Monday, January 27, 2014

What price monopoly?

Readers would have know I have been practicing DCF model just to get a "gut feel" of the valuation of the price.

SGX caught me attention when it went below $7.

So I took the average of 268 mio of FCF over the past 7 years (any earlier before meager would be meaningless), to work the sum. I thought 9% discount rate and 3% growth would be prudent and reasonable.

Turn out without applying MOS of 20%, its intrinsic value is $4.2.

That would be a yield of 6.7%, PE 15. Any serious investor would know its a screaming BUY!

I though no matter how I play around with the numbers $4.2 is really far from the $6.95 a day ago, although before calculation, I thought I would try my luck at $6.9, but decide against it.

result, it did fall to $6.9 today, but rebounded to close at$7.

Then I remember for SPH to trade at $4, it also commands lofty discount rate of only 6% and growth rate of 3%.

I thought SGX is a better company than SPH, in terms of predictability of business, yes it is cyclical, but trading volume is at the bottom, and the derviatives arm offer some hope of growth, upturn of sentiments offer hope of growth, increase penetration rate of retail participation (most difficult), will also offer some possibility of growth.

I key in 6% discount rate and 3% growth rate, and I got $8.4 intrinsic value and when apply a discount of 20%, it is $6.8.

Apparently the market deem it reasonable valuation.

SGX and SPH are both currently enjoying monopoly status in their respective market.

My doubt is, is a monopoly really worth such high lofty valuation?

I bought SPH at $4, but refused to buy SGX at $6.9, am I mad? Of course there is a 1.5% yield gap.

I will be watching SGX closely, in case Mr Market decide to give a wonderful discount. Although I felt it is highly unlikely.


  1. Dear SillyInvestor,

    I am Wilson, co-founder of Stokflok. I would like to talk to you but I could not find your email address on your blog. Could you email me at

  2. Just an update,

    I do some valuation for SIngpost too, since it also have a monopoly of mail business, although it is declining.

    Surprise surprise, for such a monopoly (High barrier then regulation), even if I accept an conservative 9% discount rate and 3% growth assumption, intrinsic value is $1.4 without MOS.

    Hmm... Interesting

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