What Warren Buffett Looks for in Company Growth

WHAT WARREN BUFFETT LOOKS FOR IN COMPANY GROWTH

An investor likes to see a company grow because, if profits grow, so do returns to the investor. The important thing for the investor, however, is that the company increases the returns to shareholders. A company that grows, at the expense of shareholder returns, is not generally a good investment. As Warren Buffett said in 1977:

‘Since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in a management performance combining, say, a 10% increase in equity capital and a 5 % increase in earnings per share.’

COMPOUNDING EFFECT OF GROWTH

Regular growth in earnings per share can have a compound effect if all, or substantially all, of the profits are retained. A company, for example, with earnings per share of 40 cents growing regularly 9 % would, in ten years produce earnings per share of 87 cents.

Of course, if the investor can do better with retained earnings than the company can, his or her interests are better served by a full distribution of profits.

PAST GROWTH AS A PREDICTABILITY FACTOR

Although a consistent record of increases in earnings per share is not of itself an absolute predictor of either further increases, or the rate of any increases,Benjamin Graham believed that it was a factor worthy of consideration.

In addition, it is logical to conclude that a company that has had regular and consistent increases in earnings per share over a protracted period is soundly managed.

WARREN BUFFETT AGAIN ON GROWTH

For Warren Buffett the important thing is not that a company grows (he points to the growth in airline business that has not resulted in any real benefits to stockholders) but that returns grow. In 1992, he said this:

‘Growth benefits investors only when the business in point can invest at incremental returns that are enticing – in other words, only when each dollar used to finance the growth creates over a dollar of long term market value.

In the case of a low-return business requiring incremental funds, growth hurts the investor.’

GROWTH FIGURES FOR ANHEUSER-BUSCH

Take Anheuser-Busch. Ten-year figures to 2002, using the Value Line summaries, show the following:

Year	Earnings per share	Return on equity %	Return on capital %
1993	.89	23.0	14.9
1994	.97	23.4	15.2
1995	.95	22.2	14.3
1996	1.11	27.9	17
1997	1.18	29.2	15.6
1998	1.27	29.3	16.5
1999	1.47	35.8	17.7
2000	1.69	37.6	18.2
2001	1.89	42.0	18.8
2002	2.20	63.4	21.9

GROWTH IN EPS

For Mary Buffett and David Clark, earnings per share growth, and its ability to keep well ahead of inflation, is a key factor in the investment strategies of Warren Buffett. Earnings that are consistently increased are an indication of a quality company, soundly managed, with little or no reliance on commodity type products. This leads to predictability of future earnings and cash flows.

On the other hand, with a company whose earnings fluctuate, future cash flows are less predictable. The reasons may be poor management, poor quality or an over reliance on products that are susceptible to price reductions.

Take an imaginary company with the following earnings per share:

Year	EPS
1	2.00
2	2.25
3	2.98
4	1.47
5	1.88
6	-.65
7	2.75
8	2.20
9	1.98
10	3.01

The only conclusion that follows from these figures is that this company has good years and bad years. Year 11 might be great, it might be dreadful, or it might be average. The only certainty here is the unpredictability.

Of course, a fall in margins for one or two years may be as a result of once only factors and this can provide buying opportunities.

The difficulty is making the judgment as to whether there is something permanently wrong, or whether the problem has been isolated and resolved.

http://www.buffettsecrets.com/company-growth.htm

WARREN BUFFETT'S INVESTMENT PRINCIPLES

Warren Buffett does not readily disclose the investments he makes on behalf of himself or Berkshire Hathaway. He does, every year, report on the substantial holdings of his company in other corporations. These provide only tiny clues however to why, when and where he invests.


He is prepared, however, and does so regularly, to outline general principles of sound investment. These have a consistent theme and can be summed up like this.


Stock investments should be looked at in the same way as buying a business. The stock investor is really buying a tiny share or partnership and should apply the same principles that they would in buying a business – the Benjamin Graham approach:


1. The company should be soundly managed. Tests of good management include:

• Share buybacks
• Good use of retained earnings
• Sticking to what you know

2. The company has demonstrated earning capacity with a likelihood that this will continue. Tests of earning capacity include:

• Company growth
• Dealing with inflation
• Capital expenditure
• Look through earnings
• Brand names

3. The company should have consistently high returns. Warren Buffett would look at both:

• Returns on equity
• Returns on capital

4. The company should have a prudent approach to debt.

5. The businesses of the company should be simple and the investor should have an understanding of the company.  See case studies

6. Assuming that all these thresholds are satisfied, the investment should only be made at areasonable price, with a margin of safety. This is always a matter for independent judgment by the investor but it is relevant to consider:

• Price/earnings ratios
• Earnings and Dividend yields
• Book value
• Comparative rates of return

7. Investors need to take a long term approach.

http://www.buffettsecrets.com/buffett-investment-principles.htm

Dealing With Information Overload When Investing

By: IS
Date posted: 02.22.2012 (5:00 am) 

It’s a rather common feeling these days isn’t it? I generally feel like I have a fairly good grasp of most stocks that I follow but even that isn’t always true.

Think about how things were in previous generations:

Someone thinking about buying a stock might have bought a newspaper, looked at a few columns or an article about that company and tried to figure out how good of an investment it is. That research would probably have taken a few minutes…then what?

Researching A Stock In 1960

-Reading newspaper to get stock quotes and economic analysis

Researching A Stock In 2012

These days, that process can lead you down a very exhausting road:

-Looking at charts getting technical indicators such as trend analysis
-Going to read the company’s financial reports
-Listening to earnings calls as well as Q&A with analysts
-Going through Wall Street and other research which is often available on the web
-Going through media such as the Wall Street Journal and The Globe and Mail
-Going through Blogs analysis (this one alone could take many days)
-Looking at social media talk about the stock (Twitter, etc)
-Doing a similar analysis for the sector and for both clients and suppliers

There Is No Way To “Complete” Your Analysis

At what point would you consider that you’ve gone through all of the information? It just seems to me like you can never reach that point. At that point, the game becomes as much about being able to judge:

-what information has most value
-how to go through it quickly but efficiently
-how to either come to a conclusion or move on to a new stock if it non conclusive

Personally the RSS Reader Is My “Filter”

I personally have many of my top information sources setup in my RSS reader and every day I go through them very quickly marking those that I want to read further. How? I guess to some extent I must rely on the title and images to seem accurate as I probably spend a few seconds at most to make that determination.

How do you deal with information overload when investing?

http://www.intelligentspeculator.net/investing_commentary/dealing-with-information-overload-when-investing/

BENJAMIN GRAHAM - THE MARGIN OF SAFETY

Benjamin Graham tells us that investment policy can be reduced to three simple words: "Margin of Safety" - the price at which a share investment can be bought with minimal downside risk.

The important point here is that the margin of safety price is not the same as the price that an investor calculates a share to be intrinsically worth.

THE INTRINSIC VALUE OF A SHARE

An investor may calculate the intrinsic value of a share by differing methods and will eventually come up with a price that he or she believes represents good buying value. Graham had his methods of calculating intrinsic value, Warren Buffett has his, other successful investors have theirs.

Graham acknowledges, however, that calculations may be wrong, or that external events may take place to affect the value of the share. These cannot be predicted. For these reasons, the investor must have a margin of safety, an inbuilt factor that allows for these possibilities.

PRIME BONDS VS GOVERNMENT BONDS

For Benjamin Graham, the benchmark for calculating the margin of safety was the interest rate payable for prime quality bonds. As Graham wrote in an era when prime bonds were much more prominent, it is more practical now to adopt, as Warren Buffett apparently does, the rate of return of government bonds as the benchmark.

Graham then uses a comparative approach. If the risk in two forms of investment is the same, then it must be better to take the investment with the higher return. Conversely, an investment with higher risk, such as shares, should, when calculating the margin of safety, have a higher return

EXAMPLE

Modifying then the example that Benjamin Graham uses in his book, we can take a share investment that is yielding 10 per cent earnings. For example, company A is earning 90 cents per share and is selling in the market at 10 dollars. If the rate of return on government bonds is 5 per cent, then the share is yielding annually an excess of 5 per cent. Over a period of ten years, the excess yield will total about 50 per cent, which, in Graham’s opinion, may be enough, if the share investment was wisely chosen in the first place. Of course, the total margin of safety will fluctuate depending upon the quality of the share investment.

Even so, something may go wrong. Graham believes however, that, with a diversified portfolio of 20 or more representative share investments, the margin of error approach will, over time, produce satisfactory results.

 ACCORDING TO BENJAMIN GRAHAM:

"[To] have a true investment, there must be a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience".

http://www.buffettsecrets.com/margin-of-safety.htm

Warren Buffett Secrets

http://www.buffettsecrets.com/index.htm

Warren Buffett: How He Does It

April 22 2005


Did you know that a $10,000 investment in Berkshire Hathaway in 1965, the year Warren Buffett took control of it, would grow to be worth nearly $30 million by 2005? By comparison, $10,000 in the S&P 500 would have grown to only about $500,000. Whether you like him or not, Buffett's investment strategy is arguably the most successful ever. With a sustained compound return this high for this long, it's no wonder Buffett's legend has swelled to mythical proportions. But how the heck did he do it? In this article, we'll introduce you to some of the most important tenets of Buffett's investment philosophy. (For more on Warren Buffett and his current holdings, check out Coattail Investor.)

Buffett's Philosophy 
Warren Buffett descends from the Benjamin Graham school of value investing. Value investors look for securities with prices that are unjustifiably low based on their intrinsic worth. When discussing stocks, determining intrinsic value can be a bit tricky as there is no universally accepted way to obtain this figure. Most often intrinsic worth is estimated by analyzing a company's fundamentals. Like bargain hunters, value investors seek products that are beneficial and of high quality but underpriced. In other words, the value investor searches for stocks that he or she believes are undervalued by the market. Like the bargain hunter, the value investor tries to find those items that are valuable but not recognized as such by the majority of other buyers. 

Warren Buffett takes this value investing approach to another level. Many value investors aren't supporters of the efficient market hypothesis, but they do trust that the market will eventually start to favor those quality stocks that were, for a time, undervalued. Buffett, however, doesn't think in these terms. He isn't concerned with the supply and demand intricacies of the stock market. In fact, he's not really concerned with the activities of the stock market at all. This is the implication this paraphrase of his famous quote : "In the short term the market is a popularity contest; in the long term it is a weighing machine."(see What Is Warren Buffett's Investing Style?) 

He chooses stocks solely on the basis of their overall potential as a company - he looks at each as a whole. Holding these stocks as a long-term play, Buffett seeks not capital gain but ownership in quality companies extremely capable of generating earnings. When Buffett invests in a company, he isn't concerned with whether the market will eventually recognize its worth; he is concerned with how well that company can make money as a business. 



Buffett's Methodology Here we look at how Buffett finds low-priced value by asking himself some questions when he evaluates the relationship between a stock's level of excellence and its price. Keep in mind that these are not the only things he analyzes but rather a brief summary of what Buffett looks for: 

1. Has the company consistently performed well? 
Sometimes return on equity (ROE) is referred to as "stockholder's return on investment". It reveals the rate at which shareholders are earning income on their shares. Buffett always looks at ROE to see whether or not a company has consistently performed well in comparison to other companies in the same industry. ROE is calculated as follows: 
= Net Income / Shareholder's Equity


Looking at the ROE in just the last year isn't enough. The investor should view the ROE from the past five to 10 years to get a good idea of historical performance. 

2. Has the company avoided excess debt? 
The debt/equity ratio is another key characteristic Buffett considers carefully. Buffett prefers to see a small amount of debt so that earnings growth is being generated from shareholders' equity as opposed to borrowed money. The debt/equity ratio is calculated as follows: 
= Total Liabilities / Shareholders' Equity


This ratio shows the proportion of equity and debt the company is using to finance its assets, and the higher the ratio, the more debt - rather than equity - is financing the company. A high level of debt compared to equity can result in volatile earnings and large interest expenses. For a more stringent test, investors sometimes use only long-term debt instead of total liabilities in the calculation above. 

3. Are profit margins high? Are they increasing? 
The profitability of a company depends not only on having a good profit margin but also on consistently increasing this profit margin. This margin is calculated by dividing net income by net sales. To get a good indication of historical profit margins, investors should look back at least five years. A high profit margin indicates the company is executing its business well, but increasing margins means management has been extremely efficient and successful at controlling expenses. 

4. How long has the company been public? 
Buffett typically considers only companies that have been around for at least 10 years. As a result, most of the technology companies that have had their initial public offerings (IPOs) in the past decade wouldn't get on Buffett's radar (not to mention the fact that Buffett will invest only in a business that he fully understands, and he admittedly does not understand what a lot of today's technology companies actually do). It makes sense that one of Buffet's criteria is longevity: value investing means looking at companies that have stood the test of time but are currently undervalued. 

Never underestimate the value of historical performance, which demonstrates the company's ability (or inability) to increase shareholder value. Do keep in mind, however, that the past performance of a stock does not guarantee future performance - the job of the value investor is to determine how well the company can perform as well as it did in the past. Determining this is inherently tricky, but evidently Buffett is very good at it. 

5. Do the company's products rely on a commodity? 
Initially you might think of this question as a radical approach to narrowing down a company. Buffett, however, sees this question as an important one. He tends to shy away (but not always) from companies whose products are indistinguishable from those of competitors, and those that rely solely on acommodity such as oil and gas. If the company does not offer anything different than another firm within the same industry, Buffett sees little that sets the company apart. Any characteristic that is hard to replicate is what Buffett calls a company's economic moat, or competitive advantage. The wider the moat, the tougher it is for a competitor to gain market share. 

6. Is the stock selling at a 25% discount to its real value? 
This is the kicker. Finding companies that meet the other five criteria is one thing, but determining whether they are undervalued is the most difficult part of value investing, and Buffett's most important skill. To check this, an investor must determine the intrinsic value of a company by analyzing a number of business fundamentals, including earnings, revenues and assets. And a company's intrinsic value is usually higher (and more complicated) than its liquidation value - what a company would be worth if it were broken up and sold today. The liquidation value doesn't include intangibles such as the value of a brand name, which is not directly stated on the financial statements. 

Once Buffett determines the intrinsic value of the company as a whole, he compares it to its current market capitalization - the current total worth (price). If his measurement of intrinsic value is at least 25% higher than the company's market capitalization, Buffett sees the company as one that has value. Sounds easy, doesn't it? Well, Buffett's success, however, depends on his unmatched skill in accurately determining this intrinsic value. While we can outline some of his criteria, we have no way of knowing exactly how he gained such precise mastery of calculating value. (To learn more about the value investing strategy of selecting stocks, check out our Guide To Stock-Picking Strategies.) 

Conclusion 
As you have probably noticed, Buffett's investing style, like the shopping style of a bargain hunter, reflects a practical, down-to-earth attitude. Buffett maintains this attitude in other areas of his life: he doesn't live in a huge house, he doesn't collect cars and he doesn't take a limousine to work. The value-investing style is not without its critics, but whether you support Buffett or not, the proof is in the pudding. As of 2004, he holds the title of the second-richest man in the world, with a net worth of more $40 billion (Forbes 2004). Do note that the most difficult thing for any value investor, including Buffett, is in accurately determining a company's intrinsic value.

Read more: http://www.investopedia.com/articles/01/071801.asp#ixzz1nJYdBDzz

More from Investopedia

• Stock-Picking Strategies: Introduction (www.investopedia.com)
• What Is Warren Buffett's Investing Style? (www.investopedia.com)
• Technical Analysis: Introduction (www.investopedia.com)
• Greatest Investors: Introduction (www.investopedia.com)
• The Value Investor's Handbook

Read more: http://www.investopedia.com/articles/01/071801.asp#ixzz1nJbe5r1l

Recent Results Announcements

Dutch Lady Milk Industries Bhd posted a higher pre-tax profit of RM141.553 million for the year ended December 31, 2011 compared with RM90.10 million previously.

Revenue jumped to RM 810.647 million from RM696.625 million in 2010, led by continued strong consumer demand for its products, particularly with the successful launch of its Growing Up Milk with 5x DHA in January last year.

UMW Holdings Bhd pre-tax profit for its financial year ended Dec 31, 2011 rose by 5.2 per cent to RM1.381 billion from RM1.313 billion in the previous year.

Revenue increased by 5.7 per cent to RM13.556 billion from RM12.280 billion previously, it said in a filing to Bursa Malaysia today.

Carlsberg Brewery Malaysia Bhd chalked up a higher pre-tax profit of RM46.22 million for the fourth quarter ended Dec 31, 2011, compared with RM39.908 million in the same quarter a year earlier.

Revenue rose to RM334.96 million against RM326.05 million, the brewer said in a statement today.

KLCC Property Holdings Bhd recorded RM1.297 billion pre-tax profit and RM260.774 million revenue for the quarter ended Dec 31, 2011.

For the nine months ended Dec 31, 2011, it posted RM1.599 billion pre-tax profit and RM745.894 million revenue, it said in a filing to Bursa Malaysia.

Petronas Dagangan Bhd posted a marginally higher pre-tax profit of RM898.9 million for the nine months ended Dec 31, 2011, from RM893.4 million in the same period of the previous year.

It registered a record revenue of RM22.267 billion, up 31.9 per cent from RM16.885 billion previously, the principal marketing domestic arm of national oil corporation Petronas, said in a statement today. 

Chin Well Holdings Bhd posted a 61.7 per cent increase in net profit for the second quarter ended Dec 31, 2011, to RM16.5 million from RM10.2 million in the previous year's corresponding quarter.

It said the achievement was on the back of 2.8 per cent higher revenue to RM131.1 million from RM127.6 million previously. - Bernama

Read more: Results: UMW 2011 profit soars http://www.btimes.com.my/Current_News/BTIMES/articles/20120224182909/Article/index_html#ixzz1nJMMyO5Z

Better earnings for GAB

Friday February 24, 2012

By THOMAS HUONG
huong@thestar.com.my

PETALING JAYA: Guinness Anchor Bhd (GAB) posted a slight increase in net profit to RM65.8mil for its second quarter ended Dec 31, 2011 compared with RM64.6mil a year earlier.

Revenue for the quarter grew 11% year-on-year to RM468.3mil on the back of strong sales generated during large-scale commercial events and an earlier Chinese New Year festive period.

The producer of beer and stout told Bursa Malaysia that in the second quarter, there was a one-off reversal of costs over-accrued in the previous financial year.

For the six months ended Dec 31, 2011, GAB's net profit grew 17% year-on-year to RM121mil while revenue rose 15.8% to RM912.9mil.

GAB brewery in Sungai Way, Selangor. The company has declared a single-tier interim dividend of 10 sen per 50 sen stock unit for FY12.

Earnings per share for the first half of the current financial year (FY12) improved to 40.06 sen against 34.20 sen a year earlier.

GAB has also declared a single-tier interim dividend of 10 sen per 50 sen stock unit for FY12.

The total dividend for the first half of FY12 was 70 sen per 50 sen stock unit.

Managing director Charles Ireland said in a statement that the company's performance was within expectations.

“Our domestic business is performing well. However, we see a significant reduction in our duty-free and export volume as a result of our strategy to focus on the local market,” he said.

He said the brewery's Guinness brand was the star in the first half of FY12 while “Heineken again grew by double-digits and Tiger continued to consolidate its leadership position in the malt liquor market.”

Ireland added that the company's RM40mil information technology infrastructure upgrade initiative, called Project Quantum, was expected to be completed in December.

“With a good performance in the first half, I am confident that GAB will deliver a satisfactory performance across the full year,” he said.

http://biz.thestar.com.my/news/story.asp?file=/2012/2/24/business/10795634&sec=business

Guinness


Market Watch
Recent Financial Results

RM'000  
Date   Financial Yr. End   Qtr   Period End   Revenue  Profit/Lost  EPS   Amended
23-Feb-12      30-Jun-12      2   31-Dec-11      468,322      65,822      21.79       -
02-Nov-11      30-Jun-12      1   30-Sep-11      444,623      55,208      18.28       -
04-Aug-11      30-Jun-11      4   30-Jun-11      348,759      29,076      9.63       -
05-May-11      30-Jun-11      3   31-Mar-11      351,916      48,972      16.21       -

ttm-EPS  65.91 sen
Price RM 12.60
ttm-PE  19.1x

HwangDBS keeps 'buy' call on Petronas Gas

Published: 2012/01/14

KUALA LUMPUR: HwangDBS Vickers Research is maintaining its "buy" call on Petronas Gas Bhd (PetGas) with the target price raised to RM16.90 a share from RM15.50 earlier due to promising outlook in the oil and gas industry.

The research house, optimistic over the company's strong earnings growth from this year's financial year onwards, said the promising outlook for the industry is supported by new pipelines and regas plants.

It said strong earnings growth will be led by contributions from the Malacca regas plant in FY2012 and the Sabah power plant in 2013, whose shares eased four sen to RM15.40 on Bursa Malaysia at 11.30am yesterday.

Petronas Gas will be the prime beneficiary with the planned new pipelines in Terengganu and new regas plants in Pengerang and Lumut, it said in a statement.

It said the company was a main player in the current volatile oil and gas market and might be rerated with imminent news of project awards. Bernama

Read more: HwangDBS keeps 'buy' call on Petronas Gas http://www.btimes.com.my/Current_News/BTIMES/articles/HGAS/Article/#ixzz1nFnAnOXY

YTL net profit up 10.4pc in 2011

Roziana Hamsawi
Published: 2012/02/24

KUALA LUMPUR: YTL Corp Bhd has registered a net profit of RM489.2 million in the six months ended December 31 2011, up 10.4 per cent from the previous corresponding period.

This was posted against a 10.8 per cent growth in revenue to RM9.87 billion.

In a statement, group managing director Tan Sri Francis Yeoh said the increase in revenue was due mainly to "the ongoing resilience of our multi-utility businesses in Malaysia, the UK and Singapore."

He added that overall, the group's cement and multi-utility operations, which are the major contributors, continued to register sound performance.

The multi-utility businesses comprised power generation (in both contracted and merchant markets) and power transmission in Malaysia, Singapore, Indonesia and Australia, water and sewerage services in the UK and merchant multi-utility businesses in Singapore.

YTL Power International Bhd's net profit was up 5.2 per cent to RM560 million compared to RM532.1 million in the same period last year.

Its half-year revenue grew 9.4 per cent to RM7.73 billion.

The division's "Yes" mobile broadband operations, however, registered a loss, substantially due to the upfront implementation costs to build the 4G network for scale.

YTL Power has declared a 1.875 per cent or 0.9375 sen per share second interim dividend. 

Net profit for YTL Cement Bhd, meanwhile, was higher by 8.8 per cent to RM167.9 million this year, due mainly to higher demand for cement in the construction industry and contributions from offshore subsidiaries.

Its revenue for the second quarter being reviewed grew 12.2 per cent to RM1.15 billion, compared to RM1.02 billion for the previous corresponding period ended 31 December 2010. 


YTL Land and Development Bhd's net profit was also higher at RM9.3 million compared to RM5.4 million in the same period the year before on a back of RM225.9 million in revenue compared to RM41.4 million previously.

The stronger performance were substantially contributed by The Capers, being developed under the Sentul urban regeneration project, and the Lakefront and Sandy Island projects being undertaken in Singapore.


YTL E-Solutions Bhd, meanwhile, registered a higher net profit of RM18.6 million while revenue was 42.2 million.

Read more: YTL net profit up 10.4pc in 2011 http://www.btimes.com.my/Current_News/BTIMES/articles/20120223214601/Article/index_html#ixzz1nFlI4k6y

Analysts raise Alliance Financial share target

Published: 2012/02/23

KUALA LUMPUR: At least five research houses raised their target prices for Alliance Financial Group Bhd (AFG) after the country's smallest banking group posted slightly better-than-expected third quarter results.

The group, which owns Alliance Bank, saw net profit rise by 9.1 per cent to RM121.4 million.

This helped its nine-month net profit grow by 14.8 per cent to RM372.3 million, accounting for about 80.9 per cent of an analyst consensus estimate for the full year.

AFG's share price rose by 1.1 per cent to close at RM3.79 yesterday after HwangDBS Vickers Research, RHB Research, CIMB Research, TA Research and UOB Kay Hian raised their targets on the stock. Not all, however, had "buy" recommendations on it.

"We continue to like AFG for its attractive valuation and strong earnings visibility," said HwangDBS, which kept its "buy" call on the stock and raised its target by 20 sen to RM4.50.

AFG's improved nine-month earnings was supported by a strong growth in non-interest income - something the group is trying hard to grow as competition in the lending space intensifies - as well as Islamic banking and lower impairment charges.

"We believe that the group should be able to grow its non-interest income, which makes up 24.8 per cent of group net income and is on track to hit 30 per cent of overall income in the medium term. (This is) correlated to strong growth in fee income and investment income," OSK Research said in a report yesterday.

AFG had hinted at an analyst briefing two days ago that that a dividend upside surprise was unlikely to happen in the foreseeable future given that it needs to conserve capital to meet Basel III requirements, the research house added.

"Although Bank Negara Malaysia's new lending guidelines have reduced industry approval rates, given (AFG's) consistently stringent credit scoring process, its own approval rates are holding up albeit with some decline," Hong Leong Investment Bank Research said. It kept its "buy" call and target price of RM4.34 on the stock.

Read more: Analysts raise Alliance Financial share target http://www.btimes.com.my/Current_News/BTIMES/articles/allg/Article/index_html#ixzz1nFkezz2s

Media Prima dividend highest in industry

By Ooi Tee Ching
Published: 2012/02/24


Read more: Media Prima dividend highest in industry http://www.btimes.com.my/Current_News/BTIMES/articles/mp23/Article/#ixzz1nFjHmqcf

GOOD RETURN: Company posts 11pc profit growth to RM205.4mRecord payout as group profit for 2011 rises 11pc to RM205.4m

MEDIA Prima Bhd will pay out 16 sen a share dividend for 2011, the biggest amount it has given to shareholders.

"With a dividend yield of 4.6 per cent, you will find that it is better than putting money into a fixed deposit," said group managing director Datuk Amrin Awaluddin yesterday.

"This also works out to be the highest dividend payout among media companies."

Media Prima posted 11 per cent profit growth in 2011 to RM205.4 million, up from RM185.3 million the previous year. This figure excluded negative goodwill from the purchase of The New Straits Times Press Bhd (NSTP), which was recognised in 2010. 

Also present was chairman Datuk Johan Jaaffar and chief financial officer Mohamad Ariff Ibrahim.

"In September 2011, we completed the disposal of our foreign subsidiary TV3N Ghana, with proceeds equivalent to RM8.2 million.

"2011 was a year of ups and downs for the global economy and which we have endeavoured with a five per cent net revenue growth, contributed by the efforts of our colleagues across the group," Johan said.

Media Prima's pivotal television platform - TV3, 8TV, ntv7 and TV9 - maintained its position as the main driver and contributor to the group's strong performance.

The television networks have continued to capture the largest viewership with a combined 47 per cent of the audience share.

TV3 maintained its top position as the single most watched station with an audience viewing share of 28 per cent on both free-to-air and pay-television, despite the intense competition and the increase introduction of new channel offerings. 

NSTP, Media Prima's print arm, posted a five per cent growth in revenue, backed by a strong 12 per cent growth in advertisement revenue from 2010.

Harian Metro remained the lead newspaper with average circulation of 390,073 copies nationwide. 

Amrin said Media Prima's Hot FM, Fly FM and One FM continued to be preferred radio stations for listeners under the age of 35. 

Last year, Media Prima's outdoor media revenue, spearheaded by Big Tree Outdoor and Kurnia Outdoor, saw a 10 per cent growth from 2010. 

Through these platforms, Media Prima reaches out to 24 million people from all ages and walks of life in the country daily.

"Tonton, which was launched in August 2010, has more than two million registered users as at January 2012. They are able to view our TV offerings, listen to our radio stations, and read the New Straits Times, Berita Harian and Harian Metro via smart mobile devices," Amrin added.

On its outlook, Ariff said Media Prima's income from advertising revenue was dependent on the global economic outlook. 

"We are monitoring the economic situation in Europe and North America. We will continue to be prudent and adhere to risk management procedures to maintain our pole position in the industry.

"Should there be a moderation in economic growth, as an integrated media company, we are able to spread the risks across all platforms," he added.

Read more: Media Prima dividend highest in industry http://www.btimes.com.my/Current_News/BTIMES/articles/mp23/Article/#ixzz1nFj1BU14

Gas Malaysia, Petronas sign new agreement

Published: 2012/02/24

KUALA LUMPUR: Gas Malaysia Bhd yesterday signed a new agreement with Petroliam Nasional Bhd (Petronas) to supply an equivalent of 492 million standard cubic feet per day (MMScfd) of natural gas.

The 10-year contract will start from January 1 2013, with the option to extend for another five years.

The new deal will replace the existing agreement for a total gas supply of 382 MMScfd, which will expire on December 31 this year.

The contract is aimed at providing a long-term supply security of natural gas to Gas Malaysia's existing customers, the company said in a statement yesterday.

The additional 110 MMScfd will enable it to expand its supply to new customers, it added.

Gas Malaysia was incorporated in 1992 to sell, market and distribute natural gas as well as construct and operate the natural gas distribution system within Peninsular Malaysia. 

It is owned by MMC-Shapadu (Holdings) Sdn Bhd (55 per cent), Tokyo Gas-Mitsui & Co (Holdings) Sdn Bhd (25 per cent) and Petronas Gas Bhd (20 per cent).

Read more: Gas Malaysia, Petronas sign new agreement http://www.btimes.com.my/Current_News/BTIMES/articles/gess/Article/#ixzz1nFhoIvPU

We're a sports apparel firm, not a shoemaker: Xidelang MD

By Francis Fernandez
Published: 2012/02/24

The challenge ahead for Xidelang is to maintain its profitability as well as change the perception of the investing public, says Mark Ding

MARK Ding Peng Peng, the controlling stakeholder and managing director of Xidelang Holdings Ltd (XDL), is a man with a mission - to change public perception of his company.

"First of all, we are not a shoe company. I don't know why the media here keeps referring us as a shoe maker. We are a sports apparel company," said Ding, who flew down from China early this week.

Indeed, data obtained from Bloomberg show that from 2009 t0 2010, XDL's sports apparel, accessories and equipment business grew by 61.37 per cent, while the sports shoes business fell by 0.88 per cent during the same period.

For the financial year ended December 31 2011, XDL's shoe business contributed RM225.79 million in sales, while the sports apparel, accessories and equipment contribued RM228.94 million in sales.

A quick check on XDL's latest full-year results for 2011 shows that gross profit margin for sports shoes declined by five per cent to 25 per cent, but the gross profit margin for sports apparel and accessories improved to 40 per cent.

"Sports apparel, accessories and equipment contribute some 47 per cent to our revenue now, and this is expected to grow in the coming years," said Ding in an interview with Business Times.

He added that the original equipment manufacturer (OEM) of sports shoes for exports was another source of growth.

"Last year, the OEM for sports shoes for the export market brought in some RM46 million in sales," said Ding.

He added that the challenge ahead for XDL is to maintain its profitability as well as change the perception of the investing public.

"Let's face the fact. My company is valued in the market at about price- to-earnings (PE) of about two times. 


"How many companies making a pre-tax profit of above RM100 million a year constantly have such low valuation?" said Ding.

He said the negative perception on China companies has played a key role, but feels that the investment public here has gone overboard.

"Even in Hong Kong, our bigger rival Anta Sports Products Ltd has a better valuation, trading at a PE of 9.8 times," said Ding.

For the record, XDL posted a pre-tax profit of RM117.50 million for the year ended December 31 2011, versus a pre-tax profit of RM106.77 million in the year before.

Read more: We're a sports apparel firm, not a shoemaker: Xidelang MD http://www.btimes.com.my/Current_News/BTIMES/articles/XIDEN/Article/#ixzz1nFggdPaN