In This Article:
First Sponsor Group Limited (SGX:ADN), a S$831.64M small-cap, is a real estate company operating in an industry which is the most prevalent industry globally, and has continued to play a crucial role in the portfolios of investors. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Singapore stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether First Sponsor Group is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for First Sponsor Group
What’s the catalyst for First Sponsor Group’s sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. In the past year, the industry delivered growth in the teens, beating the Singapore market growth of 10.37%. First Sponsor Group lags the pack with its negative growth rate of -21.92% over the past year, which indicates the company will be growing at a slower pace than its real estate peers. As the company trails the rest of the industry in terms of growth, First Sponsor Group may also be a cheaper stock relative to its peers.
Is First Sponsor Group and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 11.63x, relatively similar to the rest of the Singapore stock market PE of 14x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 7.31% on equities compared to the market’s 7.96%. On the stock-level, First Sponsor Group is trading at a PE ratio of 9.42x, which is relatively in-line with the average real estate stock. In terms of returns, First Sponsor Group generated 8.82% in the past year, which is 1.50% over the real estate sector.
Next Steps:
First Sponsor Group has been a real estate industry laggard in the past year. It delivered lower earnings growth compared to its peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector. However, before you make a decision on the stock, I suggest you look at First Sponsor Group’s fundamentals in order to build a holistic investment thesis.