For investors, young growth stocks can trigger dreams of wealth - and nightmares of poverty. These companies are often early-stage ventures that offer rapid revenue growth, but have yet to deliver earnings growth or much of a business track record. As such, the potential returns can be enormous, but investing in these stocks can also be risky. There are several points investors should consider when analyzing early-stage growth stocks.
Overview
The key features of early-stage growth stocks are rapid revenue growth but no earnings. Spending heavily to gain a market foothold, many growth companies - even those with strong sales revenue growth - can lose a lot of money in their early years. At the same time, these companies normally have a limited operating history, making it even more difficult for investors to judge the companies' current performance and value.
To stay on the safest side, many investors prefer to steer clear of companies with these risky characteristics. On the other hand, the next biggest and most rewarding stocks may be found among these kinds of stocks. The trick is to size up the risk.
To demonstrate how to evaluate an early-stage growth company's risk, let's consider Nasdaq-listed XM Satellite Radio Holdings (XMSR), a company that has been striving to become an established player in the fast-growing global satellite radio broadcasting market. Turning to XM's 2004 Form 10-K Annual Report, let's go over some key points for assessing the risk of an emerging growth stock.
Sales Growth
For starters, consider this growth trend. XM Satellite Radio delivered staggering sales growth in 2004. Scroll down to Selected Consolidated Financial Data (p.28, or Item 6 on the Table of Contents), and you will see that revenues grew from $0 in 2000, when XM Satellite Radio became publicly-listed, to more than $244 million in 2004. With sales growth of 168% in 2004, XM appears to have successfully taken advantage of growth opportunities. Importantly, the pace of sales growth was steadily upward - absent of unexpected swings - giving investors some reason to be confident that successful sales growth would continue.
Still, investors should take care: while the company's sales-growth record over the five-year period was certainly impressive, there is no guarantee that the company will be able to maintain that rate of growth into the future. In fact, the pace of growth could very well decline as the company satisfies demand for its products.
Profitability
You need to determine whether revenue growth is profitable. Look further down at XM's Consolidated Statement of Operations (p. F-5). The net loss shows us that in 2004, XM lost a lot of money - more than $642 million. That's no surprise: the company spent heavily on sales and marketing and invested in new radio programming content to attract subscribers. If those investments pay off, earnings could materialize.
But savvy investors want a clearer indication that one day the company will produce earnings. A good place to look is the company's profit margins. There should be signs that profit margins are steadily getting better - even if that means the margins are simply getting less negative.
Net Profit Margins = Net Profits after Taxes / Sales
Investors should be somewhat reassured. Although the company's losses accelerated between 2002 and 2004, its net margins saw a dramatic improvement, moving from a whopping -2,174.3% to -188.6% over the time period. Judging by its margin performance trend, XM offered heartening signs that it is moving towards profitability.
Cash Generation or Cash Burn?
Cash flow is another serious issue for newer, unprofitable companies in rapidly growing industries. As it can take time for early-stage companies to generate cash from operations, their survival depends on effective cash management so that they have an adequate cash supply to meet expenses. Emerging growth companies can face years of living on their bank balances. If a company eats through cash too fast, it runs the risk of going out of business.
So, it is good practice to look at the company's cash flow from operation.You will find that figure on XM's Consolidated Statement of Cash Flows (p. F-6). Investors may be discouraged to learn that XM's payments exceeded its cash receipts by more than $85.6 million in 2004 (see "net cash used in operating activities"). On the other hand, that number is significantly less than the $245 million of cash consumed the year before. That could signal a move towards cash flow breakeven.
When analyzing companies like XM that are cash flow negative, it's also worthwhile checking their burn rate, the rate at which a company currently uses up its supply of cash over time.
You will see on XM's Consolidated Balance Sheet (p. F-4) that at end-2004 the company had more than $717 million in cash in the bank. Assuming that annual net cash used in operating activities of $85.6 million and investing activities of $36.3 million (found lower on the Consolidated Statement of Cash Flows) stay at the same level, then XM has nearly six years before it will run out of cash. In other words, XM has a comfortable cushion of cash that will tie it over until it starts to generate cash internally. Investors need not worry about XM being forced to seek additional funds to finance day-to-day operations.
Fair Value
The best way to curb risk is to invest in companies at a fair value. Because a lot of emerging growth stocks like XM have no earnings, investors have to cast aside the traditional price-to-earnings (P/E) ratio for coming up with a fair valuation. In the absence of a P/E ratio, you can calculate the price-to-sales ratio and compare that figure with other, similar companies.
To find XM' price-to-sales ratio, we look at its stock price on the day it filed its 2004 Form 10-K Annual Report, which was on Mar 4, 2005. On that day, the stock closed at $33.11 (see XM's trading quote that day on Investopedia's stock research resource). With 29.11 million shares outstanding, XM's market value was about $7 billion.
So, at the end of 2004, XM traded for more than 28 times its current sales ($7 billion market value divided by 2004 sales of $244 million). At first glance, that appears to be an awfully rich valuation - normally investors look for companies with price-to-sales ratios in the single digits or even lower. However, priced at 28 times sales, XM is still less expensive than its closest peer Sirius Satellite Radio (SIRI), which traded for more than 80 times sales at year-end 2004. New-media technology stocks are typically very pricey - so some investors might argue that the company's rapid rate of growth combined with its steady progress towards profitability justify the high price-to-sales ratio. Then again, a lot of others would steer clear of the stock at that price.
Another way to evaluate fair value is discounted cash flow analysis. It offers a more rigorous approach to valuing emerging growth stocks. The starting point is forecasting the company's free cash flows available to shareholders. These are earnings adjusted for expenses and income that are not in cash (such as depreciation) and adjusted for required investments and changes in working capital. The series of forecasted free cash flows is then brought to current values by discounting with the company's cost of equity or overall cost of capital.
The Bottom Line
Investing in early-stage growth stocks can be a bit of guessing game. These companies are offering new services and products, and in many cases they are creating new markets. It can be awfully difficult to know their prospects with much certainty. That said, there are ways to identify their risks. Analysis of sales revenues, profitability and cash generation can help distinguish winners from losers.
Read more: http://www.investopedia.com/articles/stocks/05/earlygrowth.asp#ixzz2KA9GZFz4
Thursday 7 February 2013
Is Growth Always A Good Thing?
Rapid growth in revenue and earnings may be top priorities in corporate boardrooms, but these priorities are not always best for shareholders. We are often tempted to invest large amounts in risky or even mature companies that are beating the drum for fast growth, but investors should check that a company's growth ambitions are realistic and sustainable.
Growth's Attraction
Let's face it, it's hard not to be thrilled by the prospect of growth. We invest in growth stocks because we believe that these companies are able to take shareholder money and reinvest it for a return that is higher than what we can get elsewhere.
Besides, in traditional investing wisdom, growth in sales earnings and stock performance are inexorably linked. In his book "One Up on Wall Street," investment guru Peter Lynch preaches that stock prices follow corporate earnings over time. The idea has stuck because many investors look far and wide for the fastest-growing companies that will produce the greatest share-price appreciation.
Is Growth a Sure Thing?
That said, there is room to debate this rule of thumb. In a 2002 study of more than 2,000 public companies, California State University finance professor Cyrus Ramezani analyzed the relationship between growth and shareholder value. His surprising conclusion was that the companies with the fastest revenue growth (average annual sales growth of 167% over a 10-year period) showed, over the period studied, worse share price performance than slower growing firms (average growth of 26%). In other words, the hotshot companies could not maintain their growth rates, and their stocks suffered.
The Risks
Fast growth looks good, but companies can get into trouble when they grow too fast. Are they able to keep pace with their expansion, fill orders, hire and train enough qualified employees? The rush to boost sales can leave growing companies with a deepening difficulty to obtain their cash needs from operations. Risky, fast-growing startups can burn money for years before generating a positive cash flow. The higher the rate of spending money for growth, the greater the company's odds of later being forced to seek more capital. When extra capital is not available, big trouble is brewing for these companies and their investors.
Companies often try increasingly big - and risky - deals to push up growth rates. Consider the serial acquirer WorldCom. In the 1990s, the company racked up growth rates of more than 20% by buying up little-known telecom companies. It later required larger and larger acquisitions to show impressive revenue percentages and earnings growth. In hopes of sustaining growth momentum, WorldCom CEO Bernie Ebbers agreed to pay a whopping $115 billion for Sprint Corp. However, federal regulators blocked the deal on antitrust grounds. WorldCom's prospects for growth collapsed, along with the company's value. The lesson here is that investors need to consider carefully the sustainability of deal-driven growth strategies.
Being Realistic About Growth
Eventually every fast-growth industry becomes a slow-growth industry. Some companies, however, still pursue expansion long after growth opportunities have dried up. When managers ignore the option of offering investors dividends and stubbornly continue to pour earnings into expansions that generate returns lower than those of the market, bad news is on the horizon for investors.
For example, take McDonald's - as it experienced its first-ever losses in 2003, and its share price neared a 10-year low, the company finally began to admit that it was no longer a growth stock. But for several years beforehand, McDonald's had shrugged off shrinking profits and analysts' arguments that the world's biggest fast-food chain had saturated its market. Unwilling to give up on growth, McDonald's accelerated its rate of restaurant openings and advertising spending. Expansion not only eroded profits but ate up a huge chunk of the company's cash flow, which could have gone to investors as large dividends.
CEOs and managers have a duty to put the brakes on growth when it is unsustainable or incapable of creating value. That can be tough since CEOs normally want to build empires rather than maintain them. At the same time, management compensation at many companies is tied to growth in revenue and earnings.
However, CEO pride doesn't explain everything: the investing system favors growth. Market analysts rate a stock according to its ability to expand; accelerating growth receives the highest rating. Furthermore, tax rules privilege growth since capital gains are taxed in a lower tax bracket while dividends face higher income-tax rates.
The Bottom Line
Justifications for fast growth can quickly pile up, even when it isn't the most prudent of priorities. Companies that pursue growth at the cost of sustaining themselves may do more harm than good. When evaluating companies with aggressive growth policies, investors need to determine carefully whether these policies have higher drawbacks than benefits.
Read more: http://www.investopedia.com/articles/fundamental/03/082003.asp#ixzz2KA5lFtVB
Growth's Attraction
Let's face it, it's hard not to be thrilled by the prospect of growth. We invest in growth stocks because we believe that these companies are able to take shareholder money and reinvest it for a return that is higher than what we can get elsewhere.
Besides, in traditional investing wisdom, growth in sales earnings and stock performance are inexorably linked. In his book "One Up on Wall Street," investment guru Peter Lynch preaches that stock prices follow corporate earnings over time. The idea has stuck because many investors look far and wide for the fastest-growing companies that will produce the greatest share-price appreciation.
Is Growth a Sure Thing?
That said, there is room to debate this rule of thumb. In a 2002 study of more than 2,000 public companies, California State University finance professor Cyrus Ramezani analyzed the relationship between growth and shareholder value. His surprising conclusion was that the companies with the fastest revenue growth (average annual sales growth of 167% over a 10-year period) showed, over the period studied, worse share price performance than slower growing firms (average growth of 26%). In other words, the hotshot companies could not maintain their growth rates, and their stocks suffered.
The Risks
Fast growth looks good, but companies can get into trouble when they grow too fast. Are they able to keep pace with their expansion, fill orders, hire and train enough qualified employees? The rush to boost sales can leave growing companies with a deepening difficulty to obtain their cash needs from operations. Risky, fast-growing startups can burn money for years before generating a positive cash flow. The higher the rate of spending money for growth, the greater the company's odds of later being forced to seek more capital. When extra capital is not available, big trouble is brewing for these companies and their investors.
Companies often try increasingly big - and risky - deals to push up growth rates. Consider the serial acquirer WorldCom. In the 1990s, the company racked up growth rates of more than 20% by buying up little-known telecom companies. It later required larger and larger acquisitions to show impressive revenue percentages and earnings growth. In hopes of sustaining growth momentum, WorldCom CEO Bernie Ebbers agreed to pay a whopping $115 billion for Sprint Corp. However, federal regulators blocked the deal on antitrust grounds. WorldCom's prospects for growth collapsed, along with the company's value. The lesson here is that investors need to consider carefully the sustainability of deal-driven growth strategies.
Being Realistic About Growth
Eventually every fast-growth industry becomes a slow-growth industry. Some companies, however, still pursue expansion long after growth opportunities have dried up. When managers ignore the option of offering investors dividends and stubbornly continue to pour earnings into expansions that generate returns lower than those of the market, bad news is on the horizon for investors.
For example, take McDonald's - as it experienced its first-ever losses in 2003, and its share price neared a 10-year low, the company finally began to admit that it was no longer a growth stock. But for several years beforehand, McDonald's had shrugged off shrinking profits and analysts' arguments that the world's biggest fast-food chain had saturated its market. Unwilling to give up on growth, McDonald's accelerated its rate of restaurant openings and advertising spending. Expansion not only eroded profits but ate up a huge chunk of the company's cash flow, which could have gone to investors as large dividends.
CEOs and managers have a duty to put the brakes on growth when it is unsustainable or incapable of creating value. That can be tough since CEOs normally want to build empires rather than maintain them. At the same time, management compensation at many companies is tied to growth in revenue and earnings.
However, CEO pride doesn't explain everything: the investing system favors growth. Market analysts rate a stock according to its ability to expand; accelerating growth receives the highest rating. Furthermore, tax rules privilege growth since capital gains are taxed in a lower tax bracket while dividends face higher income-tax rates.
The Bottom Line
Justifications for fast growth can quickly pile up, even when it isn't the most prudent of priorities. Companies that pursue growth at the cost of sustaining themselves may do more harm than good. When evaluating companies with aggressive growth policies, investors need to determine carefully whether these policies have higher drawbacks than benefits.
Read more: http://www.investopedia.com/articles/fundamental/03/082003.asp#ixzz2KA5lFtVB
Tuesday 5 February 2013
Tuesday 22 January 2013
WARREN BUFFETT- DON'T MAKE THIS TERRIBLE MISTAKE
Buffett: Buying and selling stocks on current news is a mistake.
How to Invest like Warren Buffett
1. High ROCE + Low Debt
2. Predictable Earnings
3. Profits generate a lot of Cash Flows
4. Uncomplicated Business (you can understand)
5. Strong Brand + Pricing Power
6. Managers are also Owners of Business
Monday 21 January 2013
Sunday 20 January 2013
Friday 18 January 2013
Tuesday 15 January 2013
Apa ini? Listen .. listen carefully ........ Shameful!
The student who spoke her mind has my respect.
Monday 14 January 2013
KLSE Market PE is 16.6 (11.1.2013)
| KLCI | 11.1.2013 | ||||||||
| Index Stock | Price | Mkt. Cap | Earnings | Dividends | Equity | ||||
| Stock Name | RM | RM (m) | RM (m) | RM (m) | RM (m) | ||||
| AMMB | 6.64 | 20014.2 | 1527.8 | 600.4 | 11152.5 | ||||
| CIMB | 7.66 | 56935 | 4037.9 | 1651.1 | 25940.4 | ||||
| RHB | 7.9 | 19704.2 | 1713.4 | 630.5 | 12944.9 | ||||
| HLFG | 14.42 | 15180.9 | 1167.8 | 258.1 | 8495.8 | ||||
| MBB | 9 | 75960.7 | 5798.5 | 3038.4 | 36967.5 | ||||
| PBB | 16.2 | 57217.2 | 3510.3 | 1716.5 | 14975.4 | ||||
| IOI | 5.05 | 32475.5 | 1794.2 | 1006.7 | 12668.7 | ||||
| MMC | 2.63 | 8008.5 | 333.7 | 120.1 | 6211.9 | ||||
| KLK | 22.48 | 23997.5 | 1212.0 | 695.9 | 7130.9 | ||||
| GENTING | 9.51 | 35372.3 | 2875.8 | 283.0 | 17741.9 | ||||
| PPB | 13 | 15411.5 | 981.6 | 277.4 | 14060.0 | ||||
| BAT | 60.9 | 17388.8 | 718.5 | 782.5 | 431.2 | ||||
| SIME | 9.59 | 57630.8 | 4146.1 | 2074.7 | 26021.0 | ||||
| UMW | 12.4 | 14486.8 | 503.0 | 362.2 | 4264.3 | ||||
| YTL | 1.81 | 19395 | 1259.4 | 213.3 | 13394.3 | ||||
| GENM | 3.61 | 21434.3 | 1498.9 | 514.4 | 12528.1 | ||||
| TM | 5.82 | 20820.5 | 1189.7 | 707.9 | 6975.9 | ||||
| AIRASIA | 2.89 | 8033.9 | 565.8 | 136.6 | 4058.6 | ||||
| UEMLAND | 2.15 | 9307.1 | 313.4 | 0.0 | 4848.3 | ||||
| PETCHEM | 13 | 49840 | 2637.0 | 1295.8 | 9623.0 | ||||
| MHB | 4.4 | 7040 | 206.5 | 161.9 | 2432.0 | ||||
| ARMADA | 3.82 | 11189.4 | 428.7 | 78.3 | 3544.3 | ||||
| TENAGA | 6.92 | 38349.9 | 4261.1 | 1112.1 | 36410.2 | ||||
| PETDAG | 22.96 | 22809.7 | 655.5 | 798.3 | 4778.5 | ||||
| HLBANK | 14.98 | 49128.8 | 2532.4 | 2996.9 | 3542.0 | ||||
| MAXIS | 6.55 | 49128.8 | 2532.4 | 2996.9 | 8100.6 | ||||
| PETGAS | 18.98 | 37556.3 | 1082.3 | 788.7 | 8884.5 | ||||
| YTLPOWER | 1.6 | 11740.7 | 1249.0 | 340.5 | 9539.3 | ||||
| AXIATA | 6.69 | 56920.8 | 2381.6 | 1593.8 | 19399.0 | ||||
| DIGI | 5.17 | 40196.8 | 1252.2 | 1366.7 | 1399.5 | ||||
| 902675.9 | 54366.7 | 28599.8 | 348464.7 | ||||||
| Market PE | 16.60 | ||||||||
| DY | 3.17% | ||||||||
| DPO | 0.53 | ||||||||
| Mkt cap/BV | 2.6 | ||||||||
| ROE | 15.6% | ||||||||
| EY | 6.02% | ||||||||
| Risk free int. | 3.40% | ||||||||
| ERP | 2.62% | (Fairly valued) | |||||||
| KLCI | |||||||||
| 11.1.2013 | 1682.7 | ||||||||
Related:
KLSE Market PE is 17.7 (19.10.12)
Sunday 13 January 2013
Arithmetic vs logarithmic: Difference between charts plotted using these two scales
Narendra Nathan, ET Bureau Aug 27, 2012,
When data is plotted as a chart, it can be done using two types of scales—arithmetic or semi-logarithmic. The difference in scale can completely alter the shape of the chart even though it is plotted using the same set of data. Consider the three charts given below, which use theSensex data since its inception in 1979 till now. But why does one need to use the semi-logarithmic scale when arithmetic scale is commonly used for plotting charts. This is in order to overcome the inherent weakness of the arithmetic charts.
When data is plotted as a chart, it can be done using two types of scales—arithmetic or semi-logarithmic. The difference in scale can completely alter the shape of the chart even though it is plotted using the same set of data. Consider the three charts given below, which use theSensex data since its inception in 1979 till now. But why does one need to use the semi-logarithmic scale when arithmetic scale is commonly used for plotting charts. This is in order to overcome the inherent weakness of the arithmetic charts.
Arithmetic charts
In arithmetic or linear charts, both X and Y axes scales are plotted at an equal distance. For instance, the Sensex movement from 15,000 to 16,000, that is, an increase of 1,000 points, is treated as equal to the Sensex movement from 16,000 to 17,000, which is another 1,000 points.
In arithmetic or linear charts, both X and Y axes scales are plotted at an equal distance. For instance, the Sensex movement from 15,000 to 16,000, that is, an increase of 1,000 points, is treated as equal to the Sensex movement from 16,000 to 17,000, which is another 1,000 points.
This works fine when the data range is small, but will distort the picture when the range is big. Consider the Sensex movement from 20,000 to 21,000, which was a mere 5% increase, but the movement of the first 1,000 points in the Sensex, that is, from 100 to 1,100, was a whopping 1,000% increase. By treating them as equal, the arithmetic chart distorts the picture. This explains why it seems as if the Sensex was almost flat for the first 10 years of its existence in the arithmetic chart.
Logarithmic charts
Logarithmic charts are commonly used in science and engineering when you need the data to be displayed accurately. This is also a necessity when the data that needs to be plotted varies widely. In such charts, the logarithm of the data value (Sensex in the given example) is used as a base to fix the gaps between each data points on the Y axis. This process makes sure that the percentage increase between two data values is depicted clearly. To understand this in a better manner, consider the logarithmic charts given below. Note that the gap between 100 and 200 (100% increase) is equal to the gap between 200 and 400 (next 100% increase). The same gap is maintained for the Sensex increase from 1,000 to 2,000 or from 10,000 to 20,000. Semi-logarithmic charts
In logarithmic charts, both the X and Y axes are plotted using the logarithmic scale. Since there is no possibility of distortion in the X axis (where the date range is plotted), we can continue to use the arithmetic scale while plotting the share price data. In other words, the logarithmic scale is used only along one axis, that is, the Y axis, and therefore, these charts are called semi-log charts.
Advantages
The semi-logarithmic charts can be of immense help while plotting long-term charts, or when the price points show significant volatility even while plotting short-term charts. This is because the chart patterns will appear as more clear in semi-logarithmic scale charts. For example, the very long-term uptrend line in the Sensex is clearly visible in the semi-logarithmic chart (see Semi-logarithmic scale with trendline), not in the arithmetic chart. Similarly, the Sensex was constrained in a slightly upward moving channel for 13 years in the middle, that is, between 1992 and 2005, and this is clearly visible only in the semi-logarithmic chart (see Semi-logarithmic scale with channel). One can plot the charts in the semi-logarithmic scale to easily identify several other chart patterns, some of which we shall explain in the coming weeks.
http://articles.economictimes.indiatimes.com/2012-08-27/news/33425208_1_charts-sensex-arithmetic
Semilogarithmic-scale line graphs
If we use a logarithmic scale on the y-axis and if the x-axis remains the same (arithmetic scale), we create a semi-logarithmic scale line graph. With a logarithmic scale on the y-axis we represent the relative change of y over time rather than its absolute change over time. Semi-logarithmic scale line graphs are used to present and interpret rates of change over time rather than magnitude of change. They also allow showing very different magnitudes and ranges of rates between two lines (e.g. high incidence and low mortality rates for the same disease).
Semi-logarithmic scale paper:
- On the y-axis, intervals are logarithmic and no longer arithmetic.
- There are several cycles of tick marks on the y-axis. Each corresponds to an equal distance on the y-axis.
- The values of one cycle are 10 times greater than the values of the previous cycle.
- Within a cycle the 10 tick marks are not equally distant (distance from 2 to 3 is different than distance from 3 to 4). Their progression is geometric, not arithmetic.
- The y axis can cover a large range of y values.
The following characteristics are noteworthy:
- The slope of the line indicates the rate of change (the relative change) of y over time.
- A horizontal straight line indicates no change.
- An upward or downward straight line slope indicates a constant rate of increase or decrease in the measured indicator (e.g. rate) over time.
- Two parallel lines indicate similar rate of change over time.
Friday 11 January 2013
Tesco’s UK sales growth highest in three years
Tesco’s UK sales growth highest in three years
Published: 2013/01/11
LONDON: Britain’s Tesco plc said its £1 billion (RM4.86 billion) turnaround plan for its home market was starting to work as it posted its highest sales growth in three years over the Christmas period.
Tesco, the world’s third-largest retailer, beat forecasts for underlying sales growth, regaining an edge after a dismal Christmas in 2011 prompted the group’s first profit warning in 20 years and a strategic rethink.
Sales at British stores open more than a year, excluding fuel and VAT sales tax, grew 1.8 per cent in the six weeks to January 5, part of Tesco’s fiscal fourth quarter, compared with analysts’ forecasts in a range of up 0.5 to 1.5 per cent and with a third-quarter fall of 0.6 per cent. Reuters
http://www.fool.com/investing/international/2013/01/09/whats-in-store-for-tescos-shareholders.aspx
Published: 2013/01/11
LONDON: Britain’s Tesco plc said its £1 billion (RM4.86 billion) turnaround plan for its home market was starting to work as it posted its highest sales growth in three years over the Christmas period.
Tesco, the world’s third-largest retailer, beat forecasts for underlying sales growth, regaining an edge after a dismal Christmas in 2011 prompted the group’s first profit warning in 20 years and a strategic rethink.
Sales at British stores open more than a year, excluding fuel and VAT sales tax, grew 1.8 per cent in the six weeks to January 5, part of Tesco’s fiscal fourth quarter, compared with analysts’ forecasts in a range of up 0.5 to 1.5 per cent and with a third-quarter fall of 0.6 per cent. Reuters
http://www.fool.com/investing/international/2013/01/09/whats-in-store-for-tescos-shareholders.aspx
Thursday 10 January 2013
Wednesday 9 January 2013
MALAYSIA'S first Islamic bond (sukuk) for retail investors
Minimum profit rate of 3.7pc
Published: 2013/01/09
MALAYSIA'S first Islamic bond (sukuk) for retail investors, launched yesterday and expected to be listed on February 8, will have a minimum profit rate of 3.7 per cent a year.
The RM300 million sukuk with a 10-year tenure was issued by DanaInfra Nasional Bhd, a unit under the Ministry of Finance, to fund the Mass Rapid Transit (MRT) project that will run between Kajang and Sungai Buloh in the Klang Valley. It was launched by Prime Minister Datuk Seri Najib Razak.
The issue is part of a larger RM1.5 billion sukuk that's being sold by DanaInfra, of which RM1.2 billion is for institutional investors.
"It will be better than the fixed deposit (FD) return and better than the MGS (Malaysian Government Securities, or government bonds)," Treasury secretary-general Datuk Seri Mohd Irwan Serigar Abdullah told reporters after the launch yesterday.
Bankers said the actual profit rate for the retail sukuk, which will depend on investor demand and the prevailing market interest rate, will be determined at the close of the book building exercise of the institutional offering.
Datuk Lee Kok Kwan of CIMB Investment Bank, one of four banks that are the joint lead arrangers for the issue, said he was confident that there would be strong demand for the retail sukuk.
He pointed out that unlike fixed deposit, income that investors derive from sukuk is not subject to tax.
"And the main assurance is that, post-listing, the liquidity will be there as the four banks are obligated to market them," he remarked.
Bursa Malaysia chief executive officer Datuk Tajuddin Atan said the retail sukuk, which opens up a new asset class for people to invest in, cements Malaysia's role as a top sukuk marketplace.
Previously, bonds or sukuk were accessible only to high-net worth and institutional investors.
"To make this sustainable, we need a pipeline, and this is being worked on. DanaInfra has a big pipeline of sukuk, but we're also looking at other issuers," he said.
The sukuk is meant for investors who want to diversify their portfolio. The minimum subscription amount for an ETBS is RM1,000, which will get an investor one board lot which comprises 10 units with a principal price of RM100 each.
Read more: Minimum profit rate of 3.7pc http://www.btimes.com.my/Current_News/BTIMES/articles/sukuk/Article/#ixzz2HQbadqdL
Friday 4 January 2013
Indonesia: An industry-led growth economy
Cyrillus Harinowo Hadiwerdoyo, Jakarta | Opinion | Fri, January 04 2013, 9:10 AM
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