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QuestionsCategory: Valuation QuadrantHow to do adjustment regrading share split?
Jerry Ling asked 6 years ago

Hi there,
I am trying to evaluate a stock, but when i checked on the annual report. The shares seems having a share split.
Basically, share in 2014 is 90,040. Then I check on annual report 2015, shares outstanding increases to 409,981, on the same report, shares outstanding on 2014 are reinstated to 380,749.
This will influence the market cap, eps and PE ratio of analysis. How do I analyse this?
The stock is BURSA HEVEA (Code : 5095)
Additon : Should I use basic eps or diluted eps during analysis and why?
Hope for help. Thank you.

3 Answers
Victor Chng answered 6 years ago

Hi Jerry,

Share split does not affect the market capitalisation and PE because they stay the same. The only thing it affect is the share price and EPS. Hevea did a subdivision of every existing one ordinary share into four ordinary shares which means when you are collecting the number of share for 2014 and below, you have to multiple their number of share by 4. For instance, the 2014 number of share is actually 99,449 based on AR2015 notes 16. Hence to adjust for split, you have to take 99,449 X 4 = 397,796. Do the same for the remaining years.

Jerry Ling answered 5 years ago

Hi Victor,
For the share split, right now I can calculating share split for another company – Bursa Pohuat – 7088.
In 2015, it has a share split of 2:1 and a bonus issue of 1:4 ( 1 warrant for every 4 shares held)
Full announcement here :
http://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=67758&name=EA_GA_ATTACHMENTS
Adjusted share in 2015 : 213,446,610 (Ordinary share) + 507,321 (Warrants) = 213,953,931
Share in 2014               : 113,387,105 (Ordinary share) – 6,663,800 (Treasury shares) = 106,723,305
Questions:

1. In this case, how do I adjust the share in 2014 to catch up the EPS?
2. For the share price, shall I do the same adjustment or just leave it?
3. For share split or bonus issue, are they others things to take note other than only adjusting the no. of outstanding shares?

Very confusing for me though. Hope for your enlighten. Thank you.

Regards,
Jerry

Victor Chng answered 5 years ago

Hi Jerry,

1. For 2014, you just need to split the share and add in the number of converted warrant can already.
2. Usually the share price will adjust by itself one. The provider will come out the new adjusted share price
3. There is nothing else to take note