假设30年前，马来西亚有5间公司（既是A, B, C, D 和 E公司），每间公司的发行股数为1,000股以及其股票的面值(Par Value)为RM1.00，而且所有公司都以其面值的价值来发行(Issue Price)股票，所以每一间公司的缴足资本为(Issued and Paid-Up Capital)RM1,000。
如果这5间公司以面值来计算的话其占市场上的股权占有率如下：
Value of A = RM1,000 (20%)
Value of B = RM1,000 (20%)
Value of C = RM1,000 (20%)
Value of D = RM1,000 (20%)
Value of E = RM1,000 (20%)
Total Value = RM5,000 (100%)
由于当时这5间公司在同时开始营运，所以它们的盈余保留(Retained Earnings/ Reserve)是0。因此它们的股东资金（Shareholders’ Equity，又可称为Net Asset Value，简称NAV）是相同的：
(Number of Shares * Par Value) + Share Premium + Retained Earnings = NAV
NAV of A = (1,000 * RM1.00) + RM0 + RM0 = RM1,000
NAV of B = (1,000 * RM1.00) + RM0 + RM0 = RM1,000
NAV of C = (1,000 * RM1.00) + RM0 + RM0 = RM1,000
NAV of D = (1,000 * RM1.00) + RM0 + RM0 = RM1,000
NAV of E = (1,000 * RM1.00) + RM0 + RM0 = RM1,000
而且我们也假设它们的市价（Market Value，简称MV）是NAV的1倍，既是Price-to-book ratio （P/B）= 1 time。所以在起点时这5间公司以市价来计算的话，它们的股权占有率都是相等的：
MV = NAV * 1x of P/B
MV of A = RM1,000 (20%)
MV of B = RM1,000 (20%)
MV of C = RM1,000 (20%)
MV of D = RM1,000 (20%)
MV of E = RM1,000 (20%)
Total MV = RM5,000 (100%)
土著在当时只控有A公司，那土著在30年前以面值或市价来计算他们的股权占有率都显示出他们控有了20%的股权。
30年后，这5间公司的Retained Earnings/ Reserve如下：
Retained Earnings/ Reserve of A = RM10,000
Retained Earnings/ Reserve of B = RM1,000
Retained Earnings/ Reserve of C = RM1,000
Retained Earnings/ Reserve of D = RM2,000
Retained Earnings/ Reserve of E = RM-20,000
这5间公司30年后的NAV如下（假设这5间公司在30年里没有派过任何股息，没有做过股票自购（Share Buyback）没有做过股票分割或整合(Share Split or Share Consolidation)，没有派过红股(Bonus Issue)或Share Dividend，也没曾发行过附加股（Rights Issue））：
NAV of A: RM1,000 + RM0 + RM10,000 = RM11,000
NAV of B: RM1,000 + RM0 + RM1,000 = RM2,000
NAV of C: RM1,000 + RM0 + RM1,000 = RM2,000
NAV of D: RM1,000 + RM0 + RM2,000 = RM3,000
NAV of E: RM1,000 + RM0 + RM-20,000 = RM-19,000
由于E公司的股东资金为负数并宣布破产，所以它的市价为0。以那剩下4间公司的面值来算公司的股权占有率如下：
Value of A = RM1,000 (25%)
Value of B = RM1,000 (25%)
Value of C = RM1,000 (25%)
Value of D = RM1,000 (25%)
Total Value = RM4,000 (100%)
大家可以看得出如果以面值来算，那土著所掌控的A公司在整个市场上的占有率只略为提升至25%，还少于30%。但这并没有算进公司NAV的增长，极可能是政府刻意忽略，以达到其控制市场为终极目标的恶毒居心。
如果以剩下的4间公司的NAV来算它们的市价 (假设它们的P/B率还是1倍)，那它们各自的股权占有率如下：
MV of A = RM11,000 (61.11%)
MV of B = RM2,000 (11.11%)
MV of C = RM2,000 (11.11%)
MV of D = RM3,000 (16.67%)
Total MV = RM18,000 (100%)
可以看得出以市价算股权占有率的话，土著的股权占有率其实已经透过A公司掌控达到了61.11%的市场股权占有率，而不是政府所说的25%。
看回马来西亚上市公司的市值最大的前3间公司，既是Sime Darby, Maybank和CIMB Bank，是不是跟我以上的例子有点相似？如果以面值来算的话，那这3间公司在马来西亚1,000间上市公司中的股权占有率就是及其微小的，但是以市价来算的话那情况就不一样了。现在大家可看透了马来西亚政府的“用心”了么？
Sunday, December 18, 2011
Wednesday, October 5, 2011
ICULS Valuation: Scomi Engineering Bhd
According to my research, the intrinsic value of the ICULS of Scomi Engineering Bhd range from RM0.5418 to RM0.5424 per RM1 nominal value of ICULS. To achieve a safety of margin for the investment, I use to buy a security when its market price is 20% in discount to its intrinsic value, so the target price of F&N is RM0.4335 to RM0.4339 per RM1 nominal value of ICULS.
ScomiEn-LA
ScomiEn-LA
Monday, September 26, 2011
DCF Valuation (2): Fraser & Neave Holdings Berhad
According to my research, the intrinsic value of F&N is RM17.85 per share. To achieve a safety of margin for the investment, I use to buy a company's share when its market price is 20% in discount to its intrinsic value, so the target price of F&N is RM14.28.
The excel modelling for F&N is a little bit complicated than the previous excel file for Nestle, as this time I calculated the 5-year Beta of F&N based on its fluctuation for past 5-year daily prices against the daily fluctuation for the KLCI index.
F&N
The excel modelling for F&N is a little bit complicated than the previous excel file for Nestle, as this time I calculated the 5-year Beta of F&N based on its fluctuation for past 5-year daily prices against the daily fluctuation for the KLCI index.
F&N
DCF Valuation (1): Nestle (Malaysia) Berhad
I have recently completed the valuation for few companies for my own investment research. I used the discounted cash flow method ("DCF") to derive the valuation of the companies. So far all the companies I valued are blue chip companies which generate stable free cash flow and thus they are suitable to be valued by the DCF method.
The 1st company I did the research was Nestle (Malaysia) Berhad. I completed this valuation few weeks ago and share that in a chinese investment forum. Since I have not long updated my blog for quite some time, I uploaded my research to update my blog.
According to my research, the intrinsic value of Nestle is RM48.37 per share. As I am a value investor, so I would only buy a company's share which market price is 20% in discount to its intrinsic value, so the target price of Nestle is RM38.70.
Nestle.rar
(Finally I find a way to upload my excel file, so I am here providing a guide how to download the excel file. Please look at the picture I posted for the procedure to download the excel file:
1st step - click at the Nestle.rar link
2nd step - the link will then direct you to the google docs page as shown in the picture
3rd step - click the "file" selection as shown in the picture will drop down a list, so select "Download original" to save the excel file into your PC...^_^)
Wednesday, December 1, 2010
Corporate Exercises: Accounting’s games that have no value add
Bonus Issue, Share Split, Share Consolidation, Capital Reduction, Special Dividend Payout (Capital Repayment) and Share Dividend and any other types of corporate exercises have no value add to the shareholders’ value. Even Right Issue with an issue price that is lower than the market price will not have positive impact to the shareholders’ value. If the shareholder who does not want to further pump in more capital into the company by subscribing the additional Right Shares at a discount to its market price, the shareholder’s right will be greatly diluted.
Basically these kind of corporate exercises are transferring the money from the left pocket to the right pocket in disguise to mislead the shareholders that their value in the company has increased. Do you think the value 10 pieces of RM10 would be more than the value 1 piece of RM100?
There are always justifications from analysts about the corporate exercises would bring positive impact to the shareholders’ value, whereby my opinion is “it depends”. So what could be the actual impact of such corporate exercises? Please refer below:-
1) Increase the number of shares will increase the liquidity of the shares will reduce the illiquidity premium and thus share price would increase;
2) Supply of shares increase substantially and this would shift the supply curve right-ward and thus decrease the share price; and
3) Most of the corporate exercises do not change the shareholders’ value of the fund but they engage investment bankers to carry out the corporate exercises, and these investment bankers are not cheap. So the shareholders’ value indeed decreases due to expenses pay investment bankers.
Of course analysts would try to play around the abovementioned points to justify when to “buy and sell”. When the market is in bull run, they would say it’s good to have Bonus Issue as it increases the liquidity of the shares; when the market is in bear mood, they would say Bonus Issue will cause excess of supply which subsequently reduce the share price. Basically I would say these analysts have no view and are bullshitting.
As a conclusion, a company will only increase its shareholders’ value through its daily operating activities, not via some kind of complicated corporate exercises or financial activities. Know how to calculate the basis of the corporate exercises would be the way to discover the trick of the accounting games.
Basically these kind of corporate exercises are transferring the money from the left pocket to the right pocket in disguise to mislead the shareholders that their value in the company has increased. Do you think the value 10 pieces of RM10 would be more than the value 1 piece of RM100?
There are always justifications from analysts about the corporate exercises would bring positive impact to the shareholders’ value, whereby my opinion is “it depends”. So what could be the actual impact of such corporate exercises? Please refer below:-
1) Increase the number of shares will increase the liquidity of the shares will reduce the illiquidity premium and thus share price would increase;
2) Supply of shares increase substantially and this would shift the supply curve right-ward and thus decrease the share price; and
3) Most of the corporate exercises do not change the shareholders’ value of the fund but they engage investment bankers to carry out the corporate exercises, and these investment bankers are not cheap. So the shareholders’ value indeed decreases due to expenses pay investment bankers.
Of course analysts would try to play around the abovementioned points to justify when to “buy and sell”. When the market is in bull run, they would say it’s good to have Bonus Issue as it increases the liquidity of the shares; when the market is in bear mood, they would say Bonus Issue will cause excess of supply which subsequently reduce the share price. Basically I would say these analysts have no view and are bullshitting.
As a conclusion, a company will only increase its shareholders’ value through its daily operating activities, not via some kind of complicated corporate exercises or financial activities. Know how to calculate the basis of the corporate exercises would be the way to discover the trick of the accounting games.
Monday, November 15, 2010
My Update
Previously I have been sharing some investment analysis on certain stock or sharing the experience of attending AGMs, but I realised I'd be either too lazy to write so much on the same stuff and sometimes cannot recall what I have observed during the AGMs. I always can't keep on updating the long stories that I was writting and thus I trully feel sorry to those who were following my blog.
I just started a new job in an investment bank recently, and the work load becomes quite heavy lately and always work long hours, so I can't concentrate on writting long story in the blog. In view of this, from now on, I'll only write something in short and spontaneous to what I can think of. And I would like to say thank you to those friends who would be keep visting my blog once a while in the future.
I just started a new job in an investment bank recently, and the work load becomes quite heavy lately and always work long hours, so I can't concentrate on writting long story in the blog. In view of this, from now on, I'll only write something in short and spontaneous to what I can think of. And I would like to say thank you to those friends who would be keep visting my blog once a while in the future.
Saturday, November 6, 2010
How to evaluate a company's fair value? I'm puzzling.
Let me share some of my investment experience of analysing a company's fair value.
1st I'll check the company's management, if the quality of the management is good then I'll further check out their intrinsic value. If they are not integrity enough such as the "Berjaya" gang of companies are out of my radar screen.
2nd step is to evaluate a company's fair value. But what methods I should use? It depends on whether we are insider? Are we the substantial shareholder and be able to impose decision making onto the company's management and subsequently affect the distribution of the company cashflow?
1) If you are minority shareholders, maybe Discounted Dividend Model (DDM) is suitable.
2) If you are controlling shareholders, then Discounted Free Cashflow Model (DCF) could be a good tool.
However, these discounted models are too complicated because a lot of the people don't know how to use financial modeling to project future dividends/cashflows and subsequently to use the correct discount rate and constant growth rate to get the accurate PV. A small fault input or assumption could have lead to a disastrous outcome by using these models.
Then people would tend to make life easy by using P/E, P/B or P/S. But these relative valuations have their own weaknesses due to irregualr year of financial results and thus P/E, P/B or P/S could be invalid for certain years. In addition, certain ratios only applicable to certain sectors. For example P/B could be good for banking or property stocks because they rely on their asset to generate value, but it is not a good indicator for knowledge intensive sector such as IT companies since they make business base on human resource, not physical assets.
In order to justify the application of relative valuations, analyst would tend to get a normalised or average ratios for P/E, P/B or P/S by removing some of the outliers. Subsequently they further supplement these ratios by comparing with the Adjusted Net Asset (book value). IMHO, it's stupid to value a company base on NAV, because doing business is forward looking, so we should not evaluate a company based on its historical figures. If a company is making losses but sitting with huge base asset, what's the point we buy a company's at a discount to its NAV knowing a negative retain profit is gradually shrinking the company's NAV?
With all these absolute and relative valuation models, oh hell! they still cannot get us the exact valuation. So there are another value investing strategy comes to play that we should buy a company with a margin of safety to it's intrinsic value. At the end of the day, all we can see that we don't have some rocket science tools to get us the actual value but a vague range of valuation.
In order to understand a company's valuation, it all depends on how good is our business sense or instinct, how well we can understand the business model and how far we can look beyond the business prospect. It's not necessary to become well equipped in academic theory and historical numbers in order to be a good investor or else there would be a lot mathematicians, statisticians and historians become success in investment.
I like the quote from John Maynard Keynes as he had once said "It is better to be roughly right than precisely wrong”. The same quote does apply to value an investment because it's an art, not a science or mathematics.
1st I'll check the company's management, if the quality of the management is good then I'll further check out their intrinsic value. If they are not integrity enough such as the "Berjaya" gang of companies are out of my radar screen.
2nd step is to evaluate a company's fair value. But what methods I should use? It depends on whether we are insider? Are we the substantial shareholder and be able to impose decision making onto the company's management and subsequently affect the distribution of the company cashflow?
1) If you are minority shareholders, maybe Discounted Dividend Model (DDM) is suitable.
2) If you are controlling shareholders, then Discounted Free Cashflow Model (DCF) could be a good tool.
However, these discounted models are too complicated because a lot of the people don't know how to use financial modeling to project future dividends/cashflows and subsequently to use the correct discount rate and constant growth rate to get the accurate PV. A small fault input or assumption could have lead to a disastrous outcome by using these models.
Then people would tend to make life easy by using P/E, P/B or P/S. But these relative valuations have their own weaknesses due to irregualr year of financial results and thus P/E, P/B or P/S could be invalid for certain years. In addition, certain ratios only applicable to certain sectors. For example P/B could be good for banking or property stocks because they rely on their asset to generate value, but it is not a good indicator for knowledge intensive sector such as IT companies since they make business base on human resource, not physical assets.
In order to justify the application of relative valuations, analyst would tend to get a normalised or average ratios for P/E, P/B or P/S by removing some of the outliers. Subsequently they further supplement these ratios by comparing with the Adjusted Net Asset (book value). IMHO, it's stupid to value a company base on NAV, because doing business is forward looking, so we should not evaluate a company based on its historical figures. If a company is making losses but sitting with huge base asset, what's the point we buy a company's at a discount to its NAV knowing a negative retain profit is gradually shrinking the company's NAV?
With all these absolute and relative valuation models, oh hell! they still cannot get us the exact valuation. So there are another value investing strategy comes to play that we should buy a company with a margin of safety to it's intrinsic value. At the end of the day, all we can see that we don't have some rocket science tools to get us the actual value but a vague range of valuation.
In order to understand a company's valuation, it all depends on how good is our business sense or instinct, how well we can understand the business model and how far we can look beyond the business prospect. It's not necessary to become well equipped in academic theory and historical numbers in order to be a good investor or else there would be a lot mathematicians, statisticians and historians become success in investment.
I like the quote from John Maynard Keynes as he had once said "It is better to be roughly right than precisely wrong”. The same quote does apply to value an investment because it's an art, not a science or mathematics.
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