[Part 2]
The final comparison.
Consider the reports on the 27th of August in particular regarding the sale announcement of KL Festival City Mall (available at http://klse.i3investor.com/servlets/ptg/5657.jsp). Compare reports with price targets of RM2.51 and rm3.85 respectively.
One report reports the sale will garner "an exceptional gain or 10 sen/share" of RM110mil for shareholders
The other reports "cash pile will be boosted by the sale for RM349mil"
Notice abysmal the difference a singular announcement above affected the price target given by each financial house & the difference in tone (negative,positive).
[Interestingly: The media can chose either report to publish i.e. via newspapers]
In conclusion, to estimate a price that will be paid by future buyers (of a stock), one can look at a particular market's favorite method of evaluation.
For e.g. it is more likely that a company in Malaysia will use the following:
1) P/E ratio
2) Net Profit growth rate (%)
3) Revenue growth rate (%)
4) Net Asset Value (NAV) / Net Tangible Assets (NTA)
as the main evaluation metric.
The above plus peer comparison (comparing companies of similar nature) should allow for a relatively good future projection of a company's stock performance.
Of course the above qualitative methods should also have added quantitative measures as such; is it a favored stock, does it carry a premium due to a fantastic management/business model, will there be more satisfied customers years onward, and much more.
[Note: Evaluations - Most companies i.e. Oldtown bhd & Sch Bhd that have great balance sheets with very low debt usually causes less attractive evaluations. Why? For instance, Oldtown Bhd. Revenue generated is used to finance debt hence reducing its net profits which affects all the 4 evaluation metric stated above. This is contrasted to companies in the US that use debt (e.g. bonds) to finance debt (NOT Cost to produce goods/services) to improve evaluations since debt and net profit fall into seperate categories].
Until next time, happy investing.
Thursday 28 August 2014
Thursday 21 August 2014
Research Reports Parkson
[Part 1]
Parkson Holdings Bhd (parent company) is taken as a case study to test the viability of Research Reports (RRs).
It is recommended (as previously mentioned) that Research Reports should only COMPLEMENT own research done via analysing company announcements via 1st party documentation; by the company itself or through informed source(s).
RRs on Parkson dated 20/08/2014:
( 3 main RR released: http://klse.i3investor.com/servlets/ptg/5657.jsp including RR posted at http://www.bursamalaysia.com/market/listed-companies/list-of-companies/plc-profile.html?stock_code=5657 )
In brief, it is assumed the RRs was a respond to Parkson's disposal of its fully owned KL Festival City Mall (henceforth the Property) for RM349mil to Festiva Mall Sdn Bhd with AsiaMalls Sdn Bhd being the holding company.
This would unlock RM349mil (initial purchase price of RM246mil + RM103mil of profit from disposal) to be used as per reported by Parkson Bhd:
[RM200mil]; General investments including acquisition, development and management of retail malls and Working capital
[RM100mil]; Expenses related to the Proposed Disposal
Firstly, Parkson's anchor tenancy business within the Property will go on as usual.
Secondly, unlocking cash value is always good for any company, if sufficient cash is raised (appraised market value of the Property: RM353.8mil by Henry Butcher Malaysia Sdn Bhd) and an adequate return on invested capital (ROIC). Parkson's main ideology is to grow with internally generated funds with the least usage of debt. Although a rough calculation of ROIC from the mentioned disposal is difficult, it is assumed from Parkson's ideology and transparent book keeping, the cash to be raised will give a sufficient return in share value.
[ ROIC: a Company's efficiency in allocating capital. More at
http://www.investopedia.com/terms/r/returnoninvestmentcapital.asp ]
ROIC % and in turn a theoratical Internal Rate of Return (IRR) for individual shareholders is enhanced in view of retail space that is increasing in Kuala Lumpur and the reinvestment of cash in other outlets in/future development i.e. in Melaka, a still under developed city in terms of retail business.
Thirdly, in simplistic terms;
1) The cash due RM349mil upon completion of the conditional Sale & Purchase (S&P) in approximately 1-2 months will enhance Parkson's balance sheet by RM349mil or RM200mil assuming cost of disposal=RM149mil.
2) This will increase Parkson's valuations for Year 2014 unless the next 2 quarters of shopping season does really badly (the 1st half was relatively good).
Assuming negative valuations are produced by RRs, the cash will be utilized for future stores which should be fully owned by Parkson without incurring debt to grow elsewhere.
[Note: More than 65-75% of revenue is generated by Parkson Retail Group operating in a strong consumers market- China, with stiff competition that seems to be growing on debt i.e. Intime Retail Group Co Ltd and Golden Eagle Retail Group Ltd]
Fourthly, Parkson Retail Asia Limited, the Singapore subsidiary is to report its quarterly report today 21/08/2014 (after trading period).
The RRs seem to suggest Parkson will be moving no where for now, but the incoming cash flow and the business structure of anchor tenancy for the next two or more quarters seems to be vagrantly positive.
Well, in short, RRs exists only to persuade purchases for institutional funds /investors have their own qualification to purchase stocks in which one believes have all been met by the recent asset disposal.
[Fun Fact: the Disposal was a surprise in one RR and not at all to another]
There are many more considerations to valuing a company than what RRs have to offer. Besides, without such reports, those who produce them might lose credibility and goodwill. Hence, the need to constantly revise their stand to remain relevant and in business.
[Interestingly: The RRs often display a word for word reproduction of company announcements with added short term opinions]
In conclusion, use RRs wisely for despite the above, they give a quick outlook for any given company.
Happy investing.
Parkson Holdings Bhd (parent company) is taken as a case study to test the viability of Research Reports (RRs).
It is recommended (as previously mentioned) that Research Reports should only COMPLEMENT own research done via analysing company announcements via 1st party documentation; by the company itself or through informed source(s).
( 3 main RR released: http://klse.i3investor.com/servlets/ptg/5657.jsp including RR posted at http://www.bursamalaysia.com/market/listed-companies/list-of-companies/plc-profile.html?stock_code=5657 )
In brief, it is assumed the RRs was a respond to Parkson's disposal of its fully owned KL Festival City Mall (henceforth the Property) for RM349mil to Festiva Mall Sdn Bhd with AsiaMalls Sdn Bhd being the holding company.
This would unlock RM349mil (initial purchase price of RM246mil + RM103mil of profit from disposal) to be used as per reported by Parkson Bhd:
[RM200mil]; General investments including acquisition, development and management of retail malls and Working capital
[RM100mil]; Expenses related to the Proposed Disposal
Firstly, Parkson's anchor tenancy business within the Property will go on as usual.
Secondly, unlocking cash value is always good for any company, if sufficient cash is raised (appraised market value of the Property: RM353.8mil by Henry Butcher Malaysia Sdn Bhd) and an adequate return on invested capital (ROIC). Parkson's main ideology is to grow with internally generated funds with the least usage of debt. Although a rough calculation of ROIC from the mentioned disposal is difficult, it is assumed from Parkson's ideology and transparent book keeping, the cash to be raised will give a sufficient return in share value.
[ ROIC: a Company's efficiency in allocating capital. More at
http://www.investopedia.com/terms/r/returnoninvestmentcapital.asp ]
ROIC % and in turn a theoratical Internal Rate of Return (IRR) for individual shareholders is enhanced in view of retail space that is increasing in Kuala Lumpur and the reinvestment of cash in other outlets in/future development i.e. in Melaka, a still under developed city in terms of retail business.
Thirdly, in simplistic terms;
1) The cash due RM349mil upon completion of the conditional Sale & Purchase (S&P) in approximately 1-2 months will enhance Parkson's balance sheet by RM349mil or RM200mil assuming cost of disposal=RM149mil.
2) This will increase Parkson's valuations for Year 2014 unless the next 2 quarters of shopping season does really badly (the 1st half was relatively good).
Assuming negative valuations are produced by RRs, the cash will be utilized for future stores which should be fully owned by Parkson without incurring debt to grow elsewhere.
[Note: More than 65-75% of revenue is generated by Parkson Retail Group operating in a strong consumers market- China, with stiff competition that seems to be growing on debt i.e. Intime Retail Group Co Ltd and Golden Eagle Retail Group Ltd]
Fourthly, Parkson Retail Asia Limited, the Singapore subsidiary is to report its quarterly report today 21/08/2014 (after trading period).
The RRs seem to suggest Parkson will be moving no where for now, but the incoming cash flow and the business structure of anchor tenancy for the next two or more quarters seems to be vagrantly positive.
Well, in short, RRs exists only to persuade purchases for institutional funds /investors have their own qualification to purchase stocks in which one believes have all been met by the recent asset disposal.
[Fun Fact: the Disposal was a surprise in one RR and not at all to another]
There are many more considerations to valuing a company than what RRs have to offer. Besides, without such reports, those who produce them might lose credibility and goodwill. Hence, the need to constantly revise their stand to remain relevant and in business.
[Interestingly: The RRs often display a word for word reproduction of company announcements with added short term opinions]
In conclusion, use RRs wisely for despite the above, they give a quick outlook for any given company.
Happy investing.
Subscribe to:
Posts (Atom)