08 August 2011

My Projection on Mah Sing's Earning for the next 2-3 years (Part 1)

I would like to test my financial knowledge on how to project company earnings for foreseeable earnings. As most of the investors know, the purpose of we purchase the company's stock is due to the outlook of the company itself. If the market oulook changes, we might change our mind to invest more or liquidate our shares in the company. Of course, some of us would speculate on the rise of the earnings after a company announced a major changes on its daily operations or business development plan.

So, now I would to like test my projection on Mah Sing's Earning for the next 2-3 years given current market condition.

Ok, let's move on to the steps on projecting Mah Sing's earning in the next few years. First we will look at the recent business movement by Mah Sing. So far the management plan to acquire the land with approximately RM7.0B to RM12.0B Gross Development Value. Now, let's say Mah Sing complete 50% of its target (for example RM3.5B) and then Mah Sing's total GDV would be around RM15B to RM16B.

As Mah Sing's management always mention that they would like to complete the entire project within 5 - 7 years lifespan, then we can roughly (not exactly) say that the average project launched for the next few years could be RM16B/6 years = RM2.67B.

From there we would say that, as of now, average yearly project launched by Mah Sing's management would be approximately RM2.67B given the RM16B GDV land bank. Ok, What's Next?

We should also think of the take up rate of Mah Sing's overall projects. From history records, we could find that Mah Sing able to achieve around 90% of the take up rate, so the yearly sales would be about RM2.67B *  90% = around RM2.4B. So, what I can foresee is that, Mah Sing is able to achieve RM2.4B sales by next year.

However, for Mah Sing's projects, it normally takes 2 years to complete the landed projects and 3 years to complete the high rise projects, hence we could say that it takes about 2.5 years in average to 'realize' its RM2.4B sales.

If you have an excel file spreadsheet, you can even play around the grow rate of the revenue, net profit margin as well as the total of outstanding shareholder funds as we already knew the Mah Sing already issued a number of convertible bonds that would be converted to ordinary shares within a 7 years lifespan. Ok, what's next?

After we added on the net profit for next few years, then we would able to get a final figures on the projection of Mah Sing. As what I 'guessed', net profit margin for the next few years would increased as the lease agreement of South Gate and the Icon Tun Razak would complete for the following coming years.

To Be Continue...

P/S: Above statements are all my diary to keep me to check my homework on Stock Investment. Please always refer to your investment adviser before making any investment decision.

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