Geographic Impact on Peer Comparables

Geographic Impact on Peer Comparables

If we were to compare peers in the same industry across the globe, we would see a range of ratios (i.e. P/E etc). This does not necessarily mean that the a firm with a lower ratio in one country is of better value compared to a firm with a higher ratio in another country. 

One reason could be that most investors, especially retail investors, have a greater preference for investing in markets closer to where they are situated. For example, a middle class salaried man working in Singapore will more likely place his money in the Singapore exchange rather than say the NYSE. 

This is not surprising given the availability bias where the stocks have greater coverage with information easily coming across on a regular basis through the news, papers, or online articles.  Thus, with all the information on hand, the salaried man will naturally be more informed and deem himself more saavy on the local market, thereby making investment decisions from there. 

Illustration:

Genting Singapore P/E: 36.83x 

Wynn Macau Ltd P/E: 20.0x

Galaxy Entertainment Group P/E: 21.99x

If we consider that Genting Singapore (unlike its Macau peers) does not have the junket operation that mitigates casino losses and also that brings in clients, then why is this stock from a P/E point of view this stock so expensive? In my opinion, i guess it could be partially explained by this geographic bias where since Genting is pretty much the only gaming stock on the market, prices are supported by our local investors who want a gaming industry share in their portfolio but doesn't go about considering shares abroad.