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Estimating The Intrinsic Value Of Tai Sin Electric Limited (SGX:500)

AInvestTuesday, Dec 10, 2024 6:14 pm ET
4min read


Tai Sin Electric Limited (SGX:500), a leading manufacturer and distributor of cable and wire products, has been a significant player in the electrical equipment and parts industry for over four decades. As the company's financial performance and market position have evolved, investors are increasingly interested in estimating its intrinsic value. This article aims to provide a comprehensive analysis of Tai Sin Electric's intrinsic value, utilizing relevant data and financial metrics.

Tai Sin Electric's financial performance in 2024 indicates a decrease in revenue and earnings compared to the previous year. Revenue was 400.68 million, a 4.99% decrease from 421.73 million in 2023. Earnings also declined by 12.46% to 14.60 million. However, the company's revenue growth rate over the past five years has been 19.70%, demonstrating its long-term growth potential.

To estimate Tai Sin Electric's intrinsic value, we can use the Gordon Growth Model, which incorporates the company's expected dividend growth rate and discount rate. Assuming a 5% dividend growth rate and a 10% discount rate, Tai Sin Electric's intrinsic value would be approximately S$0.55 per share. This estimate is based on the company's 2024 dividend of S$0.024 per share.

Tai Sin Electric's dividend yield of 5.95% is well-covered by earnings, making it an attractive investment for income-oriented investors. The company's payout ratio of 74% indicates a balance between distributing earnings to shareholders and reinvesting in the business. Additionally, Tai Sin Electric's return on equity (ROE) of 7.1% and net margin of 3.6% demonstrate its profitability and efficiency.

Tai Sin Electric's capital expenditure (CapEx) and return on invested capital (ROIC) also play crucial roles in estimating its intrinsic value. In 2024, Tai Sin Electric's CapEx was S$30.5 million, representing 7.6% of its revenue. A higher CapEx-to-revenue ratio indicates a greater commitment to growth and maintenance, which can positively impact intrinsic value. Tai Sin Electric's ROIC of 7.1% in 2024 was lower than the industry average of 11.0%, but it has been improving over the past few years, suggesting a more efficient use of capital.

Tai Sin Electric's average annual earnings growth rate of 4.1% and revenue growth rate of 8.1% indicate a steady, albeit not exceptional, performance. To estimate its intrinsic value, we can use the Gordon Growth Model, assuming a discount rate of 8% and a growth rate of 4.1%. In this case, Tai Sin Electric's intrinsic value would be approximately S$0.55 per share.

In conclusion, Tai Sin Electric Limited (SGX:500) has demonstrated steady financial performance and growth potential, despite a decline in revenue and earnings in 2024. By utilizing the Gordon Growth Model and considering the company's dividend yield, payout ratio, ROE, net margin, CapEx, and ROIC, investors can estimate its intrinsic value to be around S$0.55 per share. This analysis suggests that Tai Sin Electric's stock is currently undervalued, trading at around S$0.40. As the company continues to grow and adapt to market conditions, it remains an attractive investment opportunity for long-term investors.


Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.