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Subject: NOT A SPAM, from an investor, I have read your blog and aboi's blog
Hi,
I have been an investor in KLSE for 12 years and recently have read both your
blog and aboi's blog. Firstly, would like to thank you and aboi too for your
contribution to the community as the blogs of both of you has really benefited
me a lot. Your analysis has indeed impressed me.
Actually I would like to send an email to aboi regarding Parkson which is in his
blog, but couldn't find his email address anywhere, so would appreciate if you
could help :) or forward this email to him, hope it does not trouble you too
much.
ok, my doubt about Parkson is in the unaudited Income statement financial year
ended 30-June-2010 attached, which I found in KLSE website. The net profit for
year 2010 is $532,869 and 2009 is $775,433, which is 31% drop largely due to the lack of one time profit $279,515 of Gain on dilution of interest in
subsidiaries. However, the diluted earnings per share drop from 51.41 to 27.41
which is almost 47% drop!!
What cause such a big difference? Did it issue new shares? Again, I would
really appreciate if you could help, thanks :)
Cheers,
Jay
---End of Message---
12 years!! Wow, that is an amazing long run as an investor on KLSE. I want to say thank you for your compliments as you certainly have more wisdom & experience than me. Let me tackle a few things one at a time.
1. The official 2010 annual report is not out yet. God knows why after 3 months but I am thinking of asking them why so long. I am using THIS which I believed is your source as well.
2. Gain on dilution of interest of subsidiaries came from Parkson Holdings Berhad, the controlling shareholder of Parkson Retail Group (listed in HKSE) selling its stake to independent third parties. By selling the stakes, it gets gain on dilution of interest which is reported in 2009 and 2008 annual reports. Right now the stake is at 51.5% which I believe will not go down any further. To be a major shareholder for a subsidiary you need at least 51%.
3. The drop in revenue is nothing shocking to say the least because it is expected. There is no way that Parkson Holdings Berhad can sustain the revenue figures by continuously selling its stakes in Parkson Retail Group. BUT operating profits does increase year by year. This is the reason why I also didn't use 10% revenue growth rate but opt for a more conservative 7% in my DCF calculation in my previous analysis HERE. To be really safe you can use 5% which will put the discounted fair value to about RM6.10 instead of my target price at RM6.60.
4. The calculations of EPS in annual reports are on a "that point of time" basis. This means that earnings is divided by the number of outstanding shares at that time. Thus when you compare the EPS from this year to another year it is not an apple to apple comparison as long as the number of outstanding shares is not the same. Having said so it makes sense that the drop of revenue % will not be the same with the drop in EPS %. With Parkson buying backs stocks (look at KLSE website) & also converting RCULS into new ordinary shares, therefore the no.of shares is not the same. RCULS is basically a security where it acts like a bond until it turns into an equity.
5. A better way to compare EPS figures from year to year is to use a weighted approach but that takes time to do it and worst it is tedious. Well, I use a book called Stock Performance Guide by Dynaquest. It has past ten years' price range, earnings per share (EPS), dividend per share (DPS), dividend yield (DY) and price earnings ratio (PER). Both EPS and DPS are weighted.
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