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For TEE Land Limited’s (SGX:S9B) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. S9B is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not all stocks are expose to the same level of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.
See our latest analysis for TEE Land
What does S9B’s beta value mean?
With a five-year beta of 0.39, TEE Land appears to be a less volatile company compared to the rest of the market. This means the stock is more defensive against the ups and downs of a stock market, moving by less than the entire market index in times of change. S9B’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.
How does S9B’s size and industry impact its risk?
S9B, with its market capitalisation of S$79.10M, is a small-cap stock, which generally have higher beta than similar companies of larger size. In addition to size, S9B also operates in the real estate industry, which has commonly demonstrated strong reactions to market-wide shocks. As a result, we should expect a high beta for the small-cap S9B but a low beta for the real estate industry. It seems as though there is an inconsistency in risks portrayed by S9B’s size and industry relative to its actual beta value. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Can S9B’s asset-composition point to a higher beta?
During times of economic downturn, low demand may cause companies to readjust production of their goods and services. It is more difficult for companies to lower their cost, if the majority of these costs are generated by fixed assets. Therefore, this is a type of risk which is associated with higher beta. I examine S9B’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Since S9B’s fixed assets are only 8.95% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. Thus, we can expect S9B to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. Similarly, S9B’s beta value conveys the same message.