Research Reports Parkson

[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.