Financial Key Ratios by Industry

There are so many different financial key ratios. Ever wonder how to select relevant financial key ratios when analyzing a company?

I have compiled information from Moody’s into this document: Financial Key Ratios by Industry (Non-financial).

You can use this reference to select relevant financial key ratios for a specific industry. For more details, you can click the link to view respective document.



CARLSBG Updates – 25 Apr 2017

CARLSBG analysis file –

I don’t expect significant growth in CARLSBG (and HEIM) business in foreseeable future. In my opinion, at 15, valuation of CARLSBG is fully valued where I believe its fair value range from 15.3 to 15.6. Its dividend yield is around 4.5%.

As of now, I won’t consider to accumulate CARLSBG, but to hold it for extremely high dividend yield as my average cost for CARLSBG is almost free.

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DIGI Updates – 21 Apr 2017

DIGI Analysis File –

I think stiff competition between Malaysian Telcos will continue in the foreseeable future. I don’t expect significant growth in DIGI business (in matter of fact, this applies to other Telcos too). You can easily find challenges faced by Telco by Googling.

In my opinion, at 5.16, valuation of DIGI is fully valued where I believe its fair value range from 4.9 to 5.2. Its dividend yield is around 4% only.

As of now, I won’t consider to accumulate DIGI, but to hold it for extremely high dividend yield as my average cost for DIGI is almost free.

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Duration of Investing a Stock if use DCF valuation

I was asked by a reader: “If we do 10-year DCF for a stock, does this mean we have to look into 10 year in investing the stock?

My response: NOT REALLY.

  1. By trying to help the reader to look from different perspective, I extended his question:”To get the total value of a company by using DCF, besides the 10-year projection, we also have to calculate Terminal Value. Terminal Value is necessary because we believe the company will continue generating profits for a very long time (infinity). Does this mean we have to invest in that company forever?

    DCF Components.png

    Remember: We have to discount the projected cash flow (near future value) and terminal value (far future value) to present value, at our discount rate. In this context, the present value means the company value as of the date we do the analysis. In other way, we can say the present value is our intrinsic value.

    DCF doesn’t tell you the timeframe of your investment, or how long you should invest.

    Thus, in theory, back to basics,

    1. Asking price > Intrinsic Value – Don’t invest or sell
    2. Asking price < Intrinsic Value – Invest!
  2. Intrinsic value derived from DCF is usually less conservative if compare to Dividend Discounted Model and P/E. Sometimes, a stock may need longer timeframe to approach the intrinsic value. This is probably the reason you have to invest (and wait) for longer term.
  3. “How long you should invest in a stock” – This depends on your investment plan. DCF is just a small part of your investment plan. Well, investment plan is another huge topic.

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HEIM Updates – 7 Apr 2017

HEIM Analysis File – FY16 Q6 –

In the foreseeable future, I think HEIM won’t have significant catalysts to boost up its growth. Having said that, HEIM will still be able to achieve steady performance even if alcoholic beverage industry is a highly regulated industry, and also faces contrabands issues. At 17.98, valuation of HEIM is not bad where I believe its fair value range from 17.9 to 20. Besides, if you buy HEIM now, dividend yield is less than 4% (excluding special dividends).

As of now, I won’t consider to accumulate HEIM, but to hold it for >6.5% dividend yield based on my average costs.

There is one slight issue in my analysis file, but the issue doesn’t impact valuation very much. In its Cash Flow Statement, you can easily spot one item called “Amortisation of prepaid contractual promotion expenses”. In the footnote (AR 2016, page 129, Note 7.2), HEIM stated:

Included in prepayments of the Group are prepaid contractual promotion expenses for promotional activities of RM43,531,000 (30.6.2015: RM49,015,000) of which RM20,125,000 (30.6.2015: RM26,218,000) are to be amortised over a period of more than 12 months. The prepaid contractual promotion expenses are made to the Group’s distribution channels to carry out promotional activities specified in the contract. The amount is amortised to profit or loss based on the volume purchased by outlets from the distributors or the time period as stipulated in the contract.

Unfortunately, HEIM didn’t disclose how they allocate “prepaid contractual promotion expenses for promotional activities“, and how they amortised the expenses based on the volume purchased. Thus, there is no way for me to make projection. Although the figures were quite large, it didn’t impact valuation significantly.

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Is Speculative Really Bad?

Often, speculator is perceived as someone who takes big risks, gambling on the future success of a stock. Thanks to Google, today I unintentionally found out the original definition of speculator.

According to Merriam-Webster, Speculate was adopted into English in the late 16th century from Latin speculatus, the past participle of the verb speculari. In Latin, definitions of speculari are as follow:

  1. examine, explore
  2. spy out
  3. watch, observe

Therefore, by Latin definitions, a speculator is a person who observes and acts before occurs. I thought this is precisely investors or traders should be doing: watching the market and individual stocks to determine what they are doing now, and then acting on that information.

In English, somehow, the definition of speculator is changed to “to invest money in ways that could produce a large profit but that also involve a lot of risk”.

Investalks 301 @JB 15-16 Apr 2017 – Financial Modelling and DCF Valuation for Non-Financial Companies