Latest news with #RM93m
Yahoo
15-06-2025
- Business
- Yahoo
OpenSys (M) Berhad's (KLSE:OPENSYS) Stock Has Shown A Decent Performance: Have Financials A Role To Play?
OpenSys (M) Berhad's (KLSE:OPENSYS) stock up by 1.6% over the past week. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to investigate if the company's decent financials had a hand to play in the recent price move. Particularly, we will be paying attention to OpenSys (M) Berhad's ROE today. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Return on equity can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for OpenSys (M) Berhad is: 13% = RM12m ÷ RM93m (Based on the trailing twelve months to March 2025). The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each MYR1 of shareholders' capital it has, the company made MYR0.13 in profit. Check out our latest analysis for OpenSys (M) Berhad Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company's earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features. To begin with, OpenSys (M) Berhad seems to have a respectable ROE. Especially when compared to the industry average of 9.1% the company's ROE looks pretty impressive. Yet, OpenSys (M) Berhad has posted measly growth of 2.0% over the past five years. That's a bit unexpected from a company which has such a high rate of return. Such a scenario is likely to take place when a company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures. Next, on comparing with the industry net income growth, we found that OpenSys (M) Berhad's reported growth was lower than the industry growth of 9.5% over the last few years, which is not something we like to see. Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if OpenSys (M) Berhad is trading on a high P/E or a low P/E, relative to its industry. With a high three-year median payout ratio of 61% (or a retention ratio of 39%), most of OpenSys (M) Berhad's profits are being paid to shareholders. This definitely contributes to the low earnings growth seen by the company. In addition, OpenSys (M) Berhad has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth. On the whole, we do feel that OpenSys (M) Berhad has some positive attributes. Although, we are disappointed to see a lack of growth in earnings even in spite of a high ROE. Bear in mind, the company reinvests a small portion of its profits, which means that investors aren't reaping the benefits of the high rate of return. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. You can see the 2 risks we have identified for OpenSys (M) Berhad by visiting our risks dashboard for free on our platform 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
14-04-2025
- Business
- Yahoo
We Believe Nam Cheong's (SGX:1MZ) Earnings Are A Poor Guide For Its Profitability
Even though Nam Cheong Limited (SGX:1MZ) posted strong earnings recently, the stock hasn't reacted in a large way. We decided to have a deeper look, and we believe that investors might be worried about several concerning factors that we found. 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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". For the year to December 2024, Nam Cheong had an accrual ratio of 1.00. Ergo, its free cash flow is significantly weaker than its profit. Statistically speaking, that's a real negative for future earnings. To wit, it produced free cash flow of RM93m during the period, falling well short of its reported profit of RM785.2m. Notably, Nam Cheong had negative free cash flow last year, so the RM93m it produced this year was a welcome improvement. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. Check out our latest analysis for Nam Cheong Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nam Cheong. Given the accrual ratio, it's not overly surprising that Nam Cheong's profit was boosted by unusual items worth RM441m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Nam Cheong's positive unusual items were quite significant relative to its profit in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power. Nam Cheong had a weak accrual ratio, but its profit did receive a boost from unusual items. For all the reasons mentioned above, we think that, at a glance, Nam Cheong's statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. If you'd like to know more about Nam Cheong as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Nam Cheong (1 is significant) you should be familiar with. In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. 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
14-04-2025
- Business
- Yahoo
We Believe Nam Cheong's (SGX:1MZ) Earnings Are A Poor Guide For Its Profitability
Even though Nam Cheong Limited (SGX:1MZ) posted strong earnings recently, the stock hasn't reacted in a large way. We decided to have a deeper look, and we believe that investors might be worried about several concerning factors that we found. 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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". For the year to December 2024, Nam Cheong had an accrual ratio of 1.00. Ergo, its free cash flow is significantly weaker than its profit. Statistically speaking, that's a real negative for future earnings. To wit, it produced free cash flow of RM93m during the period, falling well short of its reported profit of RM785.2m. Notably, Nam Cheong had negative free cash flow last year, so the RM93m it produced this year was a welcome improvement. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. Check out our latest analysis for Nam Cheong Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nam Cheong. Given the accrual ratio, it's not overly surprising that Nam Cheong's profit was boosted by unusual items worth RM441m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Nam Cheong's positive unusual items were quite significant relative to its profit in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power. Nam Cheong had a weak accrual ratio, but its profit did receive a boost from unusual items. For all the reasons mentioned above, we think that, at a glance, Nam Cheong's statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. If you'd like to know more about Nam Cheong as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Nam Cheong (1 is significant) you should be familiar with. In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. 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
