The earnings scorecard:
Probably it is the Malaysian culture that analysts don't look at the revenue. To me, it is the first thing to look at. It tells you directly whether business is good or not. The BSDREIT revenue looks good as it increases compared to the previous year.
Next I look at the profit. Profit is the indicator of the management's efficiency and overall productivity. But sudden profit drop doesn't mean anything as it could be due to extra money spent on expansion in that quater.If the profit keeps on dropping for years, it is whether the management is not doing its job or the business nature is getting worse. BSDREIT huge drop of profit compared with last year's may not signal any problem with the company. It is acceptable if it only happens for one quater.
Next, it is the EPS. It tells you how expensive the current share price is. EPS alone may mean nothing as one needs to get the PE ratio to check if it is expensive. PE of 10-20 is acceptable for current Malaysian REIT market. As the profit takes a big hit this round, PE should increase. The PE is not looking good for this quater.
The NTA or Net Tangible Asset is what I usually ignore as it is the net worth of the company if it is sold today. If the company is to be sold, the NTA will be manipulated to the price that they want. There is nothing a retail shareholder can do anything about it. Even if you yell at the management during AGM, it won't do any good. This is the part I usually skip. But one needs to make sure that the NTA does not differ with the share price too much. If it is, the company is spending too much money on advertisement, or very depreciative expenses. The increase of BSDREIT NTA may indicator the purchase of new property for the current quater. This may explain why the profit takes a hit this quater. In overall, the company still looks healthy.
Anyway, I have disposed my BSDREIT last week at RM1.36. I will consider a buyback in December 2010.
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