Wednesday, August 25, 2010

And So P&O Earnings Are Said To Be Inline With Expectations

And so I said the following in the blog posting And So P&O Reported Its Earnings

  • P&O announced its earnings last night. It said it made some 11.072 million. Earlier in the posting on P&O: Regarding P&O: The Stock That Flew Into Orbit, I noted that P&O had a half year losses of 1.417 million, which means P&O's total 3 quarters earnings for current fiscal year is 9.66 million.

    K&N estimates for current fiscal year is 32.87 million!


    Which means P&O have to double their earnings for the last quarter of this fiscal year to 23.2 million 'JUST' to be in-line with K&N's estimates!

    WakaWaka! Huhu!

And since K&N had been the champion for the stock, I guess it's only fair I highlight what they are saying.

  • P&O’s 3QFY10 results were inline with our expectations. Overall sales were relatively strong and claims were modest.

Inline within their expectations? Their fy 2010 expectations was 32.87 million. P&O only did 11.072 million for 3 quarters.

Like this also they BOLDLY claim that P&O earnings were inline with their expectations??


Good or what! :P

I then held my breath and continued.

K&N then claimed that P&O earnings were actually lower... because ... of the absence of the write back of allowance for diminution in value of earnings. LOL!

  • 3QFY10 revenue of RM109.7m was up by +22% YoY vs. 3QFY09 of RM89.6m. YTD, the group has achieved total sales of RM360.1m or 25.6% YoY. We believe both increases were mainly attributable to higher gross premium recorded and continued capture market share in motorcycle segment. Lower net profit of RM11.1m (-56.9% Yoy) was mainly attributable to the absence of write back of allowance for diminution in value of investments in the current quarter.

And then K&N recognise that they are way behind its earning estimates for P&O.

  • Despite 9M’s profit of RM9.7m at only 29.4% of our forecast, we understand that the annual net profit would only be known by final quarter after the actuary testing on IBNR reserve in 4Q. Based on our estimates and guidance, it is highly likely that the group will be able to exceed our FY10 net profit forecast of RM32.9m.

I do hope you and I read it correctly. :D

Despite 9m profit of 9.7m at only 29.4% of their forecast, K&N remains positive and they feel it is highly likely P&O will able to exceed their FY 2010 net profit forecast of 32.9 million.

And K&N's earnings valuation of P&O. (ah.. this is important... cos if the Prudential talks does not turn out... this is what you are left with.)

  • We maintain our base case valuation of RM1.15. This values the group at an undemanding FY11 PER of 6x, which is at the low end of the 6-15x 2010/11 PER of Malaysian general insurers.


See this is where and how the 'beat the expectation' games is played.

As can be seen, K&N admits that P&O's CURRENT earnings is way behind its expectations. It's only 29.4% of its expectation.


And its expectation is already 32.9 million.

Which is rather high, yes?

But... but.... but.... K&N is NOT using this set of numbers!


K&N is not even using 32.9 million!

K&N's valuation is based on fy 2011 numbers!

And as pointed out in the posting Regarding P&O: The Stock That Flew Into Orbit, K&N's earnings estimate for P&O fy 2011 is ................................................ 43.47 million!!!!!!




Yup, as it is... P&O is only 29.4% of K&N's earnings estimate of 32.9 million.

And the fair value of P&O is 1.15. This is based on earnings valuations on the assumption that P&O can earning a whopping 43.47 million!!!

yes, my dearest, this is how the beat the earnings estimate game is played!

ps: Here's a question: For which fiscal year did P&O earned more than 30 million?

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