Returns Are Gaining Momentum At Kretam Holdings Berhad (KLSE:KRETAM)
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Kretam Holdings Berhad's (KLSE:KRETAM) returns on capital, so let's have a look.
We check all companies for important risks. See what we found for Kretam Holdings Berhad in our free report.
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Kretam Holdings Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.09 = RM104m ÷ (RM1.3b - RM124m) (Based on the trailing twelve months to December 2024).
Therefore, Kretam Holdings Berhad has an ROCE of 9.0%. In absolute terms, that's a low return but it's around the Food industry average of 9.7%.
See our latest analysis for Kretam Holdings Berhad
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Kretam Holdings Berhad has performed in the past in other metrics, you can view this free graph of Kretam Holdings Berhad's past earnings, revenue and cash flow.
We're delighted to see that Kretam Holdings Berhad is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 9.0% on its capital. And unsurprisingly, like most companies trying to break into the black, Kretam Holdings Berhad is utilizing 69% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.
Long story short, we're delighted to see that Kretam Holdings Berhad's reinvestment activities have paid off and the company is now profitable. And with a respectable 47% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Kretam Holdings Berhad can keep these trends up, it could have a bright future ahead.
Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our that compares the share price and estimated value.
While Kretam Holdings Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
23 minutes ago
- Yahoo
Calculating The Fair Value Of Only World Group Holdings Berhad (KLSE:OWG)
The projected fair value for Only World Group Holdings Berhad is RM0.18 based on 2 Stage Free Cash Flow to Equity Current share price of RM0.22 suggests Only World Group Holdings Berhad is potentially trading close to its fair value In this article we are going to estimate the intrinsic value of Only World Group Holdings Berhad (KLSE:OWG) by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Believe it or not, it's not too difficult to follow, as you'll see from our example! Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (MYR, Millions) RM14.7m RM12.4m RM11.2m RM10.6m RM10.3m RM10.2m RM10.2m RM10.4m RM10.6m RM10.9m Growth Rate Estimate Source Est @ -23.46% Est @ -15.33% Est @ -9.64% Est @ -5.65% Est @ -2.87% Est @ -0.91% Est @ 0.45% Est @ 1.41% Est @ 2.08% Est @ 2.55% Present Value (MYR, Millions) Discounted @ 15% RM12.8 RM9.4 RM7.4 RM6.1 RM5.2 RM4.5 RM3.9 RM3.5 RM3.1 RM2.8 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM59m After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.6%. We discount the terminal cash flows to today's value at a cost of equity of 15%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM11m× (1 + 3.6%) ÷ (15%– 3.6%) = RM102m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM102m÷ ( 1 + 15%)10= RM26m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is RM85m. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of RM0.2, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Only World Group Holdings Berhad as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 15%, which is based on a levered beta of 1.861. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Only World Group Holdings Berhad Strength Debt is well covered by cash flow. Dividend is in the top 25% of dividend payers in the market. Weakness Interest payments on debt are not well covered. Current share price is above our estimate of fair value. Opportunity Has sufficient cash runway for more than 3 years based on current free cash flows. Lack of analyst coverage makes it difficult to determine OWG's earnings prospects. Threat No apparent threats visible for OWG. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Only World Group Holdings Berhad, we've put together three further aspects you should further research: Risks: For example, we've discovered 2 warning signs for Only World Group Holdings Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing here. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! Other Environmentally-Friendly Companies: Concerned about the environment and think consumers will buy eco-friendly products more and more? Browse through our interactive list of companies that are thinking about a greener future to discover some stocks you may not have thought of! PS. Simply Wall St updates its DCF calculation for every Malaysian stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
23 minutes ago
- Yahoo
SLP Resources Berhad (KLSE:SLP) Is Due To Pay A Dividend Of MYR0.01
SLP Resources Berhad (KLSE:SLP) will pay a dividend of MYR0.01 on the 9th of July. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues. Earnings per share is forecast to rise by 16.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 112%, which is a bit high and could start applying pressure to the balance sheet. Check out our latest analysis for SLP Resources Berhad The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from MYR0.0167 total annually to MYR0.0475. This means that it has been growing its distributions at 11% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious. With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, SLP Resources Berhad's earnings per share has shrunk at approximately 9.4% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern. Overall, while some might be pleased that the dividend wasn't cut, we think this may help SLP Resources Berhad make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint. Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, SLP Resources Berhad has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is SLP Resources Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
03-06-2025
- Yahoo
Hume Cement Industries Berhad's (KLSE:HUMEIND) Solid Earnings Have Been Accounted For Conservatively
The market seemed underwhelmed by the solid earnings posted by Hume Cement Industries Berhad (KLSE:HUMEIND) recently. Our analysis suggests that there are some reasons for hope that investors should be aware of. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. The ratio shows us how much a company's profit exceeds its FCF. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth. For the year to March 2025, Hume Cement Industries Berhad had an accrual ratio of -0.14. Therefore, its statutory earnings were quite a lot less than its free cashflow. Indeed, in the last twelve months it reported free cash flow of RM315m, well over the RM212.1m it reported in profit. Hume Cement Industries Berhad did see its free cash flow drop year on year, which is less than ideal, like a Simpson's episode without Groundskeeper Willie. Notably, the company has issued new shares, thus diluting existing shareholders and reducing their share of future earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Hume Cement Industries Berhad increased the number of shares on issue by 15% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Hume Cement Industries Berhad's EPS by clicking here. Three years ago, Hume Cement Industries Berhad lost money. But over the last year profit has held pretty steady. Meanwhile, earnings per share were actually down 21%, over the last twelve months. Therefore, the dilution is having a noteworthy influence on shareholder returns. In the long term, if Hume Cement Industries Berhad's earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit. In conclusion, Hume Cement Industries Berhad has a strong cashflow relative to earnings, which indicates good quality earnings, but the dilution means its earnings per share are dropping faster than its profit. Given the contrasting considerations, we don't have a strong view as to whether Hume Cement Industries Berhad's profits are an apt reflection of its underlying potential for profit. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Hume Cement Industries Berhad. In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
