For investors who have just started out, one often-recommended book on value investing is “The Intelligent Investor” by Benjamin Graham. The book introduces the concept of utilising the fundamental analysis to find a company that is currently undervalued. Understanding the concept of value investing is one step. The next step investors would face is how to pick the right companies from the hundreds of companies listed. On Singapore Stock Exchange (SGX) itself, there are already 700 companies listed.
Fortunately, there are many stock screeners available for investors to sieve out listed companies based on the metrics we desire. For this article, we would be focusing on using SGX Stock Screener to find Singapore listed companies of great value. Additionally, we can also find out which companies are under surveillance, has been suspended and measure their Governance Transparency Index (GTI), using the SGX Stock Screener.
Here is a step-by-step guide to using SGX stock screener to find the best Singapore-listed stocks for value investing.
Steps To Use SGX Stock Screener To Screen for Value Investing
Before getting started on the step-by-step guide, here is a brief recap on what metrics value investors can look out for. In general, there are three basic ratios. To use these ratios for a better comparison, we can always check it against the industry average and compare it against companies with similar business models.
Read Also: Guide To Value Investing In Singapore
#1 Price-To-Book Value (P/B) = Market Capitalisation / Net Assets
P/B ratio that is above 1 means that a company’s share value is higher than its net book asset value. A P/B ratio below 1 means the company’s share value is trading at a discount to its net asset value. Depending on the industry, a low P/B does not translate to better value as the assets in the industry could be inflated.
#2 Price-To-Earning Ratio (P/E) = Share Price / Earnings per Share
The metric reflects how much we are paying for every dollar the company earns. This means that the lower the P/E ratio is, the more undervalued it is. However, it is important to still delve into the earnings of the company as a lower P/E ratio for a particular year as the earnings could be deemed unsustainable.
#3 Price/Earnings-to-Growth (PEG) Ratio = (Share price / Earnings per Share) / Rate Earnings Growth
Price To Earnings To Growth Ratio is used to factor in the potential a company has in the future by factoring in its earnings growth rate. If a company has an annual net profit of $10 million and it is worth $100 million, this means its P/E is 10. If its earnings growth rate is 10%, this means its PEG ratio is 1. The lower a PEG, the more undervalued a stock can be considered to be.
#1 Go to Stock Screener From SGX Homepage
Under the Securities Tab, click the sub-tab on “Prices & Screeners” and select “Stock Screener”. This will lead you to the SGX stock screener.
#2 Select Value Investing Filters
On the SGX stock screener, there are a total of 700 companies currently listed on the exchange. On the screener, there are 9 columns – company name, stock ticker, Reuters ticker, market capitalisation, total latest annual revenue, Price-to-Earning Ratio, Dividend yield, Industry Sector and Governance Transparency Index (GTI). The companies are sorted in alphabetical order.
Apart from the 9 columns listed, we can select more filters by click on “Show more filters”.
In total, there are 14 ready-to-use matrices to filter the companies. Since we are sourcing companies based on value investing, we would select for Price-To-Earnings (P/E) ratio and Price-To-Book (P/B) ratio.
#3 Select The Industry
After selecting the respective ratios, for a better assessment, we can narrow them down to the respective industry for comparison. For the purpose of this article, we would be selecting “Food and Beverage” out of the 28 industries listed.
In the “Food & Beverages” industry, there are currently a total of 35 companies. The industry mainly includes suppliers and food processors such as F&N and Indofood Agrio (Indomie producer).
#4 Sort Companies From Lowest to Highest Price-To-Earning Ratio
With the selection of FnB companies, we can sort the companies according to the lowest Price-to-earnings (P/E) ratio to the highest. Based on Investopedia, the FnB industry average for P/E of the Big Three (Nestle, PepsiCo and Anheuser-Busch InvBev) US companies is 25 to 30.
Apart from P/E ratio, factoring the Price-to-book (P/B) ratio is important too. According to
This would mean we can narrow our focus down to Olam Intl and onwards which leaves us with 16 companies out of the 35 companies available in the industry filter. If we take out the companies that are currently suspended, it will leave us with only 8 companies.
These 8 companies are ThaiBev, Wilmar Intl, F & N, Del Monte Pac, Kencana Agri, Bumitama Agri, JB foods and Japfa.
#5 Delve Into The Individual Companies Details And Do Our Own Due Diligences Before Investing
Among the 8 remaining companies, we can start looking at the individual stocks and do our respective due diligence. For a start, we can pick the largest market capitalisation company, Wilmar Intl, to check on its finances.
SGX screener would then direct us to the individual stock’s page providing more details on the company’s historical market and financial performances.
#6 Repeat The Steps Above For Different Industries And Build A Portfolio With The Companies You Are Confident In
With the same steps above, we can build a diversified portfolio by picking stocks from various industries based on value investing metrics.
Using the time saved from utilising stock screener, we can invest more time in doing our respective due diligence on each company. Once we are comfortable and confident with the company, we can make our purchase on the stock.
While value investing is about sieving out the best company and holding it out to the long term till its true value is realised, it is important to do a periodic review on the stocks.
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