Thanks.
A winner, the best of the best, an anchor, a caring person, stubbornly optimistic.
You too have sacrificed and contributed a lot to a better Malaysia.
Happy Birthday.
Sunday, 20 February 2011
Saturday, 19 February 2011
PetDagang heading for a record quarter. Maintain outperform at RM12.50 with target price RM15.40
PetDagang heading for a record quarter
Written by Financial Daily
Friday, 18 February 2011 11:36
Petronas Dagangan Bhd
(Feb 17, RM12.70)
Maintain outperform at RM12.50 with target price RM15.40:Petronas Dagangan’s (PetDagang) record quarterly net profit of RM236 million for 3QFY11 took 9M bottom line to an all-time high of RM641 million. At 73% of our full-year forecast, it met our expectations as we anticipate a stronger 4Q. However, at 82% of consensus numbers, it beat market expectations. The absence of an interim dividend was expected. We maintain our forecasts and continue to value the stock at our target market PER of 14.5 times, leading to an unchanged target price of RM15.40.
PetDagang remains an “outperform” based on the potential re-rating catalysts of:
(i) leadership in the retail and lubricant segments;
(ii) an overseas venture; and
(iii) earnings upgrades by the market.
Its 6.8% dividend yield, the highest in the sector locally and the second highest regionally, adds to the attraction.
Net profit in 3Q rose 26% year-on-year (y-o-y), thanks to an improvement in volume and margin supported by a bigger petrol station network and higher vehicle population. Furthermore, the steady movement of the oil price in October to December helped stabilise the selling prices of products that do not come under the automatic pricing mechanism. These positive factors boosted earnings before interest and tax (Ebit) margin to 5.5%, the highest since 1QFY10’s 5.8%.
The government raised the selling price of RON 95 petrol by 5 sen per litre in December while the price of RON 97 petrol was adjusted upwards
twice by 5 sen in November and 15 sen in December. However, the price increases did not have a major impact on sales volume as the increases were not unexpected.
Furthermore, the double hikes for RON 97 affected mostly high-end users with performance cars. An estimated 75% to 80% of motorists use RON 95, which is kept affordable at RM1.90 per litre. RON 97 retails at RM2.50 per litre.
PetDagang is Malaysia’s No 1 petroleum retailer. It is also tops in the commercial and LPG segments. However, the company still trails behind Shell in the retail and lubricant segments. Management targets to wrest the retail leadership position from Shell within three years. In the lubricant segment, where it is a late entrant, PetDagang aims to be the leader in five years.
PetDagang is currently mandated to operate only in Malaysia. However, this may change as management is mulling the possibility of operating outside Malaysia. In addition to the eventual reality of hitting a saturation point, we believe its interest in widening its market exposure may have been triggered by the likelihood of full deregulation of the domestic market. — CIMB Research, Feb 17
This article appeared in The Edge Financial Daily, February 18, 2011.
http://www.theedgemalaysia.com/in-the-financial-daily/181818-petdagang-heading-for-a-record-quarter.html
Written by Financial Daily
Friday, 18 February 2011 11:36
Petronas Dagangan Bhd
(Feb 17, RM12.70)
Maintain outperform at RM12.50 with target price RM15.40:Petronas Dagangan’s (PetDagang) record quarterly net profit of RM236 million for 3QFY11 took 9M bottom line to an all-time high of RM641 million. At 73% of our full-year forecast, it met our expectations as we anticipate a stronger 4Q. However, at 82% of consensus numbers, it beat market expectations. The absence of an interim dividend was expected. We maintain our forecasts and continue to value the stock at our target market PER of 14.5 times, leading to an unchanged target price of RM15.40.
PetDagang remains an “outperform” based on the potential re-rating catalysts of:
(i) leadership in the retail and lubricant segments;
(ii) an overseas venture; and
(iii) earnings upgrades by the market.
Its 6.8% dividend yield, the highest in the sector locally and the second highest regionally, adds to the attraction.
Net profit in 3Q rose 26% year-on-year (y-o-y), thanks to an improvement in volume and margin supported by a bigger petrol station network and higher vehicle population. Furthermore, the steady movement of the oil price in October to December helped stabilise the selling prices of products that do not come under the automatic pricing mechanism. These positive factors boosted earnings before interest and tax (Ebit) margin to 5.5%, the highest since 1QFY10’s 5.8%.
The government raised the selling price of RON 95 petrol by 5 sen per litre in December while the price of RON 97 petrol was adjusted upwards
twice by 5 sen in November and 15 sen in December. However, the price increases did not have a major impact on sales volume as the increases were not unexpected.Furthermore, the double hikes for RON 97 affected mostly high-end users with performance cars. An estimated 75% to 80% of motorists use RON 95, which is kept affordable at RM1.90 per litre. RON 97 retails at RM2.50 per litre.
PetDagang is Malaysia’s No 1 petroleum retailer. It is also tops in the commercial and LPG segments. However, the company still trails behind Shell in the retail and lubricant segments. Management targets to wrest the retail leadership position from Shell within three years. In the lubricant segment, where it is a late entrant, PetDagang aims to be the leader in five years.
PetDagang is currently mandated to operate only in Malaysia. However, this may change as management is mulling the possibility of operating outside Malaysia. In addition to the eventual reality of hitting a saturation point, we believe its interest in widening its market exposure may have been triggered by the likelihood of full deregulation of the domestic market. — CIMB Research, Feb 17
This article appeared in The Edge Financial Daily, February 18, 2011.
http://www.theedgemalaysia.com/in-the-financial-daily/181818-petdagang-heading-for-a-record-quarter.html
Friday, 18 February 2011
Three ways to value stocks
September 29, 2008
By Ooi Kok Hwa
TheStar
MOST stocks sell at a certain price level influenced by the companies’ future income, the overall market conditions as well as the assets owned.
Three factors – income, market and asset approach – can be individually used to value a company.
Income approach: Under this approach, a company’s value is dependent on the present value of its future cash flows, which can be in the form of dividends, profits or cash movements. In Malaysia, we can use this approach on companies that are paying good and consistent dividends or companies showing strong future revenue and profits. In most times, these will show stable stock prices regardless of market conditions.
The overall condition may be weak, but these companies will be selling at high value due to the potential of their future businesses as well as the certainty of future dividend payments. Investors will hold them for the long term and will be quite reluctant to sell these stocks as they always reward them with handsome dividend payments. In Malaysia, these companies normally have repetitive consumer needs with products that wear out fast, are used up quickly as well as have strong brand appeal.
Examples include powdered milk, instant noodles, condensed milk, infant formula, soft drinks, canned milk, dairy products, toiletries or healthcare products. Most of these products are consumed fast and have strong brands. Given the present weak economic environment, despite higher operating costs, especially high raw material prices, these companies still enjoy good turnover and sales, as they are able to pass the higher costs to consumers.
Even though retailers need to fork out more money to pay for their products, it is necessary, as the products have already formed part of the essential items in most households. As a result, their financial results may not be much affected by the weak economic environment. In fact, they will still be able to reward their shareholders with good dividends. Hence, such stocks can be purchased any time, depending on the future outlook of their businesses rather than the overall market conditions.
If these stocks’ outlook is promising and able to generate high turnover, profits and cash flows, retailers may buy them now even though the future remains bleak.
Market approach: Under this approach, the companies’ value depends on the market prices of similar types of companies. In most instances, the fluctuation of the overall market sentiment can affect their stock prices.
For example, the stock prices for companies like Telekom Malaysia Bhd, Tenaga Nasional Bhd and Malayan Banking Bhd will fluctuate based on the overall market risks and returns. Even though these stocks do pay dividends, their price movements tend to follow the overall market fluctuation. We use price-earnings ratio or price-to-book to value these stocks, which will depend on how many times the current market price is above their earnings or book value. Then we compare these ratios with companies in the same industry. The timing to purchase this type of stocks is important, as we need to catch them when the market touches the bottom.
Unfortunately, predicting the market bottom is a very difficult task in view of the uncertainties of the market outlook.
Asset approach: We use asset approach on companies that own a lot of assets, like land banks, buildings or other fixed assets. Under this approach, the companies’ value will depend on the types of assets owned by the companies. Among the three approaches, this is the least important in evaluating any ongoing concern companies because they will not liquidate their assets.
When we buy into these operating companies, we are more interested in how much future cash flow that can be generated rather than to expect any cash proceeds from the disposal of their assets.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
By Ooi Kok Hwa
TheStar
MOST stocks sell at a certain price level influenced by the companies’ future income, the overall market conditions as well as the assets owned.
Three factors – income, market and asset approach – can be individually used to value a company.
Income approach: Under this approach, a company’s value is dependent on the present value of its future cash flows, which can be in the form of dividends, profits or cash movements. In Malaysia, we can use this approach on companies that are paying good and consistent dividends or companies showing strong future revenue and profits. In most times, these will show stable stock prices regardless of market conditions.
The overall condition may be weak, but these companies will be selling at high value due to the potential of their future businesses as well as the certainty of future dividend payments. Investors will hold them for the long term and will be quite reluctant to sell these stocks as they always reward them with handsome dividend payments. In Malaysia, these companies normally have repetitive consumer needs with products that wear out fast, are used up quickly as well as have strong brand appeal.
Examples include powdered milk, instant noodles, condensed milk, infant formula, soft drinks, canned milk, dairy products, toiletries or healthcare products. Most of these products are consumed fast and have strong brands. Given the present weak economic environment, despite higher operating costs, especially high raw material prices, these companies still enjoy good turnover and sales, as they are able to pass the higher costs to consumers.
Even though retailers need to fork out more money to pay for their products, it is necessary, as the products have already formed part of the essential items in most households. As a result, their financial results may not be much affected by the weak economic environment. In fact, they will still be able to reward their shareholders with good dividends. Hence, such stocks can be purchased any time, depending on the future outlook of their businesses rather than the overall market conditions.
If these stocks’ outlook is promising and able to generate high turnover, profits and cash flows, retailers may buy them now even though the future remains bleak.
Market approach: Under this approach, the companies’ value depends on the market prices of similar types of companies. In most instances, the fluctuation of the overall market sentiment can affect their stock prices.
For example, the stock prices for companies like Telekom Malaysia Bhd, Tenaga Nasional Bhd and Malayan Banking Bhd will fluctuate based on the overall market risks and returns. Even though these stocks do pay dividends, their price movements tend to follow the overall market fluctuation. We use price-earnings ratio or price-to-book to value these stocks, which will depend on how many times the current market price is above their earnings or book value. Then we compare these ratios with companies in the same industry. The timing to purchase this type of stocks is important, as we need to catch them when the market touches the bottom.
Unfortunately, predicting the market bottom is a very difficult task in view of the uncertainties of the market outlook.
Asset approach: We use asset approach on companies that own a lot of assets, like land banks, buildings or other fixed assets. Under this approach, the companies’ value will depend on the types of assets owned by the companies. Among the three approaches, this is the least important in evaluating any ongoing concern companies because they will not liquidate their assets.
When we buy into these operating companies, we are more interested in how much future cash flow that can be generated rather than to expect any cash proceeds from the disposal of their assets.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
Growth versus value investing
Wednesday July 18, 2007
Growth versus value investing
Ooi Kok Hwa
Value investing means searching for stocks selling lower than their value, whereas growth investing is finding companies with growth potential. Failure to pay attention to any risk factors may result in unintended lossesQ: Which one provides better return, growth or value investing?
Choosing between growth and value investing is always a tough decision. Value investing is concerned with the current price level and fair price of a stock, while growth investing is more focused on the potential earnings growth of the company.
According to Warren Buffett, the term “value investing” is redundant because “investing” is definitely an act of seeking value, at the very least, sufficient to justify the amount paid. He believes that growth is always a component in the calculation of value. For every dollar used in investing, it must create more than a dollar of long-term market value.
Value investing
The principle behind value investing is using the market approach, which is concerned about the current price level of a stock. Therefore, ratios such as price earnings ratio (PER) and price-to-book are used and special attention is paid to the price component of these ratios.
When using the PER method, a low PER is preferred, as investors believe the current low price level may be due to an overly pessimistic assessment of the company’s future prospects. The PER will eventually revert to its normal market level when other investors realised that prospects are not as bad as they thought.
As a result, they rely on the movement in stock price rather than the earnings. They will search for companies with low PERs, as they expect the ratios to increase to their normal levels with or without an increase in earnings. However, value investors face the risk of misinterpreting a cheapness signal when the market’s concern about the stock may indeed be correct.
Growth investing
This method is based on the earnings potential of a company. By assuming the PER will be constant, investors anticipate that higher growth in earnings will contribute to higher stock prices.
Benjamin Graham, the father of value investing, defined a growth company as one that has performed better than the average company over a period of years and is expected to continue doing so in the future.
Growth investing is a method of identifying companies with average growth prospects. Its focus will be on the potential growth in earnings, which has not yet been reflected in the current stock price.
Here, the key risk is the non-occurrence of the expected growth. In some cases, growth investors may be entirely vindicated in their judgment of the quality of the underlying business, but the stock still performed badly because it was so overly priced at the time of purchase.
In addition, this method assumes a constant PER. If the PER declines for some unanticipated reason, the investors will incur losses as a result of lower stock prices despite a higher growth in earnings.
Buy low, sell high or buy high, sell even higher?
Value investors are always the earlier buyers of stocks. They buy based on the belief that the market has misread the real value of the company. At that moment, the future prospects of the company may still be uncertain; there may or may not be an increase in earnings.
Thus, in addition to using the PER, value investors will use other measures, like dividend yield or price-to-book ratio, to support their purchase decisions.
In contrast, growth investors will come in at the early recovery stages of a company’s fundamentals. At that point in time, the stock’s price will have already moved higher from its recent low. Value investors will usually start to feel uncomfortable with the price level and sell the stock even though the company’s fundamentals have recovered, while growth investors will buy the stock in the belief that they are buying high to sell even higher.
Growth investors believe that it is safer to buy stocks when the fundamentals have shown definite signs of recovery, and will sell higher when the prices increase as a result of further improvement in the companies’ fundamentals.
Hence, both value and growth investing have their strengths and weaknesses. Failure to pay attention to their risk factors may result in unintended losses.
Nestle emerging market growth to offset cost rises
VEVEY, Switzerland |
(Reuters) - Nestle (NESN.VX), the world's biggest food maker, said strong demand in emerging markets would help it offset a steep rise in input costs in 2011 after it beat sales forecasts for 2010.
The maker of Nescafe coffee and Gerber baby food said it was well placed to cope with rising commodity prices by making cost savings and pushing up its own prices.
"We saw a significant uptick in raw material prices in the second half," Chief Financial Officer Jim Singh said in a conference call on Thursday. "We expect 2.5-3 billion Swiss francs additional input costs in 2011."
The increase would be about 8-10 percent on a cost base of about 30 billion Swiss francs, a Nestle spokesman said.
Nestle can rely on its strong presence in emerging markets, where underlying sales growth was 11.5 percent in 2010, and the appeal of brands such as KitKat chocolate bars to offset rising costs for milk, cocoa, coffee, sugar and grain.
The company could raise prices on its popular coffee products Nescafe and Nespresso -- the latter exceeded 3 billion Swiss francs annual sales for the first time -- Chief Executive Paul Bulcke said at a media conference.
Underlying sales growth at the group rose 6 percent in 2010 to beat a Reuters poll forecast of 5.5 percent, and accelerated to 6.4 percent in the fourth quarter, making the group confident of meeting its long-standing target of 5-6 percent growth in 2011.
Nestle shares were up 1.1 percent at 1210 GMT, outperforming a 0.5 percent rise in the STOXX 600 European Food & Beverage index .SX3P.
Peers Danone (DANO.PA) and Unilever (ULVR.L)(UNc.AS) recently said they were confident about passing on higher costs, but Kraft Foods (KFT.N) cut its 2011 forecast for earnings growth because it expects some consumers to be put off by price increases.
"We see Nestle as best placed to escape the volatility of costs which are impacting the food sector in 2011," said Deborah Aitken, an analyst at brokers Bryan Garnier.
Full-year net profit at Nestle rose to 34.2 billion Swiss francs, including the proceeds from the sale of its remaining stake in eyecare group Alcon (ACL.N) to pharma group Novartis (NOVN.VX).
Nestle CFO Singh said the group could use part of its cash for smaller acquisitions, particularly in its nutrition business, as it intends to boost its medical food activities.
Vontobel analyst Jean-Philippe Bertschy said the dividend increase of 15.6 percent to 1.85 francs per share was high, but the lack of comment on an additional share buyback was slightly disappointing.
Nestle aims to conclude its current 10 billion Swiss franc buyback in the first half of the year and will subsequently decide on a new one, Singh said.
Asked about Nestle's 30 percent stake in cosmetics group L'Oreal (OREP.PA), Bulcke said there was no reason to change the status quo.
Nestle shares gained 9 percent in 2010, but have lost about 4 percent since the beginning of the year, as investors worry about input cost inflation and forex headwinds.
They trade at about 14 times estimated 2012 earnings, a slight premium to Danone, Kraft and Unilever.
(Editing by Sophie Walker and Will Waterman)
Thursday, 17 February 2011
MBMR
MBM Resources Berhad Company
Business Description:
MBM Resources Berhad (MBMR) is an investment holding company. The Company, through its subsidiaries, operates in four segments:
Wright Quality Rating: DAD2
Stock Data
Current Price (2/11/2011): 3.19
2009 Sales 1,177,992,000
Employees: 1,528
Market Cap: 773,957,800
Shares Outstanding: 242,620,000
Closely Held Shares: 155,058,852
Forecast EPS for next FY = 14.16 x 4 = 56.64 senBusiness Description:
MBM Resources Berhad (MBMR) is an investment holding company. The Company, through its subsidiaries, operates in four segments:
- motor vehicles, which is engaged in marketing and distribution of motor vehicles, spare parts and provision of related services;
- automotive components, which is engaged in manufacturing of automotive parts and components, interior carpets, steel wheels and discs, and provision of tire assembly services;
- vehicles body building, which is engaged in manufacturing and fabrication of vehicles body and provision of related services, and
- others, which include investment holding.
Wright Quality Rating: DAD2
Stock Data
Current Price (2/11/2011): 3.19
2009 Sales 1,177,992,000
Employees: 1,528
Market Cap: 773,957,800
Shares Outstanding: 242,620,000
Closely Held Shares: 155,058,852
| Announcement Date | Financial Yr. End | Qtr | Period End | Revenue RM '000 | Profit/Lost RM'000 | EPS | Amended | ||||||
| 11-Nov-10 | 31-Dec-10 | 3 | 30-Sep-10 | 388,704 | 38,768 | 14.16 | - | ||||||
| 17-Aug-10 | 31-Dec-10 | 2 | 30-Jun-10 | 404,816 | 43,154 | 16.02 | - | ||||||
| 24-May-10 | 31-Dec-10 | 1 | 31-Mar-10 | 363,835 | 45,426 | 16.50 | - | ||||||
| 11-Feb-10 | 31-Dec-09 | 4 | 31-Dec-09 | 323,832 | 25,551 | 9.31 | - | ||||||
Today's Price (17.2..2011) RM 3.22
Forward PE = 3.22 / 0.5664 = 5.7 x
P/BV = 3.22 / 4.08 = 79%
Historical
5 Yr
Low PE 5.6
High PE 7.6
10 Yr
Low PE 6.2
High PE 8.9
2005 Revenue 944.82m Earnings 73.78m EPS 31.3 sen
2006 Revenue 1132.01m Earnings 92.09m EPS 38.6 sen
2007 Revenue 1080.91m Earnings 110.52m EPS 45.7 sen
2008 Revenue 1203.04m Earnings 117.14m EPS 46.5 sen
2009 Revenue 1177.99m Earnings 66.53m EPS 27.5 sen
9M10 Revenue 1157.355m Earnings 112.787m EPS 46.66 sen
Balance Sheet
Cash and bank balances 178.559 m
Long term borrowings 14.524m
Short term borrowings 21.598m
Net Cash 142.445m
Current Asset 464.043m (Cash 178.559m, Acc. Receivables 101.129m, Inventories 178.363m)
Current Liabilities 129.346m
Current Ratio = 464.043 / 129.346 = 3.6 x
Quick Ratio = (178.559 + 101.129) / 129.346 = 2.2 x
Total Assets 1280.493m
Total Equity attributable to owners of the company 989.292m
Net Assets per Share RM 4.08
Cash Flow Statement
Net CFO 1.203m
Capex -21.179m
FCF -19.976m
Year DPS EPS
2000 8.0 16.2
2001 7.8 37.8
2002 25.9 38.9
2003 15.1 31.9
2004 13.0 19.7
2005 13.0 31.3
2006 13.0 38.6
2007 8.8 45.7
2008 14.1 46.5
2009 6.0 27.5
124.7 334.1
DPO ratio = 124.7 / 334.1 = 37.3%
Amount of Retained Earnings = 334.1 - 124.7 = 209.4 sen
Earnings Growth = 27.5 - 16.2 = 11.3 sen
Total Return on Retained Earnings (RORE) over 9 years (2000-2009)
= 11.3 / 209.4 = 5.4%
Related:
Return on Retained Capital
A simple mathematical formula measures the capital requirements of maintaining a company's competitive advantage and management's ability to utilize retained earnings to improve shareholders' wealth. In essense this calculation takes theamount of earnings retained by a business for a certain period and measures its effect on the earning capacity of the company.
| Announcement Date | Financial Yr. End | Qtr | Period End | Revenue RM '000 | Profit/Lost RM'000 | EPS | Profit Margin | ||||||
| 17-Feb-11 | 31-Dec-10 | 4 | 31-Dec-10 | 389,879 | 32,215 | 11.64 | 8.26% | ||||||
| 11-Nov-10 | 31-Dec-10 | 3 | 30-Sep-10 | 388,704 | 38,768 | 14.16 | 9.97% | ||||||
| 17-Aug-10 | 31-Dec-10 | 2 | 30-Jun-10 | 404,816 | 43,154 | 16.02 | 10.7% | ||||||
| 24-May-10 | 31-Dec-10 | 1 | 31-Mar-10 | 363,835 | 45,426 | 16.50 | 12.5% | ||||||
Wednesday, 16 February 2011
Central to Benjamin Graham's teaching is the ability to calculate Intrinsic Value.
Investment Policy (Based on Benjamin Graham)
http://myinvestingnotes.blogspot.com/2008/08/investment-policies-based-on-benjamin.html
Central to Benjamin Graham's teaching is the ability to calculate Intrinsic Value.
His value investing approach: Buy at a discount to intrinsic value. Your gain comes from market realising the true intrinsic value given time.
Philip Fisher's growth investing approach: Buy at fair value, i.e. buy at intrinsic value. With earnings growth, you will realise a higher price for the shares.
In buying at a discount to intrinsic value, the value is in the bargain price, and the favourable upside reward / downside risk ratio.
In buying a growth stock at fair price, the value is in the earning power of the company. This creates the value in the stock although you are acquiring this at a fair price. Of course, if you can acquire it at a bargain price, the better.
Warren Buffett uses both strategies and cleverly grouped Philip Fisher's growth investing approach as value investing too, calling value investing and growth investing as sides of the same coin. He is pragmatic.
In either approaches, overpaying for a stock will be detrimental to your financial health.
http://myinvestingnotes.blogspot.com/2008/08/investment-policies-based-on-benjamin.html
Central to Benjamin Graham's teaching is the ability to calculate Intrinsic Value.
His value investing approach: Buy at a discount to intrinsic value. Your gain comes from market realising the true intrinsic value given time.
Philip Fisher's growth investing approach: Buy at fair value, i.e. buy at intrinsic value. With earnings growth, you will realise a higher price for the shares.
In buying at a discount to intrinsic value, the value is in the bargain price, and the favourable upside reward / downside risk ratio.
In buying a growth stock at fair price, the value is in the earning power of the company. This creates the value in the stock although you are acquiring this at a fair price. Of course, if you can acquire it at a bargain price, the better.
Warren Buffett uses both strategies and cleverly grouped Philip Fisher's growth investing approach as value investing too, calling value investing and growth investing as sides of the same coin. He is pragmatic.
In either approaches, overpaying for a stock will be detrimental to your financial health.
Why do you Sell and When?
Taking profit
Profit should be realised from sales of stocks in the following situations:
(I) when the stock is obviously overpriced, or
(II) when the sale of the stock frees the capital to be reinvested into another stock with potentially better return.
Not taking profit in the above situations can harm your portfolio and compromise its returns. In other circumstances, let the winners run.
Underperforming stocks should also be sold early. Hanging onto underperforming stocks is costly too. There is the opportunity cost that the capital can be better employed for higher return. Also, hanging onto these lack-lustre stocks reduces the overall return of your portfolio.
Reducing serious loss
When the fundamentals of a stock have deteriorated, sell to protect your portfolio. This decision should be make quickly based on the facts and situations, in order to keep your losses small.
Profit should be realised from sales of stocks in the following situations:
(I) when the stock is obviously overpriced, or
(II) when the sale of the stock frees the capital to be reinvested into another stock with potentially better return.
Not taking profit in the above situations can harm your portfolio and compromise its returns. In other circumstances, let the winners run.
Underperforming stocks should also be sold early. Hanging onto underperforming stocks is costly too. There is the opportunity cost that the capital can be better employed for higher return. Also, hanging onto these lack-lustre stocks reduces the overall return of your portfolio.
Reducing serious loss
When the fundamentals of a stock have deteriorated, sell to protect your portfolio. This decision should be make quickly based on the facts and situations, in order to keep your losses small.
Tuesday, 15 February 2011
If stock markets or stocks crash, WHO will benefit the most?
Those who bought during bubbles become paupers during crashes.
Those who bought during crashes become millionaires when the market reverses.
Wealth is destroyed by bubbles and created from crashes.
Your potential returns are a function of price you paid for the stocks offered by the market.
Those who will be investing for a long time will like the stock market when it is on CHEAP SALE.
Those who need to cash out significantly for various reasons during crashes will be the losers.
Those who bought during crashes become millionaires when the market reverses.
Wealth is destroyed by bubbles and created from crashes.
Your potential returns are a function of price you paid for the stocks offered by the market.
Those who will be investing for a long time will like the stock market when it is on CHEAP SALE.
Those who need to cash out significantly for various reasons during crashes will be the losers.
Ways on Pricing a Business
Posted: Feb 14, 2011
When done properly, purchasing or selling a business can be a rewarding and fulfilling decision. There are different ways for you to do these two tasks but they both share a common issue - determining the right business selling price. It usually takes experience and skills to properly price a business.
Pricing a business for sale
When you decide to buy or sell a business, coming up with the price is one of the first tasks that you will encounter and is also among the hardest phases in the process. The truth is that there is no best way to price a business. In most cases, the final selling price depends on the seller's determination to sell and the buyer's willingness to buy the business. However, there are standard methods used in pricing a business for sale.
The market-based valuation is the first method used in pricing a business. Compared to other methods, this is probably the simplest one. Basically, the business selling price must have the same price with similar businesses that have been sold within the industry around the same area. This approach, however, does not consider the unique features of a certain company. In a manner of saying, it is a "quick and dirty" way of pricing a business for sale.
The next method in determining the business selling price called asset-based valuation. This method bases its calculations on the liquidation and book values of a particular company. This method determines the sale price of a business based on the bare minimum value, as the other important aspects, such as the customer base and brand name, are completely unaccounted for.
The last and most extensive type of business pricing method is called the earnings-based valuation. Considering the account historical, present, and future revenues and cash flows, this type of valuation calculates the business selling price most accurately, especially when used with the second valuation method.
The business selling price
Even if the three methods mentioned above give accurate results, the actual business selling price can still fluctuate depending on a number of factors that can be easily quantified. When the price you set is too high, it can discourage prospective buyers and may stain the business' reputation if it stays in market for a long period of time. On the other hand, you may also lose a large amount of money if you put a business on sale for a very low amount.
The intangible value of businesses is the main reason why a business selling price fluctuates. For example, an entrepreneur sells a reputed online company with a few 'hard assets'. If he disregards the value of those intangible assets, the price would significantly decrease and it would be a disastrous mistake on his end. Note that in a lot of cases, the value of intangible assets can cover up to 95 percent of the final selling price.
Other than the challenging assessment of intangible assets, another important factor in making business decisions is not letting your emotions get in the way. You may think that buying a reputed bakery franchise is a smart financial move, but are you sure you are ready to begin operations at 3 in the morning?
The same warning goes to sellers who are pricing a business for sale. It is normal to feel emotionally attached to a company that you once owned, but be professional enough not to show any emotion when discussing a business selling price. Remember that you should avoid over or under valuation of your company. Knowing the different ways of how to determine business sale prices, do you now agree that it is not such a difficult task after all?
http://www.articlesbase.com/entrepreneurship-articles/ways-on-pricing-a-business-4225431.html#ixzz1E2MatFpg
Intangible asset valuation is the method by which accountants determine the effect of an intangible asset on the company’s balance sheet. Unlike other accounting procedures, determining the transactional value of an intangible asset is an arduous process. Intangible assets include both intellectual property, such as grants, logos or trademarks, as well goodwill from buying another company. Intangible asset valuation requires both legal and financial analysis.When done properly, purchasing or selling a business can be a rewarding and fulfilling decision. There are different ways for you to do these two tasks but they both share a common issue - determining the right business selling price. It usually takes experience and skills to properly price a business.
Pricing a business for sale
When you decide to buy or sell a business, coming up with the price is one of the first tasks that you will encounter and is also among the hardest phases in the process. The truth is that there is no best way to price a business. In most cases, the final selling price depends on the seller's determination to sell and the buyer's willingness to buy the business. However, there are standard methods used in pricing a business for sale.
The market-based valuation is the first method used in pricing a business. Compared to other methods, this is probably the simplest one. Basically, the business selling price must have the same price with similar businesses that have been sold within the industry around the same area. This approach, however, does not consider the unique features of a certain company. In a manner of saying, it is a "quick and dirty" way of pricing a business for sale.
The next method in determining the business selling price called asset-based valuation. This method bases its calculations on the liquidation and book values of a particular company. This method determines the sale price of a business based on the bare minimum value, as the other important aspects, such as the customer base and brand name, are completely unaccounted for.
The last and most extensive type of business pricing method is called the earnings-based valuation. Considering the account historical, present, and future revenues and cash flows, this type of valuation calculates the business selling price most accurately, especially when used with the second valuation method.
The business selling price
Even if the three methods mentioned above give accurate results, the actual business selling price can still fluctuate depending on a number of factors that can be easily quantified. When the price you set is too high, it can discourage prospective buyers and may stain the business' reputation if it stays in market for a long period of time. On the other hand, you may also lose a large amount of money if you put a business on sale for a very low amount.
The intangible value of businesses is the main reason why a business selling price fluctuates. For example, an entrepreneur sells a reputed online company with a few 'hard assets'. If he disregards the value of those intangible assets, the price would significantly decrease and it would be a disastrous mistake on his end. Note that in a lot of cases, the value of intangible assets can cover up to 95 percent of the final selling price.
Other than the challenging assessment of intangible assets, another important factor in making business decisions is not letting your emotions get in the way. You may think that buying a reputed bakery franchise is a smart financial move, but are you sure you are ready to begin operations at 3 in the morning?
The same warning goes to sellers who are pricing a business for sale. It is normal to feel emotionally attached to a company that you once owned, but be professional enough not to show any emotion when discussing a business selling price. Remember that you should avoid over or under valuation of your company. Knowing the different ways of how to determine business sale prices, do you now agree that it is not such a difficult task after all?
http://www.articlesbase.com/entrepreneurship-articles/ways-on-pricing-a-business-4225431.html#ixzz1E2MatFpg
What Is Intangible Asset Valuation?
http://www.wisegeek.com/what-is-intangible-asset-valuation.htm
Investing mantra: Consequences dominate Probabilities
"Investing isn't just about probabilities. It's about consequences, and you've got to be prepared for them." - John Bogle
Higher inflation rates are playing havoc in real estate sector in India
Higher inflation rates are playing havoc in yet another sector. This time it is real estate. To contain the ever rising inflation, the RBI (India) has been hiking interest rates. And it plans to continue doing so in the near future as well. This has led to higher cost of borrowing funds, which in turn has led to a slack in the demand for homes. Net result being that prices for homes in major cities are expected to drop by as much as 30%.
This is definitely exciting news for those who are seeking to buy a home. But the point is that when the funds are so expensive, how will these people fund the purchase? This would just lead to demand dwindling. So is this the end of the real estate bubble at least for the major cities? Looks like it.
Equitymaster Agora Research Private Limited
103, Regent Chambers,
Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India.
This is definitely exciting news for those who are seeking to buy a home. But the point is that when the funds are so expensive, how will these people fund the purchase? This would just lead to demand dwindling. So is this the end of the real estate bubble at least for the major cities? Looks like it.
Equitymaster Agora Research Private Limited
103, Regent Chambers,
Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India.
Weaker trade surpluses is what the Chinese government is aiming at.
China's selfish currency policies have attracted criticisms from all counters. But the dragon nation seems to have done well for itself by managing to contain its currency appreciation. Lower inflation and higher imports in an attempt to reduce the economy's dependence on exports have worked in this direction. China's imports rose 51% YoY in January 2011. To put things in perspective, this brought down the country's trade surplus from US$ 13 bn in December to US$ 6.5 bn in January 2011. This data may be colored with seasonal impact due to the New Year festivities. However, weaker trade surpluses is what the government is aiming at. Notwithstanding the fact that it is coming at the expense of other economies. The G-20 nations have expressed displeasure over China's trade and currency policies in the past. But given its apex position in global trade, it seems that China will have its way longer than expected.
Chart of the day: Flows to emerging market equity funds
In terms of fund flows, 2011 does not seem to be turning out well for emerging markets. In fact, today's chart of the day shows that funds have been withdrawn from emerging markets in 2011 so far as compared to 2009 and 2010. In those years, investors rushed to emerging market shores to capitalise on the strong growth opportunities there as the developed world languished in recession. Now with inflation rearing its ugly head and food prices soaring, concerns have begun to emerge from these fast growing markets too.
* Up to Feb 8
Data Source: The Economist
 |
Data Source: The Economist
A crisis as big as the subprime one is brewing in Asia
In 2009 and 2010, Asia was the apple of the investor's eye as countries in the region recovered strongly from the global financial crisis to post healthy growth rates. But loose monetary policies in the West and high inflation have posed its own set of problems for the Asian economies. The biggest problem that Asia has been witnessing in recent times is the surge in food prices. And this issue could end up being more chronic rather than cyclical in the years to come. For starters, weather patterns have become unpredictable which in turn has hampered agricultural production of late. Then there is the issue of population. Asia alone, for example, will have another 140 million mouths to feed over the next four years. That is in addition to the almost 3 billion people in the fast-growing region currently. This means that demand will remain high in the future and supply may not always catch up.
The other big fallout of soaring food prices for the Asian region is likely to be a significant rise in debt. So far, it was believed that bloated debt was a problem that only Europe and the US were facing on account of the global crisis. But Asia is also likely to join this bandwagon. Take India for instance. It still has one of the highest proportion of poor in the world. This obviously means that most will not be able to afford food at such high rates. As a result, the Indian government would most certainly increase subsidies sharply and cut import taxes, which would put an additional strain on its finances.
Indeed, the crisis in Egypt was a product of the inability of the Egyptian government to tackle the problem of high inflation. And though extreme, noted economist Nouriel Roubini believes that persistently high food prices and inflation could raise the risk of more governments getting toppled. Certainly, Asian governments including India will have to give serious thought to some long term reforms if such shocks are to be avoided in the future.
Do you think that rising food prices will lead to a bigger crisis in Asia in the future?
Equitymaster Agora Research Private Limited
103, Regent Chambers,
Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India.
The other big fallout of soaring food prices for the Asian region is likely to be a significant rise in debt. So far, it was believed that bloated debt was a problem that only Europe and the US were facing on account of the global crisis. But Asia is also likely to join this bandwagon. Take India for instance. It still has one of the highest proportion of poor in the world. This obviously means that most will not be able to afford food at such high rates. As a result, the Indian government would most certainly increase subsidies sharply and cut import taxes, which would put an additional strain on its finances.
Indeed, the crisis in Egypt was a product of the inability of the Egyptian government to tackle the problem of high inflation. And though extreme, noted economist Nouriel Roubini believes that persistently high food prices and inflation could raise the risk of more governments getting toppled. Certainly, Asian governments including India will have to give serious thought to some long term reforms if such shocks are to be avoided in the future.
Do you think that rising food prices will lead to a bigger crisis in Asia in the future?
Equitymaster Agora Research Private Limited
103, Regent Chambers,
Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India.
Beware of Inflation
Beware of inflation.
The longer you leave your money in fixed deposit, the higher the risk of inflation eating away the purchasing power of your money.
Money market investments are safest when the money is needed in the short-term.
The very same safe investments become high risk the longer they stay invested.
Stocks are on the opposite track. They are high risk investments in the short-term, but are lower risk investments in the long term:
Fixed deposit
1yr = Low risk
10 yrs = High risk
Stocks
1 yr = High risk
10 yrs = Low risk
http://myinvestingnotes.blogspot.com/2008/10/risks-of-investments.html
The longer you leave your money in fixed deposit, the higher the risk of inflation eating away the purchasing power of your money.
Money market investments are safest when the money is needed in the short-term.
The very same safe investments become high risk the longer they stay invested.
Stocks are on the opposite track. They are high risk investments in the short-term, but are lower risk investments in the long term:
Fixed deposit
1yr = Low risk
10 yrs = High risk
Stocks
1 yr = High risk
10 yrs = Low risk
http://myinvestingnotes.blogspot.com/2008/10/risks-of-investments.html
Monday, 14 February 2011
There are many variations on the value investing theme. However described, the fusing theme among value investors is appreciating the difference between stock price and business value.
There are many variations on the value investing theme. The philosophy permits particular applications that vary to suit individual taste and ability. Leading value investors employ a range of styles.
Philip Fisher is a good example. In Fisher's era, investment wealth arose either:
The former describes traditional Graham-based pure value investing. The latter is Fisher's pioneering sense as a growth rather than a value investor and leads to the distinction (somewhat false) between the two.
Many contrast Graham, the father of value investing, and Fisher, the father of growth investing. But because value investing and growth investing are really cousins of one another, Fisher is better understood as developing a variation on value investing's themes. The difference is more a matter of style and emphasis than fundamentals.
Among the most famous published accounts of success reported by students of Graham-Dodd's teachings is Buffett's essay The Superinvestors of Graham-and-Doddsville. He documents a range of value investors who adopted varying styles of the philosophy.
Columbia University Business School professor Bruce Greenwald published a series of essays updating and elaborating Buffett's Superinvestors theme. He highlights numerous value investors to underscore slight variations of approach.
Of the variety of value investors and their styles, those most closely aligned to Graham might be called pure value investors. Those giving more weight to other traditions or contemporary influences might loosely be described as modified value investors.
Philip Fisher is a good example. In Fisher's era, investment wealth arose either:
- from traditional value investing (buying underpriced securities and holding them until fairly priced or overpriced) or
- fairly-priced businesses poised to grow so rapidly in sales and earnings (today we would add cash flows) that profits arise from that growth.
The former describes traditional Graham-based pure value investing. The latter is Fisher's pioneering sense as a growth rather than a value investor and leads to the distinction (somewhat false) between the two.
Many contrast Graham, the father of value investing, and Fisher, the father of growth investing. But because value investing and growth investing are really cousins of one another, Fisher is better understood as developing a variation on value investing's themes. The difference is more a matter of style and emphasis than fundamentals.
Among the most famous published accounts of success reported by students of Graham-Dodd's teachings is Buffett's essay The Superinvestors of Graham-and-Doddsville. He documents a range of value investors who adopted varying styles of the philosophy.
- Some diversify investments widely while others allocate wealth to a concentrated group of stocks.
- Most place a high premium on understanding the particulars of any business before investing, yet some will invest while holding only a reasonable level of expertise on a business.
Columbia University Business School professor Bruce Greenwald published a series of essays updating and elaborating Buffett's Superinvestors theme. He highlights numerous value investors to underscore slight variations of approach.
- Some refine valuation methods to define value as what informed industrialists would pay to own a business's equivalent assets.
- Some relate historical price fluctuations to intrinsic business value.
- Others combine this innovation with more traditional valuation metrics to enhance investment discipline.
- Some emphasize the role of catalysts such as takeovers and bankruptcy reorganizations that can transform underpriced businesses into reliased investment results.
Of the variety of value investors and their styles, those most closely aligned to Graham might be called pure value investors. Those giving more weight to other traditions or contemporary influences might loosely be described as modified value investors.
However described, the fusing theme among value investors:
- is appreciating the difference between stock price and business value.
- All also believe in the gospel of the margin of safety.
Value Investors don't believe stock markets can be predicted.
Value investors don't believe stock markets can be predicted, over short or long periods.
What can be ascertained, with a modest degree of reliability, is the probable performance of underlying businesses over long periods, based on past performance and current information.
Value investors analyse this information to ascertain value and relate this to price.
What can be ascertained, with a modest degree of reliability, is the probable performance of underlying businesses over long periods, based on past performance and current information.
Value investors analyse this information to ascertain value and relate this to price.
Appointing a nominee for your stock investments
Appointing a nominee for your investments
Many of us invest in shares, deposits and mutual funds without bothering to fill up the nomination details. Since choosing a nominee is not mandatory while making an investment, the decision is often postponed. However, this process simplifies for nominees the realisation of investment proceeds in case of the original investor’s demise. This is even more critical when an investment is held in one person’s name since death makes it difficult to access his funds till several formalities are completed.
If nominees have been appointed, they can produce basic documents, such as a death certificate,to access the funds. The absence of a nominee may require more documentation,such as the probate of will and certified list of legal heirs, before the investment can be transmitted or withdrawn. Nominees are deemed to hold the investment proceeds in a trust if it is disputed by legal heirs, pending a decision by thecourts.
Documentation: Most investment forms provide a space for selecting a nominee. If it is not filled up at the time of investing, other prescribed forms can be used later.
Multiplenominees: Most investments allow more than one nominee and the percentage of share that each would be entitled to.
Signature: The nomination form has to be filled up by all joint holders, irrespective of the mode of operation of the investment.
Transmission: Nominees can have investments transferred in their names for redemption later. For this, they need to complete the KYC and PAN formalities.
Points to note
Who cannot nominate : Kartas of HUFs and powerof attorney holders are not authorised to make or change nominations or be appointed as nominees to an investment.
NRIs: Non-resident Indians can be named as nominees of investments made in rupees.However, the proceeds cannot be repatriated and have to be continued to be held in rupees.
Who can be the nominees: Certain investments permit the nomination of a trust, religious or educational institutions. Others only permit individuals to be nominated.
Thecontent on this page is courtesy Centre for Investment Education and Learning(CIEL)
http://economictimes.indiatimes.com/articleshow/7487182.cms
Top 1pc of UK workers pay quarter of all income tax
Top 1pc of workers pay quarter of all income tax
A quarter of all of Britain's income tax revenues this year will be paid by just one per cent of earners, according to official data.
A quarter of all of Britain's income tax revenues this year will be paid by just one per cent of earners, according to official data.
The figure is in sharp contrast to 1978, an era associated with supertaxes, when the top one per cent paid 11 per cent of all the tax revenues.
Experts suggested the projections, published by HM Revenue and Customs, was evidence of how the rich had got richer over the last three decades, while the tax burden on them had increased substantially in recent years.
The new top rate of 50p income tax rate came into force in April 2010, landing a small number of people with the highest rate of income tax since 1988.
It is not yet fully clear how much money this top rate of tax, introduced by the former Labour government, will raise. However, last week the HMRC published its forecasts for all income tax revenues for the current tax year. It suggested that 275,000 individual, those that will pay the 50p rate, will pay £41.4 billion in tax – 25.7 per cent of the country's total income tax bill.
In total there is expected to be 30.6 million taxpayers this tax year.
In 2008-2009 it took 648,000 of the richest taxpayers to pay a quarter of the country's income tax revenues.
John Whiting, the Tax Policy Director of the Chartered Institute of Taxation, said: "The rich are getting proportionately richer, and therefore are paying more tax.
"In a curious way it demonstrates what a contribution they make. It is well worth the country attempting to keep them here. In trading terms, they make a considerable profit for the taxman."
There have been fears in the City that the 50p tax rate would drive out many businessmen from London. Though some hedge funds have relocated to Switzerland there is no evidence of companies or individuals relocating offshore in substantial numbers.
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