Posted by kcchongnz > 2013-08-15 13:03 | Report Abuse

Only when the share price has spiked then analysts start to cover the stock. Isn't it too late already? So the way to make extra-ordinary gain in the stock market is to discover those hidden gems first before investment banks pay attention to them and start to write about them. It is not the other way round, ie buying only stocks recommended by the investment banks. Am I right?

The common comment I make to investment bank's valuation is they always base on a PE ratio to value the stock. For example Kenanga wrote the following as extracted from its report:

"Trading buy, but… PTARAS rallied strongly, gaining 23.6% since early-August to its all-time high of RM6.44. Although we value PTARAS at RM6.80, based on a targeted FY14 PER of 10x (in line with our average PER of the small-to-mid size construction companies), we suggest investors to accumulate on weakness at between RM5.50-RM5.60 for a potential upside of more than 20%."

Why use a PE ratio of 10, and not 5, 8, 12, 15, or 20? What about the huge amount of cash and cash equivalent Pintaras has, 153m or 1.91 per share? Will the valuation the same if Pintaras doesn't have this excess cash? What if Pintaras has a net debt of 100m?

Posted by JTFX > 2013-08-15 14:11 | Report Abuse

KCC, dont forget whats the first 4 letters of ANALyst...