Wednesday, January 29, 2014

A query of my post about SGX

Dear readers,

I receive an query email from a reader. I think I need to explain myself. When I write, I am thinking aloud and I do not proof read that many times.

So I might be confusing at times, or it could be due to my command of the language. ( I am better at Chinese than English)

The query go like this:

Actually, i have a quesiton regarding your analysis out of interest sake. I am an investor myself. You calculated SGX intrinsic value to be $4.2 and the current price is $7 (6.8 now) and yet you call for a Buy. Why would you buy when intrinsic value is below market price?

Of which this is my reply:

Oh no, am I so misleading?

In short, what I am trying to say:

1) intrinsic value of 4.2 is based in very conservative assumption of 9% discount rate and 3% growth.

2) but working backwards for SPH, for its price to hover around $4. It is a trading at discount rate of 6% and 3% growth.

3) if I use such lofty assumption for SGX too, intrinsic value then is $8.4 and applying 20% margin of safety, we get 6.8. So perhaps we have now a fair value of SGX.

4) I question if indeed monopoly business is worth so much, or so high a valuation.

5) in short, I think it might to worth accumulating if SGX start trading between 4.2 and 6.8, especially if market correction allow a good sale, say $6 or less.

Hope that's clarified.


In short, I dun have a buy call for SGX. I do think it is worthy to take a close look if the price continue to head south.

Personally, I will be very interested to buy if it get closer to $6. I am willing to pay fair price, if it goes lower than that, I accumulate.

Anyone, feel free to pop questions or point out any errors/ or confusing parts in my blog by leaving a comment.

I am no guru, but I give honest answers. If I made an mistake, I will admit it.

I thanks the reader for pointing out the possible misleading part.

Have a good start to the Horse Year, may your shares price gallop north


  1. Hi Mike,

    Dropping by to wish you Happy Lunar New Year!

    祝您 : 事事吉祥! 岁岁如意!

    We often have to make assumption when doing quantitative analysis. For qualitative analysis, some says it like an art. If we can combine both quantitative and qualitative analysis, and at the same with unemotional mind, we will be on a path to success with a little luck.

    We all have much to learn.

  2. Thank you solace,

    Huat huat to you too. Agreed, there is no magic bullet in analysis. We just try to learn as much as possible so that we can get past ourselves in our performance


  3. Everything in a stock, you research is relative important.
    imho nothing is more important than finally the price you paid for it.

    Right Price
    “When” is more important than “What”.

  4. Very true...

    The various research is to determine the "when", since there are times your gut feel tell u it is cheap but your research show otherwise.

    In the case, hold and wait for the time.

    Btw.. Happy new year to you uncle temperament! Huat!! Gongxifacai, shentijiankang


  5. Huat Ah!!! Happy New to You and all readers.

  6. Hi Silly Investor

    I read somewhere that treats every stock price as a new price .

    Happy New Year and Huat la !


    Small-Time Investor

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