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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Surface Reader

Surface Reader

3 posters

Go down  Message [Page 1 of 1]

1Surface Reader Empty Surface Reader Mon Jun 13, 2011 11:35 pm

pushpakumara


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Hi Guys

Just to get some insight into reading of annual reports as I am always a surface reader when it comes to reading material facts in an annual report. May be becuase I am not good in my accounting and I thought that I need some indepth reading when it comes to reading annual reports. So like to get some clarifictions from a versatile in this repsect.

I was reading the Hotel Services (Ceylon) PLC and like to pose the following questions for some generous answers. (beg your pardon if I am asking any silly questions)

01. In this particular company although the profits have gone up compaired to previous yers , the earnings per share has come down. (Share Price in 2010/11 is 23.10 (on a particulr day) compaired to 114/- in 2006/2007. Is there any relevance between share price and earnings per share? If not what is the formula to calculate it?

02. Share Capital is Rs. 176,000,000/--

Is this figure equals to multification of initial share price and issued number of shares?

03. What is the advntage for a listed company when its share price goes up? Is there any financial gain for the company?

04. If a share of a company is low will that company has high exposure for a take over bid?

These are the quetions initially sprung to my mind and as and when I have similar questions like to post them for clarifications and answers.

So then until I get some answers good night to all of you.




Last edited by milanka on Thu Jun 16, 2011 5:21 pm; edited 1 time in total (Reason for editing : heading changed to lower case)

2Surface Reader Empty Re: Surface Reader Tue Jun 14, 2011 12:20 am

Fresher


Moderator
Moderator

1) Which years did you compare when you say earnings per share (EPS) has come down?
consider the share split in early 2009. each share was sub divided into 10 which means an EPS now must be multiplied by 10 to compare pre split EPS.

*EPS = Profit attributable to shareholders/no. of ordinary shares
The latest EPS = 52,699,000/176,000,000 = 0.30

2) This is the actual money equivalent the company would have got from the share issue. After the initial issue at the par value, the company will not get any money from the trades. initially this 176mil was made up of Rs. 10/- a share. Because of the split every share represents 1/- of the stated capital.

3) I don't think there is any direct financial gain. But there are many advantages. you might want to go through this http://www.gopublicpros.com/images/The_Advantages_of_Being_Public.pdf

4) If the price drops too much it might be a target of an easy take over bid.
This can be a hostile one too

3Surface Reader Empty Re: Surface Reader Tue Jun 14, 2011 10:33 pm

pushpakumara


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

npp wrote:1) Which years did you compare when you say earnings per share (EPS) has come down?
consider the share split in early 2009. each share was sub divided into 10 which means an EPS now must be multiplied by 10 to compare pre split EPS.

*EPS = Profit attributable to shareholders/no. of ordinary shares
The latest EPS = 52,699,000/176,000,000 = 0.30

2) This is the actual money equivalent the company would have got from the share issue. After the initial issue at the par value, the company will not get any money from the trades. initially this 176mil was made up of Rs. 10/- a share. Because of the split every share represents 1/- of the stated capital.

3) I don't think there is any direct financial gain. But there are many advantages. you might want to go through this http://www.gopublicpros.com/images/The_Advantages_of_Being_Public.pdf

4) If the price drops too much it might be a target of an easy take over bid.
This can be a hostile one too

Hi npp, sorry for the delayed response. thank you very much for your initiative.
The answers to your queries are as follows.

01. I did compare EPS of 2010/11 against 2007/08 and 2006/07.
Just a clrification on formula for EPS, when you say number of ordinary shares , is it same as Share Capital? In the Annual Report the Share Capital remained same which is 176,000,000/- during 2006/2011. So the only variable in the formula is Profit attributble to Share Holders. If then based on the same formula the EPS in 2006/2007 should be 71,338,000/176,000,000=0.405. But it is printed as 4.05 in the report. (Page 06).
02. Understood and many thanks.
03. Thanks for this as well
04. Very clear, and thanks for that too.

Thanks to you npp and it is nice to have a good samaritans of your nature around here in this forum.

If you can just clarify the (1) above in my reply that would be fine for me.

4Surface Reader Empty Re: Surface Reader Tue Jun 14, 2011 11:40 pm

Fresher


Moderator
Moderator

It is again the split.
In a case of a split, the Share capital does not change. Only the no. of shares change.
Say you have 100 shares are 50/- each. after a 10:1 split you will have 1000 shares and the equivalent value is 5/- each. It also does not change the share capital.

As such, before the split there were 17,600,000 shares and now 176,000,000.
Thus the difference in EPS. (you must divide by 17,600,000)

5Surface Reader Empty Re: Surface Reader Wed Jun 15, 2011 12:12 am

Intrinsic


Manager - Equity Analytics
Manager - Equity Analytics

pushpakumara wrote:
npp wrote:1) Which years did you compare when you say earnings per share (EPS) has come down?
consider the share split in early 2009. each share was sub divided into 10 which means an EPS now must be multiplied by 10 to compare pre split EPS.

*EPS = Profit attributable to shareholders/no. of ordinary shares
The latest EPS = 52,699,000/176,000,000 = 0.30

2) This is the actual money equivalent the company would have got from the share issue. After the initial issue at the par value, the company will not get any money from the trades. initially this 176mil was made up of Rs. 10/- a share. Because of the split every share represents 1/- of the stated capital.

3) I don't think there is any direct financial gain. But there are many advantages. you might want to go through this http://www.gopublicpros.com/images/The_Advantages_of_Being_Public.pdf

4) If the price drops too much it might be a target of an easy take over bid.
This can be a hostile one too

Hi npp, sorry for the delayed response. thank you very much for your initiative.
The answers to your queries are as follows.

01. I did compare EPS of 2010/11 against 2007/08 and 2006/07.
Just a clrification on formula for EPS, when you say number of ordinary shares , is it same as Share Capital? In the Annual Report the Share Capital remained same which is 176,000,000/- during 2006/2011. So the only variable in the formula is Profit attributble to Share Holders. If then based on the same formula the EPS in 2006/2007 should be 71,338,000/176,000,000=0.405. But it is printed as 4.05 in the report. (Page 06).
02. Understood and many thanks.
03. Thanks for this as well
04. Very clear, and thanks for that too.

Thanks to you npp and it is nice to have a good samaritans of your nature around here in this forum.

If you can just clarify the (1) above in my reply that would be fine for me.



Dear Pushpakumara,

# of shares in 2006/7 --> 17,600,000
Profit --> 71,338,000
EPS --> 4.05

# of shares in 2007/8 --> 17,600,000
Profit --> 66,534,000
EPS --> 3.78

# of shares in 2010/11 --> 176,000,000
Profit --> 52,699,000
EPS --> 0.30

Note: Initial # of shares --> 17,600,000
On 09/03/09 --> 1:10 share split --> new shares --> 176,000,000

Hope it is clear now ?



6Surface Reader Empty Re: Surface Reader Thu Jun 16, 2011 12:12 am

pushpakumara


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Intrinsic wrote:
pushpakumara wrote:
npp wrote:1) Which years did you compare when you say earnings per share (EPS) has come down?
consider the share split in early 2009. each share was sub divided into 10 which means an EPS now must be multiplied by 10 to compare pre split EPS.

*EPS = Profit attributable to shareholders/no. of ordinary shares
The latest EPS = 52,699,000/176,000,000 = 0.30

2) This is the actual money equivalent the company would have got from the share issue. After the initial issue at the par value, the company will not get any money from the trades. initially this 176mil was made up of Rs. 10/- a share. Because of the split every share represents 1/- of the stated capital.

3) I don't think there is any direct financial gain. But there are many advantages. you might want to go through this http://www.gopublicpros.com/images/The_Advantages_of_Being_Public.pdf

4) If the price drops too much it might be a target of an easy take over bid.
This can be a hostile one too

Hi npp, sorry for the delayed response. thank you very much for your initiative.
The answers to your queries are as follows.

01. I did compare EPS of 2010/11 against 2007/08 and 2006/07.
Just a clrification on formula for EPS, when you say number of ordinary shares , is it same as Share Capital? In the Annual Report the Share Capital remained same which is 176,000,000/- during 2006/2011. So the only variable in the formula is Profit attributble to Share Holders. If then based on the same formula the EPS in 2006/2007 should be 71,338,000/176,000,000=0.405. But it is printed as 4.05 in the report. (Page 06).
02. Understood and many thanks.
03. Thanks for this as well
04. Very clear, and thanks for that too.

Thanks to you npp and it is nice to have a good samaritans of your nature around here in this forum.

If you can just clarify the (1) above in my reply that would be fine for me.



Dear Pushpakumara,

# of shares in 2006/7 --> 17,600,000
Profit --> 71,338,000
EPS --> 4.05

# of shares in 2007/8 --> 17,600,000
Profit --> 66,534,000
EPS --> 3.78

# of shares in 2010/11 --> 176,000,000
Profit --> 52,699,000
EPS --> 0.30

Note: Initial # of shares --> 17,600,000
On 09/03/09 --> 1:10 share split --> new shares --> 176,000,000

Hope it is clear now ?

oops I have got it wrong, many thanks to you Intrinsic. Very clear at the end.

Good night to you if you are around..


7Surface Reader Empty Re: Surface Reader Thu Jun 16, 2011 12:16 am

pushpakumara


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

npp wrote:It is again the split.
In a case of a split, the Share capital does not change. Only the no. of shares change.
Say you have 100 shares are 50/- each. after a 10:1 split you will have 1000 shares and the equivalent value is 5/- each. It also does not change the share capital.

As such, before the split there were 17,600,000 shares and now 176,000,000.
Thus the difference in EPS. (you must divide by 17,600,000)

Thanks npp, you made it clear.

You have a good night , if you are around.

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