Stock Valuation: Sinotrans Shipping Ltd (368)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
Industrials – Transportation & Logistics – Shipping & Ports HKD1.81
@ 28 Sep 2018
COMPANY PROFILE Sinotrans Shipping Ltd is engaged in dry bulk vessel time chartering and dry bulk cargo voyage chartering, container vessel time chartering, shipping agency, ship management and oil tanker bareboat chartering under finance lease.

Sinotrans Shipping is a transportation and logistics company, domiciled in Hong Kong. The company organises itself into three segments: container shipping, dry bulk shipping, and others. Container shipping, which contributes the majority of revenue, transports shipping containers and provides freight forwarding services. Dry bulk shipping, the next most significant segment, transports ocean freight and includes charter hire income. The others segment includes ship management and the liquefied natural gas business. The company derives the majority of revenue from Asia.

Stock Code 368
Stock Valuation Below

Sinotrans Shipping Price to Sales

The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.
At the price of HKD1.81 as at 28 Sep 2018, Sinotrans Shipping Ltd is trading at a Price to Sales Ratio of 0.9 times last 12 months sales.  This is a 4.0% discount to current fair Price to Sales Ratio of 0.9 times.
Is the stock undervalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from or Estimates are from – Thomson Reuters.
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