Techcomp

just a qn here. techically mkt cap is simply a function of price and no. of shares in issue. its not a matrix of valuation, profitability or potential growth, much less niche. most probably, it does serve some indication on potential interests by bigger players such as investment houses since they might be restricted by some mandate on mkt cap itself. i seem to hear many people comparing mkt cap alone and deducing whether it should or should not be placed in a comparison of whether a company has a moat to talk about, much less be even entitled to be compared to other similar players in the field (whether or not they are gaining or losing market share is also obviously out of context) so what is the significance of mkt share when it comes to investment decisions? anyone care to share?

Market cap is the value of a firm as determined by the market, e.g. today for techcomp the market thinks the value is 80-85bn$. it is obviously a very important metric as it tells investors what the market is valuing their investment at, whether it is right or wrong is a completely different matter One cannot compare a 10bn$ company with a 1mln$ company- companies get more valuable (i.e higher market cap) because they are doing something right to consistently produce increasing levels of profits, when investors see this they assign higher multiples to the earnings because although a big company may not grow as fast as a small one its earnings are more certain which is very important for investors. That is why SMRT trades at PEs between 15-20 By the same token, It is very normal to see small caps trading at low PE multiples simply because the market is not sure whether the earnings are sustainable over a period of time, this does NOT mean that the stock is undervalued, as the market goes more confident of the earnings power of a small cap it will award it higher PE multiples.

Hi Phantom1 and Soyanbean, There are a few schools of thoughts. One believes that the bigger companies should enjoy higher PE as they are more established and they have earnings track record. The other believes that the smaller cap stocks have higher growth potential and should have a high PEG (Price-Earning Growth Ratio) of more than 1. Meaning that if the Company can grow at 30% pa, the Company should be trading at a PE of 30x. There are no right or wrong in the market. Mr Market decideds everything. I fully agreed with Phantom1 that comparison of Techcomp with the big US boys are just plain silly. These big boys would probably not even look at Techcomp. What market capitalisation can tell us is how the investment market perceived this Company. It does not tell us anything about the business aspect of the Company. This is something that I firmly believe. Take for instance, the Company, Man Wah Holdings who delisted from Singapore last June at 4x PE. The same Company is listing in HK now at 17x-24x forward PE. How can the same Company have 2 different valuations within the space of 12 months when nothing has changed? It boils down to investors\' appetite and size of market. I believe SGP investors will probably subscribe to a 8x blended PE for Techcomp given it has 2 divisions -- manufacturing and distribution. Its smallish size, poor liquidity and patchy earning track record also contribute to the single digit valuation. At 8x FY09, the Stock should trade around 58 cents. If the market can have more confidence about its prospect and give it a forward PE of 8x-9x based on Westcomb estimates, the stock will trade at least 75 cents.

I guess if Techcomp can deliver its promises when they announce their 1H2010 earnings, the market may re-rate the Company again. Then, it may not be a penny stock anymore. :laugh: :laugh:

My eyes nearly popped out to see Techcomp at 64.5 cents. Still going up after a good run???? Anyone still holding on to this babe? Can it touch 70 cents? Usually, the 1H earnings are small compared to the full year\'s, and the market misunderstands things by annualising the 1H results.

dont get too excited (or depressed) when Techcomp trades at the 42-cent level tomorrow. It\'s gone X-All. The bonus issue and the dividend will all apply to shareholdings (and those purchased) as of end-today but not tomorrow onwards.