PBBANK – Target Price at RM15.20

pbbank-logo

Being the third largest bank in Malaysia, Public Bank Group (PBBANK) reported a 4% increase in net earnings for first quarter of financial year 2013. The profit is mainly supported by the group’s stronger annualized domestic loan growth as well as low impaired loan ratio. Besides, Public Bank recorded a return on equity of 22.2%, which is the best among domestic lenders.

Public Bank has been awared as the Best Bank in Malaysia for many years.
The group, founded by Tan Sri Dato’ Sri Dr. Teh Hong Piow in 1966 is well-known for its strong fundamental performance and steady growth across the years. Needless to say, the counter PBBANK is definitely one the top pick for fundamental investors.

Let’s check out what’s the target price of PBBANK here.

Data that is required for calculation are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM1.112

Earning growth: 10.98%
Source: Financial Times

Future PE: 14.1695
Source: Bloomberg

1. Future EPS

Future EPS is required to find out the future price of the counter. We will make use of the earning growth estimated by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of PBBANK for 10 years, replace the value in the formula:

Future EPS = 1.112 * (1.1098 10)

The earnings growth rate picked from finance site is an average growth rate. We make an assumption that it is the rate that the company will grow in 1 year. Hence,

Future EPS = 1.112 * (1.1098 1) = 1.234

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE, which is retrieved earlier from finance site.

Future Price = Future EPS * Future PE

Future Price = 1.234 * 14.1695 = 17.49

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do reverse calculation with the future price derived from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Corresponding to calculation in Step 1, the number of year equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in certain number of year(s). Let’s say we are expecting a minimum of 15% return from PBBANK next year. Here’s how the calculation goes:

Target Price = 17.49 / (1.15 1) = 15.2

As of time of writing, the last closing price of PBBANK is RM16.70, which is 10% higher than the target price. Besides, the price is also currently on the high side of its 52 weeks range. As such, it is not the right timing to buy PPBANK now. Patience is a virtue.

GAMUDA – Target Price at RM4.23

gamuda-logo

Lately, Gamuda had been hit by arbitration losses against Wayss & Freytag and Bahrain Asphalt Establishment B.S.C (BAE) with payment of RM91.9mil and RM27.4mil respectively. Analysts thus slashed its earnings forecast slightly for financial year 2013. However, Gamuda’s fundamentals were believed to be remained intact driven by its large-scale Klang Valley MRT project.

Let’s check out what’s the reasonable price of GAMUDA.

Data that is required for calculation are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM0.2792

Earning growth: 18.93%
Source: Financial Times

Future PE: 14.6403
Source: Bloomberg

1. Future EPS

Future EPS is required to find out the future price of the counter. We will make use of the earning growth estimated by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of GAMUDA 10 years later, replace the value in the formula:

Future EPS = 0.2792 * (1.1893 10)

The earnings growth rate picked from finance site is an average growth rate. We make an assumption that it is the rate that the company will grow in 1 year. Hence,

Future EPS = 0.2792 * (1.1893 1) = 0.332

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE, which is retrieved earlier from finance site.

Future Price = Future EPS * Future PE

Future Price = 0.332 * 14.6403 = 4.86

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do reverse calculation with the future price derived from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Corresponding to calculation in Step 1, the number of year equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in certain number of year(s). Let’s say we are expecting a minimum of 15% return from GAMUDA next year. Here’s how the calculation goes:

Target Price = 4.86 / (1.15 1) = 4.23

As of time of writing, the last done price of GAMUDA is RM4.06, which is slightly lower than the target price of RM4.23. Therefore, buying GAMUDA now may indicate a potential capital uprise of approximately 4%.

Telekom Malaysia (TM) – Target Price at RM4.77

telekom-logo

Telekom Malaysia (TM) reported a revenue rose of 9.2% for the financial year ended December 31, 2012. The group also declared total dividend payout of 22 cents per share last year.

Agreement was signed last week between TM and UEM Land Bhd for its high speed broadband service Unifi. With this agreement, residents at Nusajaya under development of UEM Land Bhd will enjoy the broadband service for free up to 24 months depending on the type of houses purchased.

Now, let’s check out what’s the target price of TM.

Data that is required for calculation are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM0.353

Earning growth: 11.15%
Source: Financial Times

Future PE: 14

The estimated PE ratio from Bloomberg is 24.1228, which is much higher than current PE of 15.5807, mainly due to lower expected earnings in next 12 months. Whereas if we look at the historical PE of TM, the average for past 5 years is about 14. The lesser number will lead us to a more conservative result of future price calculation. Therefore, we’ll use 14 as future PE here.

1. Future EPS

Future EPS is required to find out the future price of the counter. We will make use of the earning growth estimated by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of TM for 10 years, replace the value in the formula:

Future EPS = 0.353 * (1.1115 10)

The earnings growth rate picked from finance site is an average growth rate. We make an assumption that it is the rate that the company will grow in 1 year. Hence,

Future EPS = 0.353 * (1.1115 1) = 0.3924

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE, which is retrieved earlier from finance site.

Future Price = Future EPS * Future PE

Future Price = 0.3924 * 14 = 5.49

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do reverse calculation with the future price derived from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Corresponding to calculation in Step 1, the number of year equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in certain number of year(s). Let’s say we are expecting to yield a minimum of 15% return from TM next year. Here’s how the calculation goes:

Target Price = 5.49 / (1.15 1) = 4.77

As of time of writing, the last closing price of TM is RM5.50, which is higher than the target price of RM4.77. Apparently, TM is not on sale now. The search for discounted stock continues…

SIME – Target Price at RM9.29

sime-logo

Sime Darby is a huge global player which diversified in different range of businesses such as plantations, property, motors, industrial, energy and utilities as well as healthcare.

The company has recently announced its expansion of business in Indonesia’s fast-growing healthcare market via joint venture with Australia-based Ramsay Health Care Ltd. Sime Darby’s management believe that the healthcare division offers tremendous growth opportunities, albeit the division playing the smallest part in overall group’s earnings.

Let’s check out what’s the reasonable price of SIME.

Data that is required for calculation are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM0.6118

Earning growth: 10.58%
Source: Financial Times

Future PE: 15.7983
Source: Bloomberg

1. Future EPS

Future EPS is required to find out the future price of the counter. We will make use of the earning growth estimated by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of SIME for 10 years, replace the value in the formula:

Future EPS = 0.6118 * (1.1058 10)

The earnings growth rate picked from finance site is an average growth rate. We make an assumption that it is the rate that the company will grow in 1 year. Hence,

Future EPS = 0.6118 * (1.1058 1) = 0.6765

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE, which is retrieved earlier from finance site.

Future Price = Future EPS * Future PE

Future Price = 0.6765 * 15.7983 = 10.69

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do some reverse calculation with the future price derived from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Corresponding to calculation in Step 1, the number of year equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in certain number of year(s). Let’s say we are expecting to yield a minimum of 15% return from SIME next year. Here’s how the calculation goes:

Target Price = 10.69 / (1.15 1) = 9.29

As of time of writing, the last closing price of SIME is RM9.40, which is slightly higher than the target price of RM9.29. BUY call is yet to come.

AXIATA – Target Price at RM5.79

axiata-logo

Axiata Group Berhad (Axiata) reported an overall revenue growth of 7.3% for the financial year ended 31 December 2012 from all its operating companies across Asia. Following are brand names operated under the Group’s mobile subsidiaries and associates in different countries:

Country

Brand Name

Malaysia Celcom
Indonesia XL
Sri Lanka Dialog
Bangladesh Robi
Cambodia HELLO
India Idea
Singapore M1

In light with the positive and strong growth of the company, it is one of analysts’ top picks for year 2013. Let’s see what’s the fair price of Axiata.

Data that is required for calculation are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM0.297

Earning growth: 12.14%
Source: Financial Times

Future PE: 20
Source: Bloomberg

1. Future EPS

Future EPS is required to find out the future price of the counter. We will make use of the earning growth estimated by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of AXIATA for 10 years, replace the value in the formula:

Future EPS = 0.297 * (1.1214 10)

Since the future PE derived from finance site is estimated for next 12 months, the value of “year” hence replaced by 1.

Future EPS = 0.297 * (1.1214 1) = 0.333

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE.

Future Price = Future EPS * Future PE

Future Price = 0.333 * 20 = 6.66

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do some reverse calculation with the future price derived from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Corresponding to calculation in Step 1, the number of year equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in certain number of year(s). Let’s say we are expecting to yield a minimum of 15% return from AXIATA next year. Here’s how the calculation goes:

Target Price = 6.66 / (1.15 1) = RM5.79

As of time of writing, the last closing price of AXIATA is RM6.72, which is 16% higher than the target price of RM5.79. It seems to me that the cheapest Malaysian telco stock is not that cheap yet!

MAYBANK – Target Price at RM8.57

maybank-logo

Maybank is the largest financial institution in Malaysia with market capitalization of RM66,997,900,000 (RM67 billion) and remain its leader position in KLCI top 30 companies for several years. Last year, Maybank offered total dividend of 60.5 cents which indicates a total of 74.7% net dividend payout ratio. That also makes Maybank the highest dividend yield (more than 6%) company in year 2012.

Let’s see what’s the latest target price of Maybank by completing simple calculation below.

Data that is required for calculation are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM0.7267

Earning growth: 2.94%
Source: Financial Times

Future PE: 13.1781
Source: Bloomberg

1. Future EPS

Future EPS is one of the prerequisite data that helps to determine the future price. So in order to figure out the future EPS, we will make use of the earnings growth estimated by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of MAYBANK for 10 years, the formula would thus become

Future EPS = 0.7267 * (1.0294 10)

As the future PE derived from finance site is a forecast for next 12 months, the value of “year” should be replaced by 1.

Future EPS = 0.7267 * (1.0294 1) = 0.748

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE.

Future Price = Future EPS * Future PE

Future Price = 0.748 * 13.1781 = 9.86

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do some reverse calculation with the future price derived from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Corresponding to calculation in Step 1, the number of year equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in certain number of year(s). Let’s say we are expecting to yield a minimum of 15% return from MAYBANK next year. Here’s how the calculation goes:

Target Price = 9.86 / (1.15 1) = RM8.57

As of time of writing, the last closing price of MAYBANK is RM9.63, which is slightly overvalued than the target price of RM8.57. Therefore, it’s a NO-NO call for me to invest in MAYBANK now. Considering Maybank is GLC (Government-Linked Company), I shall continue to observe the price movement and trend until 13th General Election is over next month.

SUNWAY – Target Price at RM3.90

sunway-logo

Sunway Group had recently proposed a one-for-three rights issue at the price of RM1.17. Share base is thus enlarged from the current 1.3 bil to 2.15 bil,with future EPS diluted by more than 20%. Nonetheless, analysts’ response remains positive as RM1 bil from the fund-raising exercise would contribute to the development of new projects, new landbank as well as debt repayment, including the development of its highly regarded 1770-acre Sunway Iskandar projects.

The proposal of rights issue might look attractive, let’s look at the target price of SUNWAY to check whether it’s right time to buy in now.

Data required are current EPS, earnings growth (or equity growth) and future PE.

Current EPS: RM0.41

Earning growth:7.54%
Source: Financial Times

Future PE: 10.2
Source: Bloomberg

1. Future EPS

Future EPS is required to find out the future price of the counter. In order to get Future EPS, we will make use of the earning growth predicted by analyst. The formula is:

Future EPS = Current EPS * (Earnings Growth year)

E.g. Assuming you want to calculate the future price of SUNWAY for 10 years, the formula would thus become

Future EPS = 0.41 * (1.0754 10)

Since the future PE derived from finance site is estimated for next 12 months, the value of “year” here is replaced by 1.

Future EPS = 0.41 * (1.0754 1) = 0.44

2. Future Price

The formula to find out the future price is quite straight forward as we multiply the result of Step 1, Future EPS by Future PE.

Future Price = Future EPS * Future PE

Future Price = 0.44 * 10.2 = 4.49

3. Target Price

In order to calculate the target price, which indicates the current fair value price, we wiil do some reverse calculation from the future price derived
from Step 2. The formula is:

Target Price = Future Price / (Rate of Return year)

Synchronized with calculation in Step 1, the value of year here equals to “1”. Rate of return is the minimum acceptable rate of return expected to get in number of year(s). Let’s say we are expecting to yield a minimum of 15% return from SUNWAY next year. Here’s how the calculation goes:

Target Price = 4.49 / (1.15 1) = 3.90

Here you go, so the target price for SUNWAY is RM3.90!

As of time of writing, the last closing price of SUNWAY is RM2.90, which has a potential of 34.5% growth to targeted price RM3.90. Result from calculation ( RM3.90 – RM2.90 ) / RM2.90 * 100

Well, look like it’s the right time to stock in now~

SKPETRO – Target Price at RM3.15

I’ve recently calculated the sticker price / fair value price for some of the top picks of year 2013. The calculation is solely based on certain key data retrieved from different financial sites. As the ratios or estimations found for each counters may vary according to analysts, the result could be very subjective.

Oil Drum Stuffed With Money

Key numbers required in the calculation are Current EPS, EPS Growth Rate, Future PE, Min Acceptable ROI (%), Number of Years. For more information on how to get EPS Growth Rate and Future PE, you may refer to earlier post here. As for Min Acceptable ROI (%) and Number of Years, my preference would be minimum 15% return in 10 years and hence the numbers are always set as 15 and 10 respectively.

Calculation could be done manual using excel / your very own desk calculator or making your life simpler by using tools / services. There are plenty of valuation tools or utilities provided in the market to estimate fair value price. Some of them are offered to public for FREE provided you sign up their sites. The calculator utilised here can be found in Phil Town’s site, the author who introduced Rule #1 as well as sticker price. There are plenty other valuation tools and calculators provided in the site besides value price calculation. All you need to do is throw in the key numbers requested by the calculator and you will get the answer in just a few clicks. It’s totally hassle free!

Now let’s look at SKPETRO, the key data are shown in table below:

SKPETRO
Current EPS 0.1048
EPS growth 15.41
Future PE 29
Min return 15%

Key in data step by step required by the calculator and voila ~ here’s what we get for SKPETRO:

Result (RM):
1. Future EPS 0.44
2. Future Value 12.76
3. Sticker Price 3.15
4. MOS 1.58

As of time of writing, the last closing price of SKPETRO is 3.07, very close to calculated sticker price of 3.15, which also indicates that the current price is way above our margin of safety. If we are aiming at 15% return per year, it is advisable to wait for the right opportunity to move in, most likely after 13th General Election.

The Edge-Lipper Malaysia Fund Awards 2013

winners

The Edge-Lipper Malaysia Fund Awards is held annually to recognise the outstanding and top-performing players in the fund management business in the country. This year, this prestigious awards was held on 25th February.

Conventional funds and syariah-compliant funds that have done well consistently for the past 3 years or more are honored. Winners are determined based on the Lipper Leader ratings for consistent and strong risk-adjusted performance relative to their peers.

To those who plan to invest in unit trust but still wobbling in the sea (there are total 592 funds launched as at January 2013), table below might serve as a lighthouse for you.

GROUP
Classification Winners
Bond Am Investment
Equity Hwang
Mixed Assets CIMB
Overall Am Investment
 
3 YEAR
Classification Winners
Bond Malaysian Ringgit AMB Income Trust
Bond Malaysian Ringgit (Islamic) PB Islamic Bond
Equity ASEAN PB Asean Dividend
Equity Asia Pacific Public Asia Ittikal
Equity Asia Pacific Ex Japan Public Islamic Asia Dividend
Equity Asia Pacific Ex Japan (Islamic) Public Islamic Asia Dividend
Equity Global Pacific Global Stars
Equity Greater China Eastspring Investment Dinasti Equity
Equity Malaysia (Islamic) Eastspring Investment Dana Ilham
Equity Malaysia Kenanga Growth
Equity Malaysia Diversified Saham Amanah Sabah
Equity Malaysia Small & Mid Caps Public Focus Select
Mixed Asset MYR Bal – Global PB Asia Real Estate Income
Mixed Asset MYR Bal – Malaysia (Islamic) CIMB Islamic Balanced Growth
Mixed Asset MYR Bal – Malaysia Hwang Select Balanced
Mixed Asset MYR Conservative Hwang Select Income
Mixed Asset MYR Flexible MAAKL-HW Flexi
Mixed Asset MYR Flexible (Islamic) Eastspring Investment Dana Dinamik
 
5 YEAR
Classification Winners
Bond Malaysian Ringgit AmDynamic Bond
Bond Malaysian Ringgit (Islamic) PB Islamic Bond
Equity Asia Pacific Public Asia Ittikal
Equity Asia Pacific Ex Japan Public Islamic Asia Dividend
Equity Global Pacific Global Stars
Equity Malaysia (Islamic) Hwang AIIMAN Growth
Equity Malaysia Kenanga Growth
Equity Malaysia Diversified Saham Amanah Sabah
Equity Malaysia Small & Mid Caps Public Focus Select
Mixed Asset MYR Bal – Global PB Asia Real Estate Income
Mixed Asset MYR Bal – Malaysia (Islamic) Apex Dana Al-Faiz-I
Mixed Asset MYR Bal – Malaysia Hwang Select Balanced
Mixed Asset MYR Conservative Hwang Select Income
Mixed Asset MYR Flexible (Islamic) InterPac Dana Safi
Mixed Asset MYR Flexible MAAKL-HW Flexi
 
10 YEAR
Classification Winners
Bond Malaysian Ringgit Public Islamic Bond
Equity Malaysia Kenanga Growth
Equity Malaysia (Islamic) Eastspring Investment Dana al-Ilham
Equity Malaysia Diversified Hwang Select Opportunity
Equity Malaysia Small & Mid Caps Public Small Cap
Mixed Asset MYR Bal – Malaysia Eastspring Investments Balanced
Mixed Asset MYR Bal – Malaysia (Islamic) Dana Makmur Pheim

Top Dividend-Paying KLSE Stocks 2012

When we talk about investment, dividend certainly plays a crucial role as one of the source that increase wealth. Dividend is paid out to shareholders when companies make good profit. For investors who look into long term capital gain, dividend could serve as “bonus” or token of appreciation for their “loyalty” and support towards the companies. Whereas if you are a market speculator who merely seeking “fast money” or short term gain, this may not be the post that would catch your eyes.

Listed below are top 10 KLSE dividend-paying stocks for year 2012 order by cents and by dividend yield (percentage) respectively.

Top 10 Dividend Stock by Cents 2012

CIHLDG C.I. HOLDINGS BHD

510

YHS YEO HIAP SENG

360

DLADY DUTCH LADY

260

NESTLE NESTLE

210

BAT BRITISH AMERICAN TOBACCO

207

ADVENTA ADVENTA

170

GAB GUINNESS ANCHOR BHD

125

PANAMY PANASONIC MANUFACTURING MSIA

120

KULIM KULIM

98.44

JTINTER JT INTERNATIONAL BHD

84

Table1 Source: MalaysiaStock.biz
 

Top 10 Dividend Stock by Div Yield (%) 2012

MAYBANK MALAYAN BANKING

5.57

MAXIS MAXIS

5.02

BAT BAT MALAYSIA

4.46

DIGI DIGI.COM

4

TM TELEKOM MALAYSIA

3.68

AXIATA AXIATA GROUP

3.59

SIME SIME DARBY

3.47

IOICORP IOI CORP

3.16

KLK KUALA LUMPUR KEPONG

3.13

GAMUDA GAMUDA

3.12

Table2 Source: TopYields.nl
 

Coins and plant, isolated on white background

Despite the fact that dividend payout of more than RM2 per share as shown in Table1 may seem attractive,  there are some characteristics of good dividend stocks that need to be taken care:-
 

1. Positive Cash Flow and Earning

Companies must be sustainable and consistently having sufficient cash flow and earnings before they can issue dividend to shareholders.
 

2. Payout ratio of not more that 70% 

it is not a healthy practise for company to pay more than they can afford as part of the profit should be used for business expansion or future growth. Nonetheless this is not the case for mature businesses where company’s growth is “saturated” and have not much room left to grow.
 

3. Dividend yield of more than 3%

Reason is simple. If you are looking for return of mere 3% per annum, there are always better places to safe keep your hard-earned money, e.g. bank’s fixed deposit. Therefore, a good dividend-paying stock must at least generate return between 3% to 6%.