Posted by soojinhou > 2015-12-07 18:38 | Report Abuse

Thank you for sharing the statistics on the nominal return rate from Bursa. I guess I'm not surprised that returns have deteriorated lately. I think Malaysia is stuck in the middle income trap. Growth was fuelled by mega projects after mega projects funded with debt which are the low hanging fruits. High quality growth through technological innovation is sorely lacking. Why would corporate Malaysia bother with innovation when easy profit can be made through cheap labor from Indon or Bangladesh to work in palm oil plantations and factories.

Posted by Alphabeta > 2015-12-07 21:43 | Report Abuse

Sustainable growth rate (SGR) = ROE x (1-Dividend Payout Ratio), businesses that can deliver consistent ROE over the years with positive free cash flow and dividend payout policy should be able to create wealth for the shareholders.

If you track the management ability to manage operation, induce demand for top line growth and cost control measures to improve margin. Its investment and divestment decisions and how it funds its capex and working capital for growth. In addition, how productive in term of assets management to optimize capacity utilization, debt to equity and interest coverage are keys to achieve sustainable growth rate.

If a business can deliver an ROE of 12%, assuming its market price is RM 1.00 and book value per share is also RM 1.00. Hence, its P/E ratio will be 8.3 (1/0.12) and P/BV will be 1. If its dividend payout ratio is 50% of EPS, the dividend yield will be 6%. If the retained earning of 6 cents is reinvested and the market price should increase to RM 1.06. In reality the market sentiment may give premium or discount.

Assuming is the market price is RM 1.50, the 6 cents dividend will give a yield of 4%, and a 6% growth rate should give a market price of RM 1.59. Hence the TSR is now 10% (6% capital gain + 4% dividend yield) instead of 12%.

Alternatively, if the market price is RM 0.80, now the dividend yield will be 7.5% and resulting a TSR of 13.5%.

If the business fundamentally can deliver a sustainable growth rate, negative market sentiment will give us an opportunity to enter at a bargain price.

Posted by Kevin Wong > 2015-12-08 15:38 | Report Abuse

stock market mainly reward those investors who stay invested in quality/growth counters...at all times...for the long term optimist
Good luck everybody!