Nice to see you researching on this company. In fact, it has been on my list for the longest and I’m not able to get my hand on this company due to its valuation. It’s always been high up there. This is also something for you to learn which we usually call this valuation as healthcare premium. In other words, they tend to trade at high PE multiple, typically in the range of 20 to 40s. The reason being, everyone loves stability and do not mind paying for the premium and sheltered themselves from huge volatility during the down turn.
- Is it more sensible to use P/E or PEG ratio in the case of RMG? Both is fine except there is always a premium in the healthcare industry. One way, just like Motley Fool, we look at the company’s historical valuation to gauge the sentiments over the years
- What is the recommended (or rule of thumb) CAGR value before PEG ratio becomes more meaningful than P/E ratio? Typically I would not exceed more than 15%. Having said that, I can miss out a lot of growth stocks.
- Does the value vary with the type of industry? Not really (for me), but there are some industries definitely you can’t apply, i.e. technology, medical as these stocks tend to be very expensive and may come with exponential growth
- Victor used P/E ratio of 20 for the analysis. Other than being conservative, is there any other reason for choosing P/E of 20 for the analysis? This valuation is close to its historical low, the most pessimistic since its listing.
- I noticed you have been following RMG for 7 years now. Could you share some insight regarding the succession plan of the management should Dr. Loo Choon Yang steps down? Not only from the leadership point of view but considering he owns more than 50% of the outstanding shares. You’re right that this is definitely the key man risk for Raffles Medical. I have not ask this question before but you can consider bring it up during the AGM :)