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QuestionsCategory: Financials QuadrantFinancial Analysis
Hong Lee Heng asked 6 months ago

Hi IQ team,
Im new to value investing, appreciated if you can review my practice analysis on AEM using Annual Report 2020 (attached excel). Some Questions:

  1. other income should include in the Extraordinary Items?
  2. Net profit should minus off the \’Changes in inventories of finished goods and work-in-progress(10,452)\’? When I refer to inventories Note 10 (annual report page 109) it seem that the company estimated higher price to purchase inventories in 2019 but the actual price is lower so they add this figure (10,452) as profit in 2020? not sure if im right.

Thanks in advance!

1 Answers
Victor Chng answered 6 months ago

Hi Hong Lee,
1.You are right on the change in inventories as it is an extraordinary item. If figure is positive you have to minus it from the net profit and vice versa. You can consider the whole other income as extraordinary item too.
2.Your profit attributed to shareholder should be $97.6m instead of $87.1m (stated in your excel).
3.The total debt should be $1.8 instead of $11.3m (stated in your excel). You have to go to note 15 and see the breakdown. Take bank loan and exclude lease liabilities. 
4.The rest of your figures are correct. Keep up the good work :)

Hong Lee Heng replied 6 months ago

Hi Victor,

Got it. Thanks for reviewing.

Victor Chng replied 6 months ago

Welcome Hong Lee :)

Tan Bao Ling replied 5 months ago

Hi Victor, may I know why do we exclude lease liabilities from total debt?

Victor Chng replied 5 months ago

Hi Bao Ling,

Lease liabilities are usually rent that the business need to pay. Hence, in the event when the company want to break the contract, at most they just give up their rental deposit. For bank loan, it is a different case as they can sue the company into bankruptcy unlike lease liabilities.