Many investors like to use relative valuations to compare the “worth” of a company. Yet when it comes to fundamentals they don’t follow through by using relative fundamentals.

I illustrate this with the example of Riverview Rubber, a Bursa Malaysia plantation company. My reference company is KLK – this is partly because I have a detailed fundamental analysis and partly because I happen to know some of the senior managers there.

On a PE basis, Riverview is relatively expensive while it is cheap from a PBV basis https://i.postimg.cc/gjZSQgbd/Riverview-vs-KLK-valuation.png

When you compare their respective ROE treads as per the chart, you can see that Riverview under performed KLK over the past decade. https://i.postimg.cc/MZNbTDq1/Riverview-vs-KLK.png

It is not just the numbers. Because I have a reasonably good picture of how KLK numbers came about, I can have a “qualitative picture” how Riverview under performed.

If you expect Riverview to be taken over like Boustead Plantation, you would look at the PBV. But if there is no sale, the market is likely to rate it based on its earnings.

On a PE basis, Riverview is more expensive yet on a ROE basis it is worse. This is not Buffett wonderful company at fair price. Neither is this a Graham cigar-butt.

If you want to look at some other Bursa companies with some plantation activities, have a look at KFIMA. https://www.i4value.asia/2023/12/is-kfima-one-of-better-bursa-stocks.html#more