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alexyeo asked 4 years ago

Hi trainers,
I was doing my screening when this company popped up. Increasing revenue and earnings, no debts, reasonable ROE above 10+, reasonable P/E around 18x, down from the 22x since IPO. Generates pretty decent cashflow. 
Did some digging and realized that this company has been around for quite some time. IPO recently in 2017 at 90 cents, price has since fallen. Company came out with a co-owning policy to align interest, which I thought was pretty interesting. According to AR 2017, market share in SG is around 20% and company is expanding to regional countries. Asset light and I thought the business can be  scalable, just need to retain talent as it is a people’s business after all.
Was wondering if such staffing business is recurring in nature? Any thoughts on this company? Can we value such business using P/E and what’s a reasonable PE to pay for such kind of company?
Paiseh for being long-winded. Appreciate the help. Thanks

1 Answers
Victor Chng answered 4 years ago

Hi Alex,
I personally have not anaylse this company before but PE ratio is definitely the right valuation method for this company. I do not know what is a reasonable PE range for this company but looking at PE 18x, I probably will not think it is cheap. 
From my understanding about job hiring sector, they always have hard time passing down their cost to their customers hence, they only can increase revenue by increasing volume. The industry for this sector is extremely competitive.  

alexyeo replied 4 years ago

Thank you very much for your input, will monitor this company longer and revisit it if PE goes into attractive level.

Victor Chng replied 4 years ago

You are welcome Alex :)

by the way, Happy Chinese New Year