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Valuation Quandrant

Q&A › Category: REITs › Valuation Quandrant
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Cass Ng asked 5 months ago
I am working on the Valuation on FLCT (BUOU).
I tried to insert the value but it seems not right. 
Had tried to watch the video again but still cannot get it, I must have get it wrong.

Step 2:
Historical Peak and Trough: Is it referring the peak n trough of stock price?
Undervalued and Overvalue price: Is it referring to the P/B of the peak and trough on the date of the stock price?
This higher P/B will be overvalued, the lower P/B willl be undervalued?


Step 3: Historial Peak and Trough: Is it referring on the stock price? Or dividend?
Undervalue and Overvalued price: Is it referring to the dividend on the stock price when it near the peak n trough?

I have attached the screenshot, what went wrong and what should I fill it in for the Step 2 and 3?



Attachments
Screenshot-2025-06-27-151747.jpg
4 Answers
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Rusmin Ang Staff answered 5 months ago
Hi Cass You can look at the share price of FLCT over the last ten years and identify the peak and the trough. From there, you can then manually calculate the yield and price to book at that time to get the historical high/low for both P/B and yield. Once you completed this exercise, you can then back calculate what will be the share price today if FLCT were to trade at historical low and high valuation. For example, if the historical high yield is 8%, then you can use the latest FLCT's DPU to derive the price. Once the current share price trades close to this figure, we know that FLCT is trades at historical high yield which is usually attractive time to accumulate, assuming the REIT passes the rest of the REIT criteria. Same thing can be applied to the low yield which is often the time to sell.
Cass Ng replied 5 months ago

I think you may have misunderstood me, let me rephrase.
My question is about filling in the blanks, I’m unsure whether those blanks are meant for price or ratio values.

Step 2: Historical Peak and Trough

1. Should I be filling in the historical stock price peak/trough, or the P/B ratio peak/trough?

2. For the undervalue and overvalue prices, how should I derive them?
a. Am I supposed to fill in the undervalue price by looking at when the stock reached its trough P/B, and taking the corresponding nearby stock price?
b. Or am I supposed to fill in the P/B ratio instead? The example shows a P/B in brackets, but I’m not sure how to derive that.

Step 3: Historical Peak and Trough

1. For this step, should I be filling in the stock price or the dividend yield percentage?
2. For the undervalue and overvalue, do I fill in the yield percentages, or the stock price?

I am totally confused on the form. I have watcehd the video 4 times but the form layout seems different from what was demonstrated.

Rusmin Ang Staff replied 5 months ago

Oops, thanks for rephrasing. Let me answer it below:

1. PB data
2a. Take the latest NAV and historical low/high PB figure to get the undervalue and overvalue share price.
2b. Low and high PB datapoint
3. Additional data point which is optional. But usually when a REIT is cheap/expensive, both PB and yield would show answer that is in close range. Again, this method is just an estimate. No crisis is similar in 100%. You can then fill the calculated share price for both undervalued and overvalued price.

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Cass Ng answered 5 months ago
Hi Rusmin, Thanks for your reply, and I hope I’m not disturbing your weekend. I’ve briefly plotted some data from FLCT’s Annual Reports. From what I observe, when the stock price gets closer to its P/B lows or higher yield levels, does that generally indicate the stock is undervalued? I’ve attached a chart for your reference. Also, I’m currently using the year-end (December) price points for this analysis — is that the correct approach?
Or would it be more accurate to use the price around the ex-dividend date (or ex-dividend month) instead? Appreciate your guidance on this. Thanks again!
Attachments
chart.jpg
Rusmin Ang Staff replied 5 months ago

No worries, you’re not 🙂

If you’re plotting the chart, I’d suggest daily share price but you can use yearly NAV as datapoint across all the dates in that particular year. You can download historical share price from investing.com (need to sign up as member which is free). Again, it can be quite troublesome. So it will be easier if you just pick the figure from the historical point and calculate the high and low. You should get pretty close answer too.

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Cass Ng answered 5 months ago
Hi Rusmin, Thanks for the advice! I managed to download the historical data for the past 5 years and plot a chart. Could you help me check if it's correct? It looks like the price and P/B ratio are getting quite close now.
  1. Are the historical peaks and troughs, as well as the concepts of "undervalued" and "overpriced", correct?
    I filtered out the peaks of the P/B ratio and took the price on those same days. Then, I used the financial year's NAV for the entire year to calculate the overvalued price, and did the same for the troughs to determine the undervalued price.
Regarding step 3:
  1. When the price and yield converge, does that also indicate an undervalued price?
    I'm using the closing price at the end of the year for this.
  2. If all other criteria are met, would it be fair to say that this REIT is potentially undervalued?

    Thank you very much!
Attachments
Step-2.jpg
Step-3.jpg
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Rusmin Ang Staff answered 5 months ago
Hi Cass, Your work is pretty good. From the Chart, you can see the high (~1.3x) and low point (0.6x - 0.8) more clearly. If all other criteria is intact, then likely this REIT is considered undervalued. Just note that there is DPU from capital which we should exclude out from the calculation of current dividend yield.
Cass Ng replied 5 months ago

Got it now!
Thank you so much for your patience and guidance, really appreciate you taking the time to explain!