Little Value Investor

LVI: Energy Sector Price to EPS Peer Comparison

Mark Goh
Publish date: Wed, 02 Mar 2022, 01:46 PM
Mark Goh
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Little Value Investor is my public (but also personal) archive of my investing ideas so that I can look back at my previous self to reflect.

I have been investing starting in 2016 when my bestfriend convinced me to invest. Mostly self thought, my early journey have been binge watching Professor's Damodaran NYU Stern University's semester classes on Valuation. Now, in my free time I read announcements, quarterly and annual reports.
Following Message
All the craze in the world on energy sector with price of brent crude reaching to record levels.
 
Following my previous post on LVI: Semiconductor Peer Sector Price to EPS, it would be interesting to look at our local energy sector stocks under same methodology. You can read the methodology in the link above.
 
I filtered all stocks that are under 'oil & gas procuders', 'energy infrastructure' and 'equipment & services' subsectors in the entire Bursa. The result is it include all the following component stocks:
 
BARAKAH, YINSON, OVH, ARMADA, RL, PETRONM, DIALOG, HIBISCS, ICON, COASTAL, CARIMIN, DELEUM, PENERGY, HENGYUAN, T7GLOBAL, UZMA, THHEAVY, DAYA, SCOMI, SCOMIES, SUMATEC, VELESTO, HANDAL, SERBADK, REACH, MHB, WASEONG, DAYANG, SAPNRG, PERDANA, ALAM
 
As oppose to the semiconductor methodology, if I remove all stocks with net loss in any of the last 20 ttm results then I will be left with very little statistical sources. So I decided to keep all of them except with a negative average net loss. This render me with the following counters:
 
YINSON, PETRONM, DIALOG, HIBISCS, CARIMIN, DELEUM, HENGYUAN, T7GLOBAL, UZMA, SUMATEC, DAYANG
 
And plot price and eps on a log scale.
 
Here is what I received:
 
Caption: Please right click and view the image in another tab.[it looks distorted in this post]
 
The linear regression line an R squared of 0.90 which is very good. (Correction: in the previous post that I fitted a polynomial best fit line not a linear one)
 
 
From here, all stocks that are below the line are trading at relatively undervalue and above the sector are stocks that are overvalue. I need to stress the word relatively because there are some companies that deserve a lower valuation and some deserve a higher valuation.
 
I am not interested in the energy sector due to its highly cyclical nature (maybe I will make an exception for Dialog) but hope this at least helps retail investors that do.
 
Thank you
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pokerpro88

thanks Mark...very informative!

2022-03-03 12:32

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