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Thursday, 30 May 2013

Guinness Malaysia is richly valued

Guinness Malaysia

Quarter Q1 eps   Q2 eps Q3 eps Q4  eps FYE eps
30-Jun-13 18.81 21.90 20.24 0.00 60.95
30/06/2012 18.28 21.79 17.06 11.53 68.66
30/06/2011 12.81 21.40 16.21 9.63 60.05
30/06/2010 8.85 14.50 15.38 11.81 50.54
30/06/2009 15.66 11.48 10.79 9.07 47.00
30-Jun-08 14.27 8.90 12.05 6.45 41.67
30-Jun-07 12.27 8.08 11.23 5.68 37.26
30-Jun-06 12.03 9.90 6.93 13.58 42.44
30-Jun-05 9.70 9.48 7.19 9.37 35.74
30-Jun-04 7.00 11.32 5.89 8.38 32.59
Sum 476.90
DPO 101.3%


EPSGR from 2004 to 2012 (Period 8 years) was about 10% (actual is 9.8%).


Historical PE of Guinness (most recent quarters data at the top.)
Quarter High Pr Low Pr ttm-eps High PE Low PE
3 20.88 20.50 72.48 28.81 28.28
2 18.88 16.46 69.30 27.24 23.75
1 16.88 16.00 69.19 24.40 23.12
4 16.00 15.10 68.66 23.30 21.99
3 13.62 12.70 66.76 20.40 19.02
2 13.80 12.80 65.91 20.94 19.42
1 13.50 11.56 65.52 20.60 17.64
4 10.20 9.40 60.05 16.99 15.65
3 10.66 9.95 62.23 17.13 15.99
2 9.84 9.44 61.40 16.03 15.37
1 10.16 9.10 54.50 18.64 16.70
4 8.39 8.05 50.54 16.60 15.93
3 7.78 7.12 47.80 16.28 14.90
2 7.05 6.80 43.21 16.32 15.74
1 7.12 6.78 40.19 17.72 16.87
4 7.00 6.50 47.00 14.89 13.83
3 6.15 5.90 44.38 13.86 13.29
2 5.65 5.35 45.64 12.38 11.72
1 5.20 4.96 43.06 12.08 11.52
4 5.45 5.05 41.67 13.08 12.12
3 5.45 5.20 40.90 13.33 12.71
2 5.55 5.20 40.08 13.85 12.97
1 5.80 5.35 39.26 14.77 13.63
4 6.10 5.25 37.26 16.37 14.09
3 5.90 5.10 45.16 13.06 11.29
2 6.45 5.80 40.86 15.79 14.19
1 6.60 5.90 42.68 15.46 13.82
4 6.30 5.80 42.44 14.84 13.67
3 5.85 5.45 38.23 15.30 14.26
2 5.85 5.40 38.49 15.20 14.03
1 5.95 5.50 38.07 15.63 14.45
4 5.90 5.50 35.74 16.51 15.39
3 5.85 5.35 34.75 16.83 15.40
2 5.60 5.30 33.45 16.74 15.84
1 5.55 5.10 35.29 15.73 14.45
4 5.30 5.05 32.59 16.26 15.50
3 5.05 4.74 30.59 16.51 15.50



On 29.8.2013, it is priced at $20.80 per share.
This is at a P/E of 28.81 times.

Over the last 8 quarters (2 years):
ttm-EPS has grown from 62.23 sen to 72.48 sen (+16.5%)
P/E has expanded from average of 16.56 times to the average of 28.55 (+72.4%)

Market Price of Share = EPS x PE
The share price of Guinness has risen over the last 2 years "enriching" its business owners.  
This share price increase is partly due to improving EPS and mainly due to the very generous P/E expansion during this period.

Has the market price risen ahead of the value based on the fundamentals of this stock?
In any event, the upside return/downside risk ratio is less enticing and also, the potential return based on the current price is less attractive.































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5 comments:

  1. NewbieThursday, May 30, 2013 8:18:00 am

    What should GAB investor do since it is overvalued and upside is limited?

    Sell or Wait?

    Regards.

    ReplyDelete
  2. investbullbearThursday, May 30, 2013 10:21:00 am

    What returns can one expect from Guinness Malaysia in the next 10 years?

    Let's do some mental calculation.

    30.5.2013
    LFY EPS 68.66 sen
    Its lowest historical PE was 13.

    Assumption in calculating future returns:

    1. EPS growth rate continues to grow at 9.8% per year.

    2. As Guinness DPO ratio exceeds 100% historically, we assume that all earnings for the year will be distributed as dividends.

    3. At the 10th year (2013), we will use the P/E of 13 to derive its share (market price).


    Calculations:

    2012 EPS 68.66 sen

    2013 EPS = 68.66*(1+9.8%)^10 = 174.87 sen

    Total Dividend received from 2012 to 2013 (10 yrs) = 0.5 x 10 x (68.66 + 174.87 ) = $12.18

    Share price in 2013 = 13 x 174.87 sen = $22.73

    Initial investment = $20.80 (2012)

    Final value of investment in 2013 = $22.73 + $12.18 = $34.91.

    This translates into a compound annual return of 5.31%.


    Assuming the dividends received remained stagnant at 68.66 for the next 10 yrs, (an unlikely scenario for Guinness), the total dividends received in the next 10 years will be = 10 X 68.66 sen = $ 6.87.

    The final value of the initial investment will be = $22.73 + $6.87 = $ 29.60.

    This translates into a compound annual return of 3.59%.


    [It is probable that the price rise of Guinness will pause to allow its fundamentals to catch up in the future.]

    ReplyDelete
  3. investbullbearThursday, May 30, 2013 1:03:00 pm

    What should you do if you find that the price or P/E is significantly above or below the historically fair price or fair P/E mark?

    http://myinvestingnotes.blogspot.com/2012/06/what-should-you-do-if-you-find-that.html

    ReplyDelete
  4. NewbieThursday, May 30, 2013 7:05:00 pm

    Thank you for your kind reply.

    I think you meant to say 2023 EPS instead of 2013 EPS.

    Also, don't forget that GAB has a debt of 200 million so dividend payout will most likely be impacted.

    Regards.

    ReplyDelete
  5. NewbieThursday, May 30, 2013 7:06:00 pm

    Thanks for your kind reply.

    I think you meant to say 2023 EPS instead of 2013 EPS.

    Also don't forget that GAB has a debt of 200 million so dividend payout will most likely be impacted.

    ReplyDelete