say that companies priced below that price is overvalued? Unless you're implying the whole sector is overvalued...

Then again, you compared RMG with a REIT.
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Old 07-11-2013, 11:12 AM   #34
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Not disagreeing with you on anything.

I just think that you are comparing in a un-analytical manner. One shouldn't compare a single company's ratios to a broad index ratio. Sector indices are fair game. If the health sector has always been above 20x PE, who's to say that companies priced below that price is overvalued? Unless you're implying the whole sector is overvalued...

Then again, you compared RMG with a REIT.
That's my point. (see underline). yes, you might ask why I think so. it is my un-analytical way of thinking.

Re comparing with REIT

I know the structure is different, but I look at it from an asset class and sector point of view. You want to invest in property, you can:
1) buy a physical house,
2) buy capland, kepland etc
3) buy a property based REIT

different considerations and risk levels, yet facing the same macro-economic consideration.
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Old 07-11-2013, 11:22 AM   #35
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Anyway, sectoral P/E ratios give you a finer granularity, broad ratios such as a market index give you a coarser view right?

I choose to use a coarser view at the expense of losing out and limiting my upside potential. (e.g healthcare sector's PE is higher than the market PE).
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Old 07-11-2013, 11:38 AM   #36
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Let's take a look at the PE of healthcare stocks in Singapore.

- IHH (82.1)
- RMG (35.4)
- Q&M Dental (32)
- International Healthway (12)

The super expensive one is IHH?
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Old 07-11-2013, 12:39 PM   #37
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When IHH was listed, i remember its PE was 50+ if i am not wrong. I bought RMG at $2.30+ because RMG was trading at a much lower PE. IHH and RMG are the most closest comparable since TMG was delisted at that time.

Since there was a mismatch in valuation, i know IHH share price has to come down or RMG has to go up. In the end, both went up.

There must be a reason why the healthcare sector is commanding a much higher PE in Asia. The demand and growth must be there to support the higher valuation in these medical stocks. So far the results of RMG has proven its steady growth.
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Old 07-11-2013, 12:56 PM   #38
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Let's take a look at the PE of healthcare stocks in Singapore.

- IHH (82.1)
- RMG (35.4)
- Q&M Dental (32)
- International Healthway (12)

The super expensive one is IHH?
dw, i just realised dbs vickers provides a very neat way to revealing all these fundamental ratios. u took the numbers from there as well or ownself calculate?

Anyway, lets not compare hospital with clinic.
but ihh @ p/e 82.....
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Old 07-11-2013, 02:49 PM   #39
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dw, i just realised dbs vickers provides a very neat way to revealing all these fundamental ratios. u took the numbers from there as well or ownself calculate?

Anyway, lets not compare hospital with clinic.
but ihh @ p/e 82.....
I took the figures from sharejunction. I also remembered IHH having high PE bcos I used to be vested before.

I understand Mount Elizabeth and Gleneagles Hospital are super elite private hospitals, but 82 times is really......

I guess u r right. Cannot compare hospitals with clinics.
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Old 07-11-2013, 02:51 PM   #40
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That's my point. (see underline). yes, you might ask why I think so. it is my un-analytical way of thinking.

Re comparing with REIT

I know the structure is different, but I look at it from an asset class and sector point of view. You want to invest in property, you can:
1) buy a physical house,
2) buy capland, kepland etc
3) buy a property based REIT

different considerations and risk levels, yet facing the same macro-economic consideration.
Correct, but do you know why alot of ppl is saying the sector may not be as what you described?

Hint: it's got something to do with historical valuations.

By the way, buying a physical house or real asset vs. buying a developer vs. buying a REIT is most definitely NOT the same. The difference is so fundamental and obvious.
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Old 07-11-2013, 02:52 PM   #41
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Let's take a look at the PE of healthcare stocks in Singapore.

- IHH (82.1)
- RMG (35.4)
- Q&M Dental (32)
- International Healthway (12)

The super expensive one is IHH?
By the same argument, Healthway must be the cheapest.

Let's all go buy Healthway then.

I'm reminded of what Warren Buffet has to say "price is what you pay, value is what you get".
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Old 07-11-2013, 03:36 PM   #42
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By the way, buying a physical house or real asset vs. buying a developer vs. buying a REIT is most definitely NOT the same. The difference is so fundamental and obvious.
It is different, I know. Maybe I dunno how to describe what I want to say. The first question is do I want to be exposed to this sector. The second question is what asset class do I want to use if I want to be exposed to the sector(House, Equity, REIT).

Your point is basically it is an apple versus orange comparisons between you compare let's say houses versus REITs because they are completely different animals. I understand that. But I don't have money to buy Reflections at Keppel, but have money to buy Keppel Land. It is not the same, but gives me exposure to the property sector (at different levels of risk as well as returns).

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Old 07-11-2013, 03:43 PM   #43
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By the same argument, Healthway must be the cheapest.

Let's all go buy Healthway then.

I'm reminded of what Warren Buffet has to say "price is what you pay, value is what you get".
PE is a ratio of two factors. Lousy earnings can drag down PE as much as an exuberant market get pull up the PE. It's like whether getting something below book value is good or bad. Can be either case.

At the end of the day, ratios are useful as a filter or a quick acid test. Need to understand the business and company better.
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Old 07-11-2013, 03:52 PM   #44
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Looking at some of the arguments here, I would like to say that P/E is not a good gauge on how a sector is good or how a stock is undervalue. PE is made up of price and eps. Price fluctuates by demand and supply and eps is calculated using historical values. By using price in the equation, it already breaks the usefulness of PE.

Of course, there is no one single measurement that would determine if a stock is overvalue or undervalue. For me, I would normally use a combination of ratios but more importantly is the art of seeing how a business would perform in the future by reading the Chairman and CEO statements in the annual report. If you all have read the annual report, you would have realise that RMG has an insurance business.

If you all don't know how profitable is insurance business, you might want to read up on it. It is recurring revenue for RMG. Though it forms only a small portion of RMG's business, I can see the prospects of it.
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Old 07-11-2013, 03:53 PM   #45
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PE is a ratio of two factors. Lousy earnings can drag down PE as much as an exuberant market get pull up the PE. It's like whether getting something below book value is good or bad. Can be either case.

At the end of the day, ratios are useful as a filter or a quick acid test. Need to understand the business and company better.
Sorry, lousy earnings would bring up PE, not drag it down...
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