If you are looking to invest in Asian Pay Television Trust’s (SGX:S7OU), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. S7OU 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.
An interpretation of S7OU’s beta
With a five-year beta of 0.52, Asian Pay Television Trust appears to be a less volatile company compared to the rest of the market. This means that the change in S7OU’s value, whether it goes up or down, will be of a smaller degree than the change in value of the entire stock market index. S7OU’s beta indicates it is a stock that investors may find valuable if they want to reduce the overall market risk exposure of their stock portfolio.
Could S7OU’s size and industry cause it to be more volatile?
S7OU, with its market capitalisation of S$704.03M, is a small-cap stock, which generally have higher beta than similar companies of larger size. However, S7OU operates in the media industry, which has commonly demonstrated muted reactions to market-wide shocks. Therefore, investors can expect a high beta associated with the size of S7OU, but a lower beta given the nature of the industry it operates in. It seems as though there is an inconsistency in risks from S7OU’s size and industry. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
How S7OU’s assets could affect its beta
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test S7OU’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Since S7OU’s fixed assets are only 11.49% of its total assets, it doesn’t depend heavily on a high level of these rigid and costly assets to operate its business. As a result, the company may be less volatile relative to broad market movements, compared to a company of similar size but higher proportion of fixed assets. This is consistent with is current beta value which also indicates low volatility.
What this means for you:
You could benefit from lower risk during times of economic decline by holding onto S7OU. Its low fixed cost also means that, in terms of operating leverage, it is relatively flexible during times of economic downturns. What I have not mentioned in my article here are important company-specific fundamentals such as Asian Pay Television Trust’s financial health and performance track record. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for S7OU’s future growth? Take a look at our free research report of analyst consensus for S7OU’s outlook.
- Past Track Record: Has S7OU been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of S7OU’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.