Bank stocks: possession of intrinsic value is significantly undervalued treasures

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					Bank stocks: possession of intrinsic value is significantly undervalued treasures
Bank stocks: possession of intrinsic value is significantly undervalued treasures
Time: January 3, 2009 10:18:46 Central Financial Network
As in the earlier period (see 2008 No. 54 "bull market has been quietly
coming" article), we believe that the current market valuation has a certain
rationality, then, come the new year, which stocks worth investing in? What are the
valuation of stock a large margin of safety? The answer is: There are treasures
banking stocks! Its intrinsic value is greatly underestimated!
Enterprise value is defined within the remaining life of business, you can generate
cash flow (earnings) discounted. Prices will fluctuate around the intrinsic value, so the
valuation of the core is to predict future cash flow (earnings). Since it is estimated,
then the uncertainty is the most important, especially in the economic situation is to
increase the tone of the 2009, we were still in uncertainty in the gold bar. The
following step by step we will give the valuation of bank stocks.
Surplus is the surplus of high quality basic characteristics of uncertainty
Earnings quality is the use of the historical surplus in just the level of the case do not
use other information, investors predict future earnings of the accuracy of the level of
business. Earnings quality is the key decision to the sustainability of earnings, we use
the net assets of each bank rate of return (weighted average) of historical data you can
compare companies with high earnings quality.
Industrial and Commercial Bank of China, Construction Bank, CITIC Bank, Bank of
Beijing (601169), Bank of Communications (601 328), Bank of Ningbo (002142),
Nanjing, Bank (601,009) and other seven banks listed less than three years,
short-listed operating history, future earnings to determine nature difficult to grasp, so
aside consideration. Included in the scope of our investigation is the seven time to
market for more than three years Bank: Shanghai Pudong Development Bank
(600000), Shenzhen Development Bank, Minsheng Bank (600016), Industrial Bank
(601166), Hua Xia Bank (600015), China Merchants Bank (600036) and Bank of
China (601988).
Can be observed:
1, high and stable return on equity is: Shanghai Pudong Development, Industrial,
Shenzhen Development, China Merchants Bank.
The development of the current management team deep Newbridge Capital is entered
after 2005, so 2005 data and should be seen separately.
2, return on net assets is generally stable: the people's livelihood, China,
Bank of China.
This seven banks ROE although uneven, but are relatively stable, so the seven banks
can range into the next observation.
Current account surplus cash surplus ratio is the key to higher earnings uncertainty
Can be observed:
1, the cash surplus account surplus ratio is high and relatively stable: Pudong,
Shenzhen Development, China Merchants.
2, the low percentage of cash surplus account surplus is: Bank of China (601988),
China, Industrial and livelihood.
Among them, the cash surplus of the Bank of China proportion since the 2003 market
has been among the lower, not on people's livelihood, China and the
Industrial not only the large fluctuations, and from 2006 to 2008 were significantly
down, there is the potential increase in non-performing assets the risk of tsunami in
this round of financial uncertainty of future earnings more.
The surplus in the business continuity of accrual earnings lower than cash (Note), an
American scholar sloan in a paper published in 1996 and this was done systematically
explained. sloan in this paper the use of U.S. public company in 1962 to 1991 data
from 30 years to study under the current surplus and the relationship of surplus, that
surplus back to the next current period earnings, the regression results show that the
coefficient of cash surplus 0.855, while the accrual of the coefficient is 0.765. That is,
if there is a dollar surplus in the current period's cash surplus, under the
corresponding surplus of 0.855; but if there is a dollar surplus in the current period
accrued surplus, the surplus is the next corresponds to only 0.765. If investors forecast
a surplus next, the use of random walk model, while corporate earnings in the current
share of the cash surplus is small, investors overestimate the enterprise value is more
It can be seen that the higher future earnings uncertainty is Pudong, Shenzhen
Development, China Merchants Bank. So, their intrinsic value is how much?
The valuation of the shares of three banks
Equity investment is not an exact science, the intrinsic value is an
"approximation of the range" to reflect, we can do is a
conservative estimate of future corporate earnings, then the mathematical model of
the ancient irrefutable (discounted residual income model) to find This
"approximation of the range", otherwise it will be a
"precision error."
In the old model, we need to determine the variables are:
1, beginning at the end of 2008 - stood at this time point of view to the future; 2,
earnings per share - a conservative assumption that earnings per share growth next
year is 0, that is, net profit growth rate assumption is 0, s started three years the
growth rate is 2%. Because the assumption that the number of shares unchanged, the
surplus is not dividends, then retained earnings would lead to net assets increased, so,
assuming that earnings per share does not increase, it means that ROE is declining; 3,
the net current assets - to Numerical report third quarter 2008, based on assumptions
in the fourth quarter is a low-profit; 4, the discount rate - the light of long-term
government bonds yield 0.07 value.
According to calculations indicate that the intrinsic value per share for the three banks
are: deep development: 35 yuan, Shanghai Pudong Development: 43 yuan, China
Merchants Bank: 33.
We do a sensitivity analysis, calculated the intrinsic value of shares of three banks: 1,
optimistic assumptions: assume that other conditions remain unchanged, earnings per
share increased 20% in 2009, 2010, 2009, on the basis of the same; 2, pessimistic
assumptions: assuming other conditions remain unchanged, earnings per share
decreased by 20% in 2009, 2010, 2009, on the basis remains unchanged.
Can see from the schedule: Pudong, Shenzhen Development Bank and China
Merchants Bank, the intrinsic value per share, "the scope of
approximations" are: 35 ~ 50, 29 ~ 40 yuan, 27 ~ 38. As of December 26,
2008 closing, Pudong, Shenzhen Development and China Merchants Bank shares are
13.41 yuan, 9.72 yuan and 12.36 yuan, have at least 50% of the margin of safety!
So, the valuation of stock a large margin of safety could Investment? Definitely not!
Need to wait for the right opportunity, liquidity flow indicator is quietly moving, it
tells us the right opportunity.
(Note: quote from "financial statement analysis and securities
investment", author: Guo-Hua Jiang, Peking University Guanghua School
of Management Associate Professor of Accounting, Ph.D.)
□. Zhang. Wing. Cheong. Certificate. Coupons. Cities. Games. Red. Weeks. S

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