Valuations
Assuming margins shrink to 24% (because the sharp rise in margins may not be sustainable) and sales grow at 7% (which is not unreasonable given they have grown faster previously), at S$2.83, you are buying at ~12x P/E, which is 8.3 E/P. FCF is ~11x P/FCF and is a FCF yield of 8.9%. Dividend yield at the historical 60% payout ratio gives you a decent 5% yield.
This is my “prudent” case. I believe these assumptions are prudent and won’t fall too far short of it. And thus even if I get it wrong, the results of the company, supported by the previously mentioned growth drivers, will grow at a fast enough clip to erase any folly of mine on the valuation level which I am entering into.
Assuming margins shrink to 24% (because the sharp rise in margins may not be sustainable) and sales grow at 7% (which is not unreasonable given they have grown faster previously), at S$2.83, you are buying at ~12x P/E, which is 8.3 E/P. FCF is ~11x P/FCF and is a FCF yield of 8.9%. Dividend yield at the historical 60% payout ratio gives you a decent 5% yield.
This is my “prudent” case. I believe these assumptions are prudent and won’t fall too far short of it. And thus even if I get it wrong, the results of the company, supported by the previously mentioned growth drivers, will grow at a fast enough clip to erase any folly of mine on the valuation level which I am entering into.
I note that dividend payout prior to 2005 is ~60%.
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