It is better to invest in another company. Those in this stock should be aware of the opportunity cost.
A new management is in place. But will they be able to turnaround this company? Turnarounds are usually difficult and can take a long time, if at all.
Certain businesses are not easy to manage. This company is in real estate development. The business was doing well from 2009 to 2016. From 2016 to now, it had done so poorly.
Look for businesses with durable competitive advantage, selling unique products and services. These businesses should have earnings that are consistent and growing over the long term.
I briefly looked at this company in past and was impressed by its performance. Look at the increasing EPS and DPS from 2009 to 2016.
Perhaps, a lesson here is 5 years is probably a business cycle for many businesses and looking at 10 years or even 15 years results may offer one a better understanding of the long term sustainability of a business.
Excluding the very high PEs and very low PEs at the extremes, its usual historical PE ranged from low PE of 8.3 to high PE of 11.9 and its average or signature PE was 9.8.
At the current price of RM 11.40 per share, it is trading at a PE of 7.08x and its DY is 4.34%.
2009 to 2022
It EPS grew from 58.28 sen in 2009 to 157.64 sen in 2022. It has grown its EPS 2.7x.
Its EPS grew at a faster rate from 2009 to 2015 (doubling over 6 years) and grew at a slower rate from 2016 to 2022 (EPS increased by about 50%),
Excluding the very high PEs and very low PEs at the extremes, its usual historical PE ranged from low PE of 11.2 to high PE of 16.5 and its average or signature PE was 14.1.
It paid out 35% of its earnings as dividends and grew its earnings by 99.36 sen (157.64 - 58.28 sen). It retained 957.61 sen (1473.01 sen - 515.4 sen). The return on its retained earnings (RORE) is thus, 10.4% (99.36 sen / 1473.01 sen).
Its usual DY ranged from low DY of 2.38% to high DY of 3.12%.
At the current price of RM 19.90 per share, it is trading at a PE of 11.06x and its DY is 2.96%.
2009 to 2022
It EPS grew from 0.24 sen in 2009 to 4.72 sen in 2022. It had grown its EPS 19.7x.
Its EPS grew 11.7x, at a fast rate from 0.24 sen in 2009 to 2.8 sen in 2017. Its EPS dropped from 2.8 sen inn 2017 to 2.64 sen in 2018. From 2018, its EPS grew from 2.64 sen to 4,72 sen in 2022; it grew 1.8x.
Its PE expanded from PE of 16.1 in 2009 to PE of 76.6 in 2015. From 2015/16, its PE contracted from this highest PE to PE of 18.4 in 2022.
Excluding the extremely high PEs and extremely low PEs, the usual historical PE for MYEG ranged from low PE of 15.9 to high PE of 25.9 and its average or signature PE was 19.9.
It paid out 27.7% of its earnings as dividends and grew its earnings by 4.72 sen - 0.24 sen = 4.48 sen. It retained 26.94 sen - 7.46 sen = 19.48 sen. The return on its retained earnings is thus, 4.48 sen / 19.48 sen = 23%.
Its usual DY ranged from low DY of 0.83% to high DY of 2.23%.
At the current price of RM 0.79 per share, it is trading at a PE of 14.8x and its DY is 1.91%.
From 2009 to 2022, it has grown its earnings per share 2.9 times, from 47 sen to 136.65 sen.
It paid out 99% of its earnings as dividends and despite retaining only 1% of its earnings, it was able to grow its earnings 2.9 times.
At the price of RM 23.56 per share, it is trading at a PE of 18.12x.
Excluding the extremely high PEs and extremely low PEs, the usual historical PE for Heim ranged from 14.8 to high PE of 25.6 and its average PE was 20.5.
Its usual DY ranges 3.33% to 5.26%. At RM 23.56 per share, its DY is 5.86%.
From 2009 to 2022, it has grown its earnings per share 2.26 times, from 13.93 sen to 31.5 sen.
It paid out 48.2% of its earnings as dividends and grew its earnings by 31.5 sen - 13.93 sen = 17.57 sen. It retained 340.44 sen - 164.03 sen = 176.41 sen. The return on its retained earnings is thus, 17.57 sen / 176.41 sen = 9.96%.
At the price of RM 4.14 per share, it is trading at a PE of 12.07x and its DY is 4.35%.
Excluding the extremely high PEs and extremely low PEs, the usual historical PE for PBB ranged from low PE of 13.4 to high PE of 15.7 and its average or signature PE was 14.5.
Its usual DY ranged from low DY of 3.04% to high DY of 4.35%.
China's economy has slipped into deflation as consumer prices declined in July for the first time in more than two years.
The official consumer price index, a measure of inflation, fell by 0.3% last month from a year earlier.
Analysts said this increases pressure on the government to revive demand in the world's second largest economy.
This follows weak import and export data, which raised questions about the pace of China's post-pandemic recovery.
The country is also tackling ballooning local government debt and challenges in the housing market. Youth unemployment, which is at a record high, is also being closely watched as a record 11.58 million university graduates are expected to enter the Chinese job market this year.
Falling prices make it harder for China to lower its debt - and all the challenges which stem from that, such as a slower rate of growth, analysts said.
"There is no secret sauce that could be applied to lift inflation," says Daniel Murray from investment firm EFG Asset Management. He suggests a "simple mix of more government spending and lower taxes alongside easier monetary policy".
Most developed countries saw a boom in consumer spending after pandemic restrictions ended. People who had saved money were suddenly able and willing to spend, while businesses struggled to keep up with the demand.
The huge increase in demand for goods that were limited in supply - coupled with rising energy costs after Russia's invasion of Ukraine - inflated prices.
But this is not what happened in China, where prices did not soar as the economy emerged from the world's tightest coronavirus rules. Consumer prices last fell in February 2021.
In fact, they have been at the cusp of deflation for months, flatlining earlier this year due to weak demand. The prices charged by China's manufacturers - known as factory gate prices - have also been falling.
"It is worrisome as far as it shows that demand in China is poor while the rest of the world is awakening, especially the West," Alicia Garcia-Herrero, an adjunct professor at the Hong Kong University of Science and Technology, said.
"Deflation will not help China. Debt will become more heavy. All of this is not good news," she added.
China produces a large proportion of the goods sold around the world.
A potential positive impact of an extended period of deflation in the country may be that it helps to curb rising prices in other parts of the world, including the UK.
However, if cut-price Chinese goods flood global markets it could have a negative impact on manufacturers in other countries. That could hit investment by businesses and squeeze employment.
A period of falling prices in China could also hit company profits and consumer spending. This may then lead to higher unemployment.
It could result in a fall in demand from the country - the world's largest marketplace - for energy, raw materials and food, which would hit global exports.
China's economy is already facing other hurdles. For one, it is recovering from the impact of the pandemic at a rate that is slower than expected.
On Tuesday, official figures showed that China's exports fell by 14.5% in July compared with a year earlier, while imports dropped 12.4%. The grim trade data reinforces concerns that the country's economic growth could slow further this year.
China is also dealing with an ongoing property market crisis after the near-collapse of its biggest real estate developer Evergrande.
The Chinese government has been sending the message that everything is under control, but has so far avoided any major measures to encourage economic growth.
Building confidence among investors and consumers will be key to China's recovery, Eswar Prasad, a professor of trade policy and economics at Cornell University, said.
"The real issue is whether the government can get confidence back in the private sector, so households will go out and spend rather than save, and businesses will start investing, which it hasn't accomplished so far," Professor Prasad said.
"I think we're going to have to see some significant stimulus measures (including) tax cuts."
Additional reporting by BBC business reporter Peter Hoskins.
https://www.bbc.com/news/business-66435870
The Good versus Bad Billionaires
Good billionaires emerge outside "rent-seeking industries."
Common rent-seeking industries are construction, real estate, gambling, mining, steel, aluminum, oil, gas and other commodity sectors that mainly involve digging resources out of the ground.
In these businesses, major players often spend their time extracting maximum rents from limited national resources by bribing politicians if necessary, not growing national wealth in innovative ways.
New names on the billionaire list can be a favourable sign. Looking at the scale of billionaire fortunes is not enough to reveal the extent of their political vulnerabilities.
Comparing the share of the wealth generated by "bad billionaires."
To make a qualitative judgement about the sources of great fortunes, compare the total wealth of tycoons in these corruption prone businesses to that of all billionaires in the country.
This no doubt miscasts many honest mining and oil tycoons, but even in nations where these industries are relatively uncorrupt, they tend to make weak contributions to productivity and to tie the economy to the volatile swings of commodity prices.
Good billionaires
This label is for tycoons in industries that are known to make the largest contributions to growth in productivity or that make popular consumer products, like smartphones or cars.
These "good" industries are the ones least likely to generate backlashes against wealth creation; they include technology, manufacturing, pharmaceutical, and telecoms, as well as retail, e-commerce and entertainment.
How are nations generating their wealth?
Analysing billionaires does offer anecdotally telling, real-time evidence of how nations are generating wealth.
Among the largest developed economies of 2019, bad billionaires controlled the smallest shares of billionaire wealth: in Italy (7%) and France(9%) - a good sign for both countries.
Only 13% of Swedish billionaire wealth originates in rent seeking industries. Much of the rest is created at globally competitive companies, including H&M in fashion and IKEA in furniture retailing.
Few new or good billionaires are to be found in nations like Turkey or Russia, where aging regimes have turned away from reform and promoted favoured tycoons. The undisputed capital of connected tycoons is Moscow. Nearly 70% of Russian billionaire wealth comes from bad billionaires. The Kremlin treats billionaires with contempt, arbitrarily changing rules that govern their businesses knowing the public has little sympathy for a billionaire class widely perceived as corrupt.
Popular resentment against great wealth is palpable in Mexico as well, where bad billionaires also control close to 70% of billionaire wealth. Mexican tycoons are known for cornering industries such as telephones and concrete, which earn monopoly profits for their owners while driving up prices for consumers.
Bad billionaires typically arise in family empires, particularly in the emerging world, where weaker institutions make it easier for old families to cultivate political connections.
September 2008, pre-Lehman Brothers bankruptcy
In September 2008, China's economy was slowing. The Shanghai stock market had just crashed. Property prices were weak. The Chinese officials said China was entering the middle-income rank of nations, so it was time for it to slow down as previous Asian miracle economies, like Japan, South Korea and Taiwan, had. They talked about cutting back on investment, downsizing large state companies and letting the market allocate credit, which at this point was not growing faster than the economy. Between 2003 and 2008, credit had held steady at about 10% of GDP.
October 2008, post Lehman Brothers bankruptcy
Lehman Brothers filed for bankruptcy in the US and global markets went into a tail-spin. Demand collapsed in the US and Europe, crushing export growth in China, where leaders panicked.
By October 2008, the Chinese government had reversed course, redoubling its commitment to the old investment -led growth model, this time by fueling the engine with debt. From 2008 through 2018, total debts would increase by $80 trillion worldwide, as countries fought off the effects of the financial crisis, but of that total, $35 trillion, or nearly half, was racked up by China alone.
August 2009
By August 2009, the Chinese government had launched an aggressive spending and lending program that kept China's GDP growth above 8%, while the US and Europe were in recession. That steadily high GDP growth had convinced many Chinese that their government could produce any growth rate it wanted.
Bank regulators were the only officials who expressed alarm and their main concern was increasingly reckless lending in the private sector. "Shadow banks" had started to appear, selling credit products with yields that were too high to be true.
2013
By 2013, shadow banks accounted for half of the trillions of dollars in new yearly credit flows in China. When Beijing began to limit borrowing by local governments, local authorities set up shell companies to borrow from shadow banks. Soon these "local government funding vehicles" became the biggest debtors in the shadow banking system.
As the flow of debt accelerated, more lending went to wasteful projects. By some estimates, 10% of the firms on the mainland stock exchange were "zombie companies." kept alive by government loans. The state doled out loans to incompetent and failing borrowers.
Much of the lending started to flow into real estate, the worst target for investment binges. Easy loans spurred the sale of about 800 million square feet of real estate in 2010, more than in all other market so the world combined. In big cities, prices were rising at 20% to 30% a year.
Caught up in the excitement, banks stopped looking at whether borrowers had income and started lending on collateral - often property. This "collateralized lending" works only as long as borrowers short on income can keep making loan payments by borrowing against the rising price of their property. By 2013, a third of the new loans in China were gong to pay off old loans. In October 2013, Bank of China chairman warned that shadow banking resembled a "Ponzi scheme," with more and more loans based on "empty real estate."
He was one of the Chinese leaders who appeared to accept the reality that a maturing economy needed to slow down, which would allow him to restrain the credit boom. Yet every time the economy showed signs of slowing, the government would reopen the credit spigot to revive it.
The cast of dubious creditors grew increasingly flaky, including coal and steel companies with no experience in finance, guaranteeing billions of dollars in IOUs issued by their clients and partners.
2014: Chinese urged to buy stocks
By 2014, lending entrepreneurs were shifting their sights from property to new markets - including the stock market.
Even the state-controlled media jumped in the game, urging ordinary Chinese to buy stocks for patriotic reasons. Their hope was to create a steady bull market and provide debt-laden state companies with a new source of funding. Instead they got one of the biggest stock bubbles in history.
There are 4 basic signs of a stock bubble:
June 2015, Shanghai market started to crash
By April 2015, when the state-run People's Daily crowed that the good times were "just beginning," The Shanghai market had reached the extreme end of all four bubble metrics, which is rare.
The amount that Chinese investors borrowed to buy stock had set a world record, equal to 9% of the total value of tradable stocks. Stock prices were up 70% in just 6 months, despite slowing growth in the economy. On some days, more stock was changing hands in China than in all other stock markets combined. In June 2015, the market started to crash and it continued to crash despite government orders to investors not to sell.
[Comments:
This credit binge had some characteristics unique to China's state-run system, including the borrowing by local government fronts and the Communist propaganda cheering on a capitalist bubble. But its fundamental dynamics were typical of debt mania. It began with private players, who assume the government would not let them fail, and devolved into a game of whack-a-mole. As the government fitfully tried to contain the mania, more and more dubious lenders and borrowers got in the game, blowing bubbles in stocks and real estate. The quality of credit deteriorated sharply, into collateralized loans and IOUs. These are all important mania warning signals.
The most important sign was, as ever, private credit growing much faster than the economy. After holding steady before 2008, the debt burden exploded over the next 5 years, increasing by 74 % points as a share of GDP. This was the largest credit boom ever recorded int he emerging world (though Ireland and Spain have outdone it in the developed world).]
By mid 2019
By mid-2019 China had, in fact, seen economic growth slow by nearly half, from double digits to 6%, right in line with previous extreme binges. To date then, no country has escaped this rule: a five-year increase in the ratio of private credit to GDP that is more than 40% points has always led to a sharp slowdown in economic growth.
[Comments:
China did however, dodge the less consistent threat of a financial crisis, aided by some unexpected strengths. One was the dazzling boom in its tech sector, without which the economy would have slowed much more dramatically. Another was the fact that Chinese borrowers were in debt mainly to Chinese lenders and in many cases the state owned bother parties to the loan. In short, /China was well positioned to forgive or roll over its own debts. And with strong export income, vast foreign exchange reserves, strong domestic savings and still ample bank deposits, it has managed to avert the financial crisis that often accompanies large, debt driven economic slowdowns.]
