Sunday, September 28, 2014

Latest ROE (Return On Equity) of STI Stocks

Return On Equity , ROE
If you are Value Investors that focus on Fundamental Analysis, I am sure ROE (Return On Equity) is a familiar indicator to you. For those who are not, basically ROE is a ratio (reflect in %) measuring a counter/index's financial performance. In layman term, this ratio tells us how much returns we can get for every dollar we invested in the counter. 

According to the latest report from SGX, the ROE for STI is 10.2% over the past 12 months. It is sitting nicely in between Nikkei 225's 8.0% and Heng Seng Index's 13.8%. Obviously, in simple term, the higher the ratio, the better it is. Personally think that this is an healthy ROE ratio. Of course, if it can improve to 12 to 15%, that would be an even better ratio ;-)

Formula for ROE = Trailing 12 month NET INCOME / [Average of the beginning and ending balance of total COMMON EQUITY]

As we all know, STI consists of 30 blue chips and following are the ROEs for each of the stock (source : Bloomberg) :
ROE on STI
Note : The three and four digits ROE in Starhub Ltd is due to the adoption of merger accounting in July 2012 when the shares of Singapore Cable Vision (SCV) were acquired and consolidated into the Starhub Group. 

Last but not least, ROE is just one of the many important ratios that we need to look at, do pay equal attention to others ratios like P/E (Price/Earning), Debt-To-Equity and Return On Asset (ROA) etc..

Have a great Sunday!

Cheers! 

11 comments:

  1. Hi Richard,

    I think it's important to break up the component of ROE. If not, different gearing can distort the ROE greatly. You can look at Dupont's fomula to see the breakup. One of the components is leverage (assets/equity).

    I wrote a post here: http://bullythebear.blogspot.sg/2008/02/dupont-analysis-of-roe.html#.VCepxPmSzmc

    If you're free can take a look :)

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    Replies
    1. Hi LP, thanks for the additional input and will sure to check out your post! Cheers!

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  2. dun understand the staurhub note... anyone kind enough to explain the context?

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    1. Steven, my bad, maybe it is the way that I summarizes the point, you can check out the exact notes from SGX below :

      Note as shown in the table above, StarHub has maintained a relatively high ROE over the past three years. This is because the StarHub Group’s total common equity in the June 2014 quarter and the June 2013 quarter was relatively small at S$94.5 million and S$82.7 million. The StarHub Group shareholders’ equity is lower than that at StarHub’s Company level due to the adoption of merger accounting in July 2002 when the shares of Singapore Cable Vision (SCV) were acquired and consolidated into the StarHub Group.

      Hope this helps!

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    2. For newbies only:-
      Another words if you look at ROE, makes sure you look at debt to equity also. They are like "Siamese Twins".
      Anyway, financial authors always warn you any financial ratio by itself has got no real meaning. ie. never invest basing on one financial ratio only. You may hit the jackpot or you may dig a "hole-in". Investing look simple but it is never easy to practise is always the Truth.

      WB's:-
      1st & 2nd principles ,EQ:IQ and can you sit still do nothing?
      Really sound simple isn't it?
      But can you do it?
      i am still trying.........

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    3. Temperament : indeed! But your last part lost me... Catch no ball

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    4. This comment has been removed by a blog administrator.

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  3. May be you should read more about what WB says and why he says. Maybe?
    "Can you sit still and do nothing"? (aka when there is really nothing for you to do)

    One of my favourite songs (to remind me to sit still)

    "(Sittin' On) The Dock Of The Bay"

    Sittin' in the morning sun
    I'll be sittin' when the evening comes
    Watching the ships roll in
    Then I watch them roll away again, yeah

    I'm sittin' on the dock of the bay
    Watchin' the tide roll away, ooh
    I'm just sittin' on the dock of the bay
    Wastin' time

    I left my home in Georgia
    Headed for the Frisco Bay
    Cuz I've had nothing to live for
    And look like nothing's gonna come my way

    So, I'm just gon' sit on the dock of the bay
    Watchin' the tide roll away, ooh
    I'm sittin' on the dock of the bay
    Wastin' time

    Looks like nothing's gonna change
    Everything still remains the same
    I can't do what ten people tell me to do
    So I guess I'll remain the same, listen

    Sittin' here resting my bones
    And this loneliness won't leave me alone, listen
    Two thousand miles I roam
    Just to make this dock my home, now

    I'm just gon' sit at the dock of a bay
    Watchin' the tide roll away, ooh
    Sittin' on the dock of the bay
    Wastin' time

    [Ends in harmonic whistling]



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    Replies
    1. Temperament : hahaha... I think I finally catch the ball liao...but I didn't see that (the song) coming... lol

      Thanks for sharing....

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  4. How come SGX price not shoot to roof with yearly ROE >35? Anything I miss? Thanks for enlightening

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    1. Ah John : I guess where is the roof is very subjective. Current price could be the roof of its current financial situation ;-)

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