iCapital.biz See the Stockmarkets & Economies From Our Point Of View

Independence. Intelligence. Integrity.  
HomeSite MapFAQ
About Us Track Record Site Tour Subscribe Education Chinese Contact
Click Here to Log In   
Our Viewpoints
Do You Know?

Capital Dynamics Sdn Bhd is the first independent investment adviser in Malaysia. It has been described as "one of the country's most iconoclastic and critical research outfits".

Since our inception in 1988, we have remained totally independent and have been providing objective advice on Stockmarkets and Economies through i Capital.

The i Capital newsletter is its flagship product. It has been around since 1989.

In 2002, www.icapital.biz, the online version of i Capital was launched.

In October 2005, icapital.biz Berhad, a RM140 million Close-End Fund was listed on the Main Board of Bursa Malaysia. This fund is managed by Capital Dynamics Asset Management Sdn Bhd and advised by Capital Dynamics Sdn Bhd.

In 2006, Capital Dynamics achieved a major milestone when it established Capital Dynamics (S) Pte Limited in Singapore, its platform for global investing. With this, it became the first Asian-owned fund manager to invest worldwide.

In July 2007, Capital Dynamics (S) Pte Ltd launched the i Capital Global Fund.

Capital Dynamics continues to expand with Capital Dynamics (Australia) Ltd incorporated in 2008. Also a global fund manager, it aims to provide investors with access to our proven investment success.

In July 2009, Capital Dynamics (Australia) Ltd launched the i Capital International Value Fund targeting at retail investors.

Exclusive Features
Open-End Fund
Closed-End Fund
China On The Move
Economic Lessons
Maximum Bullish Series
Malaysia's Saviour Series
Home > Education > Guide to Fundamental Analysis (Part 1)
Guide to Fundamental Analysis (Part 1)   
This is a very brief introduction to the very vast subject of fundamental analysis. Subscribers of i Capital® are encouraged to undertake more research of their own to fully benefit from this important topic. To understand and make productive use of fundamental analysis, familiarity with accountancy and economics are essential. However, one need not be an accounting or economics expert for this purpose.

From a shorter - term perspective, one could argue that fundamental analysis does not apply to the Kuala Lumpur Stock Exchange (KLSE). From a longer - term perspective, however, it is very difficult to invest successfully even on the KLSE without incorporating fundamental analysis into one's methodology. While the general perception is that the KLSE is still an inefficient market where rumours, tips, poor corporate governance, etc. rule, the smart investor would realise that applying sound fundamental analysis in such a stock market can be rewarding. But just like any other investment methods, fundamental analysis has its strength and weakness.

A. Earnings Per Share (EPS)

The Formula for calculating net EPS is:

Net Attributable Profit divided by Number of Shares Outstanding

EPS is generally used as an indicator of the performance of a company over a long period of time. For example, while a company's earnings may be rising over a period of time, its EPS may not be. There are various ways in calculating a company's EPS, depending on what the objective of the investor or analyst is. Most use net attributable earnings, that is, earnings after tax and minority interests.

EPS can also be based on historical or prospective earnings. Projected EPS is important because it can significantly influence the company's share price. A company's EPS can also be calculated on a diluted or non-diluted basis. Where a company has warrants outstanding, it is common practice to calculate the EPS assuming that all the warrants are exercised. The number of shares outstanding may also be affected by rights and bonus issues. In such cases, the number of shares outstanding could be an average figure.

B. Price - Earnings Ratio (PE ratio)

PE Ratio is a useful tool for valuing companies, that is, it establishes a quantitative relationship between the share price and earnings of a company. It shows how much one is paying relative to its earnings. PE ratio can be used for the same company over a period of time or it can be used to compare 2 or more companies at the same period of time.

The formula for PE ratio is:

Current market price divided by earnings per share.

There are generally 2 types of PE ratio calculated:
a) Historical PE ratio is based on past EPS.
b)Prospective PE ratio is based on future or forecasted EPS.

For example, when we say that the 2001 PROSPECTIVE PE ratio for company XYZ is 17 times, this refers to the present market price of Company XYZ but based on its forecasted EPS for 2001. If we use the 1999 EPS, then we are referring to the HISTORICAL PE ratio.

C. Dividend Yield

The formula for Dividend Yieldis:

Dividend per share divided by Market price per share

It is always expressed in percentage terms. Dividend yield is often used to compare with the interest derived from fixed deposits or other investment alternatives. This will help us evaluate which investment alternative gives a better return. In making such comparisons, one needs to decide whether it is more relevant to use net or gross dividends. Just like calculating a PE ratio, the dividend per share can be on a historical or prospective basis.
<< Technical Analysis & Trading (Part 2) On to Part 2... >>
Our Inspiration
With www.icapital.biz, rest assured, you are amongst the best.
CEO on Air

Play Now

Click here for more videos.
8th AGM of icapital.biz Berhad
Only available in
i Capital (print edition)
Section C :
Capital Dynamics Portfolio
Technical analysis :
V.S. Industry
Technical analysis :
MyState Ltd
Section F feature :
SCH Group Bhd
Major markets :
Stop Press

Click here to Activate your Account
Internet Subscribers of www.icapital.biz:
Click here to Resend Activation Code