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Hi Tee,

I read this book recently and I am trying to put it into practice. However, I encounter some problems. Hope you guys could help.

According to the book, one of the info we will need to calculate the intrinsic value is Average P/E Ratio. Obviously, we calculate each year P/E ratio, eg. last 10 years, then take the average but

My question is :-
1) P/E ratio = Market value per share divide by earning per share. Does the market value per share here refer the current market value per share? From the annual report, I can get the highest and lowest price for a particular year. Which should I take?

There is this Current Ratio in the annual report. Does this refer to P/E ratio?

Thanks!!!

You want to know about surgery than you ask Tee.

You want to know Intrinsic value, you ask ANalabs King Leno the most intelligent investor in the whole world.

I am very sure whoever wrote this book, are still very very unsuccessful in stock market.

Since when Intrinsic value use PE to calculate anything ?

Intrinsic value is what is the current value of the business. How do you value a business ? Different business use a different variables. Same business also uses different variable as time and situation changes. In other word, there is NO such thing as One formula to value every damn business.

You cannot ask a so general question.
But try to ask like what is the intrinsic value or business value of Analabs company or BJToto company or Public bank company.

Then, you can see you ways or perceive things will be different.

Huh ? It is still look the same ?
Then, please forget stock market-lah you. Put your money in Public Balance Fund or give it to your wife to save it-lah you .. whoaa !

I FeeeeeeeeeeL Gooooooood !

Finally ....some sensorial reversal here. Leno....this is more like the LENO that we once known....!

To me, a company is a living thing. It is forever changing in form, in shape and in size as well. Especially, when there is a change in ownership or management, everything will be different.

The past, at best, is only a guide to the future. When assessing intrinsic value, everything known has to be taken into consideration. Climate change, political changes, government's policy, world economy and any other thing that can affect your company in one way or the other have to be taken into consideration. Hence the difficulty of the problem.

Earnings is the life blood of a company. If there is any one single factor that is most important to a company, it is earnings. Without earnings, a company cannot survive. When you look at earnings, look at earnings per share. The latest two quarterly earnings are important, but what is more important is the prospective earnings or future earnings.

Minority shareholders have no say in a company. If the major shareholder wants to "eat" the minority shareholders, even the bones will be swallowed. So be careful to whom you hand over your hard-earned cash for management.

When it comes to dividend payouts, it's true that the minority shareholders have no say in the matter. Here, you have to look at the dividend policy of the company as well as their track record.

Cheers!

One more thing to remember when you consider intrinsic value is that it is extremely dangerous to hike up the value because of the hope of a merger or privatization. One typical example is Ramunia.

There are various way of determining the intrinsic value of the stock , either through comparable method such as P/E , P/CF, P/BV , P/S or through fundemental method which deriving from future cash flow . The cash flow can be either dividend, free cash flow to the firm / free cash flow to equity or residual income.

All this method can be found in financial books or some investment blog / website.

One of the fundemental intrinsic value method use is Gordon Growth Model which assume a company is paying dividend indefinitely at constant grow rate.

The key challenge to fundemental analysis is the estimation step , where investor need to estimate future grow of the company , including expected cash flow to be recieve in the future and terminal value.

Method use might be the same but the intrinsic value derived might be different due to different in estimation.

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