APM - Return on Retained Earnings

APM
Year		DPS		EPS		Retained EPS
2002		11.2		35.5		24.3
2003		9.2		24.2		15
2004		7.9		29.1		21.2
2005		12.2		34.8		22.6
2006		9.4		27.5		18.1
2007		10.8		26.7		15.9
2008		11.8		25.4		13.6
2009		11.3		36		24.7
2010		13.5		60.1		46.6
2011		16.5		59.5	P	43
Total		113.8		358.8		245
2002-2011
EPS increase (sen)				24.0
DPO				32%
Return on retained earnings				10%
(Figures are in sens)

United Plantations - Return on Retained Earnings

United Plantations
Year		DPS		EPS		Retained EPS
2002		21.1		37.2		16.1
2003		19.8		45.4		25.6
2004		21.6		57.9		36.3
2005		21.6		63.9		42.3
2006		26.8		72.1		45.3
2007		25.8		86.2		60.4
2008		29.8		151		121.2
2009		37.5		129		91.5
2010		63.8		133		69.2
2011		71.2		182	P	110.8
Total		339		957.7		618.7
2002-2011
EPS increase (sen)				144.8
DPO				35%
Return on retained earnings				23%
(Figures are in sens)

KLK - Return on Retained Earnings

Kuala Lumpur Kepong
Year		DPS		EPS		Retained EPS
2002		7.2		24.5		17.3
2003		9.6		33.7		24.1
2004		13.1		39.7		26.6
2005		15.5		36.1		20.6
2006		21.1		33.7		12.6
2007		26.8		57.7		30.9
2008		40.7		103		62.3
2009		53.8		60.6		6.8
2010		45		85.8		40.8
2011		60		127		67
Total		292.8		601.8		309
2002-2011
EPS increase (sen)				102.5
DPO				49%
Return on retained earnings				33%
(Figures are in sens)

Boustead - Return on Retained Earnings

Boustead
Year		DPS		EPS		Retained EPS
2002		3.2		11.1		7.9
2003		3.7		16.7		13
2004		8		22		14
2005		9.3		14.4		5.1
2006		9.3		7.8		-1.5
2007		10.9		49.1		38.2
2008		18		59.7		41.7
2009		18.2		26.7		8.5
2010		20.8		38.3		17.5
2011		35.9		34.2		-1.7
Total		137.3		280		142.7
2002-2011
EPS increase (sen)				23.1
DPO				49%
Return on retained earnings				16%
(Figures are in sens)

Petronas Gas

Petronas Gas
Year		DPS		EPS		Retained EPS
2003		30		33.2		3.2
2004		18.6		32.4		13.8
2005		30.8		41.6		10.8
2006		35.8		49.1		13.3
2007		38.3		63		24.7
2008		42.5		55.2		12.7
2009		48.7		48.7		0
2010		50		47		-3
2011		50		72		22
Total		344.7		442.2		97.5
2003-2011
EPS increase (sen)				38.8
DPO				78%
Return on retained earnings				40%
(Figures are in sens)

Poh Kong - Return on Retained Earnings

Poh Kong
Year		DPS		EPS		Retained EPS
2004		1		8.5		7.5
2005		1.2		2.9		1.7
2006		1.2		5.3		4.1
2007		1.3		4.5		3.2
2008		1.4		7		5.6
2009		1.4		6.9		5.5
2010		1.4		8		6.6
2011		1.4		10		8.6
Total		10.3		53.1		42.8
2003-2011
EPS increase (sen)				1.5
DPO				19%
Return on retained earnings				4%
(Figures are in sens)

Tongher - Return on Retained Earnings

Tong Herr
Year		DPS		EPS		Retained EPS
2002		5.3		9.8		4.5
2003		5.3		16.2		10.9
2004		14		35.4		21.4
2005		12.1		23.4		11.3
2006		13		43.7		30.7
2007		10.2		51		40.8
2008		13.9		14.4		0.5
2009		5		6.6		1.6
2010		5		14.4		9.4
2011		6		29		23
Total		89.8		243.9		154.1
2002-2011
EPS increase (sen)				19.2
DPO				37%
Return on retained earnings				12%
(All figures are in sens)

TSM Global - Return on Retained Earnings

TSM Global (formerly Juan Kuang)

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		0		-1.3		-1.3
2003		0		-12.9		-12.9
2004		0		-4.7		-4.7
2005		0		14.6		14.6
2006		0		11.5		11.5
2007		0		10.9		10.9
2008		2.5		18.6		16.1
2009		2.5		20		17.5
2010		2.5		22.3		19.8
2011		5		24.9		19.9
Total		12.5		103.9		91.4
2002-2011
DPO				12%
EPS increase (sen)				26.2
Return on retained earnings				29%

Top Glove - Return on Retained Earnings

Top Glove

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		0.6		3.5		2.9
2003		1.8		4.9		3.1
2004		2.4		7.6		5.2
2005		2.7		11		8.3
2006		3		14.6		11.6
2007		4.6		17.3		12.7
2008		5.5		18.7		13.2
2009		11		28.5		17.5
2010		16		42.4		26.4
2011		11		19.4		8.4
Total		58.6		167.9		109.3
2002-2011
DPO				35%
EPS increase (sen)				15.9
Return on retained earnings				15%

Maybank - Return on Retained Earnings

Maybank

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2003		31.4		39.4		8
2004		30.6		47.7		17.1
2005		53.7		47.6		-6.1
2006		43.3		52.2		8.9
2007		41.3		57.8		16.5
2008		32.1		58.3		26.2
2009		6		33.5		27.5
2010		41.3		53.9		12.6
2011		45		59.5		14.5
Total		324.7		449.9		125.2
2003-2011
DPO				72%
EPS increase (sen)				20.1
Return on retained earnings				16%

LPI - Return on Retained Earnings

LPI

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		9		14.4		5.4
2003		9		17.6		8.6
2004		10.8		25.8		15
2005		34.6		32.3		-2.3
2006		32.4		33.8		1.4
2007		48.2		38		-10.2
2008		48.8		45.1		-3.7
2009		40.5		54.5		14
2010		26.5		62.3		35.8
2011		70		70.13		0.13
Total		329.8		393.93		64.13
2002-2011
DPO				84%
EPS increase (sen)				55.7
Return on retained earnings				87%

Public Bank - Return on Retained Earnings

Public Bank

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		9.5		25.5		16
2003		9.9		30		20.1
2004		42.8		36.2		-6.6
2005		48.3		40.7		-7.6
2006		37.9		47.8		9.9
2007		45.5		60.7		15.2
2008		56.7		69.5		12.8
2009		40.1		71.9		31.8
2010		37.2		87		49.8
2011		46.8		99.5		52.7
Total		374.7		568.8		194.1
2002-2011
DPO				66%
EPS increase (sen)				74.0
Return on retained earnings				38%

Padini - Return on Retained Earnings

Padini

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		0.2		1		0.8
2003		0.5		1.6		1.1
2004		0.6		1		0.4
2005		1.1		2.6		1.5
2006		1.4		4.4		3
2007		2.2		4.8		2.6
2008		2.7		6.3		3.6
2009		2.7		7.5		4.8
2010		3		9.3		6.3
2011		4		11.5		7.5
Total		18.4		50		31.6
2002-2011
DPO				37%
EPS increase				10.50
Return on retained earnings				33%

Nestle - Return on Retained Earnings

Nestle

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		98.5		63.2		-35.3
2003		70.2		81.5		11.3
2004		75.2		94		18.8
2005		80.2		114		33.8
2006		95		113		18
2007		100		124.5		24.5
2008		190		145.4		-44.6
2009		130		150		20
2010		150		166.9		16.9
2011		170		194.6		24.6
Total		1159.1		1247.1		88
2002-2011
DPO				0.93
EPS increase				131.40
Return on retained earnings				149%

Guinness - Return on Retained Earnings

Guinness

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		27.4		24		-3.4
2003		28.1		25.8		-2.3
2004		30.4		32.6		2.2
2005		30.1		35.7		5.6
2006		30.2		42.4		12.2
2007		32.9		37.3		4.4
2008		36.4		41.7		5.3
2009		41		47		6
2010		45		50.5		5.5
2011		54		60		6
Total		355.5		397		41.5
2002-2011
DPO				0.90
EPS increase				36.00
Return on retained earnings				87%

Genting Malaysia - Return on Retained Earnings

Genting Malaysia (GENM)

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		2.3		11		8.7
2003		2.5		9.2		6.7
2004		2.6		13.6		11
2005		3		15.4		12.4
2006		3.7		17		13.3
2007		4.2		19.2		15
2008		4.8		24		19.2
2009		5.3		23.4		18.1
2010		5.9		23.8		17.9
2011		6.2		25.22		19.02
Total		40.5		181.82		141.32
2002-2011
DPO				0.22
EPS increase				14.22
Return on retained earnings				10%

Petronas Dagangan - Return on Retained Earnings

Petronas Dagangan

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2003		10.8		15		4.2
2004		7.2		19.2		12
2005		10.8		21.2		10.4
2006		14.4		50.9		36.5
2007		21.9		64.5		42.6
2008		33.5		66.6		33.1
2009		36		58.3		22.3
2010		63.8		75.8		12
2011		75		87.6		12.6
Total		273.4		459.1		185.7
From 2003-2011
DPO				0.60
EPS increase				72.60
Return on retained earnings				39%

The Magic of Dutch Lady: Measuring management's ability to profitably allocate earnings.

Depicted below are the 12 years financial statistics of Dutch Lady.

Dutch Lady

Date DPS EPS Retained EPS

1999 0 15.9 15.9

2000 4.5 21.7 17.2

2001 5.8 18.7 12.9

2002 5.8 23.7 17.9

2003 12.8 24.2 11.4

2004 56 26.6 -29.4

2005 63.2 42.4 -20.8

2006 63.2 67.3 4.1

2007 42.1 73.8 31.7

2008 65.6 66.6 1

2009 72.5 94.4 21.9

2010 72.5 119 46.5

Total 464 594.3 130.3

1999-2010
DPO				0.78
EPS increase				103.1
Return on retained earnings				79.1%

We can observe that for the last 12 years (year 1999 to year 2010), the management of Dutch Lady:

1.  has earned a total of 594.3 sen per share

2.  has distributed a total of 464 sen per share, giving a DPO ratio of 78.1%.

3.  has retained a total of 130.3 sen per share as retained earnings.

4.  has increased its EPS by 103.1 sen per share ( 119 - 15.9 = 103.1) from 1999 of 15.9 sen per share to 119 sen per share in 2010.

How do we as investors measure a company and its management's ability to profitably allocate (unrestricted) earnings?

We can do this by taking the per share earnings retained by a business for a certain period of time, then compare it to any increase in per share earnings that occurred during this same period.  

Thus, the management of Dutch Lady has used the retained EPS of 130.3 sen per share to grow its earnings by 103.1 sen per share from 1999 to 2010..  

Therefore, the management of Dutch Lady has earned a 79.1%( = 103.1 / 130.3) return in 2010, on the 130.3 sen a share that Dutch Lady retained from the year 1999 to 2010.

Even if we have no idea of the business of Dutch Lady, we can still safely conclude that Dutch Lady has done a great job of profitably allocating its retained earnings.

This test is not perfect.  One must be careful that the per share earnings figures used are not aberrations.  One has to make sure that the per share figures used are indicative of any real increase or decrease in earning power.  

The advantage to this test is that is gives you, the investor, a really fast method of determining whether or not a company and its management have the ability to allocate retained earnings in a fashion that increases the wealth of the company's shareholders.

Investing for the Long Run - An approach

Investment objectives.

1.  I am looking at a 10 year time horizon in this investment.

2.  My objective is to grow my initial capital 400% in 10 years, that is, doubling at the 5th year and quadrupling at the 10th year.

3.  The sum invested will be a big sum of meaningful amount (a fat pitch).

What stock to buy?

1.  Good quality growth stock, with durable competitive advantage and economic moat.

2.  Revenue and earnings growing at >15% per year, that are predictable and sustainable.

3.  ROE > 15% per year.

4.  FCF +++

5.  Good management with integrity

When to buy?

1.  When the stock price is compelling, that is, undervalued.

2.  A low buying price translates into higher returns on the invested amount.

Getting Rich with Dividends: 3 Tips to Improve Returns With Dividend Stocks

http://finance.yahoo.com/blogs/breakout/3-tips-improve-returns-dividend-stocks-172506087.html

Why the Market Is Irrational and What You Can Do About It

http://finance.yahoo.com/blogs/breakout/harvard-teach-investing-111707627.html

What Harvard Can Teach You About Investing

http://finance.yahoo.com/blogs/breakout/harvard-teach-investing-111707627.html

Knowing a Business Leads to Investing Success. Act Like an Owner

Investing is very similar. You must be able to:

1) value a business and
2) wait for the right price.

You should spend at least as much time reading annual reports as you do studying books on value investing. I’m not saying you don’t need to master the great books and writings on investing. On the contrary, this is essential too.

Nevertheless, as you master the framework and develop your own investing process, more and more of your time and energy shouldshift to studying businesses.

Do yourself a favour, invest in your financial education before you invest in the markets

"Risk comes from not knowing what you are doing." 

Risk can be alleviated with proper education and experience.  This is the same process that you must commit to undertake when you decide to invest in any market.  First and foremost, you must get yourself educated. 

It is strange that most parents would not think twice to pay high school fees to send their kids to university, when there is no real guarantee that they will succeed in life after getting their degree.  However, when it comes to paying for financial education, where there is a chance they can lose all of the kids' education funds, many people shy away because of the price.  Instead, they would rather risk their hard earned money in a market or instrument that they have little knowledge of, or worse, investing based on rumours or tips from various unverified sources.

Most people are attracted by the myth of quick, easy money from investing (or trading) but fail to understand that it takes a lot of hard work to be successful.  Everyone equates being a doctor or lawyer to earning lots of money.  But it is also common understanding that to be a doctor or a lawyer requires one to put in many years of education and practice before one can be successful.  Ask anyone about his or her current job and you would most likely get the same response that hard work is the norm.  How then can it be different for investing (and trading)?

"Risk comes from not knowing what you are doing" - a famous quote from Warren Buffett.  

It sounds simplistic, but it epitomises the real meaning of the work "Risk".

Any instrument, be it stocks or forex will be dangerous if you don't know what you are doing.  it is not the instrument but the level of the investor's understanding of the instrument and the market that determines his risk level.  So, do yourself a favour, invest in your financial education before you invest in the markets. 

Here is another quote from Mr. Buffett: "The most important investment you can make is in yourself.."