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QuestionsCategory: Financials QuadrantReturn on Equity for UOL
Jayden Lee asked 4 years ago

Hi Rusmin and Victor,
I would like to ask a question regarding UOL’s ROE.
To calculate UOL’s ROE for 2014-2016, I used Profit after income tax and non-controlling interests and divided it by Shareholders’ funds
However, when I did the same calculation for 2017, I derived a different ROE number from the annual report.
2014 ROE: 685,996 / 7,642,729 = 8.98 %
2015 ROE: 391,389 / 7,894,175 = 4.96 %
For 2014 and 2015, Page 10  https://www.uol.com.sg/wp-content/uploads/uol-reports/files/uol_annual_report_2015.pdf
2016 ROE: 287,040 / 8,127,154 = 3.53 %
2017 ROE: 891,009 / 9,445,120 = 9.43 % (The ROE is given in the annual report as 10.14%. I have no idea why. There must be something I did not consider)
For 2016 and 2017, Page 14 https://www.uol.com.sg/wp-content/uploads/uol-reports/files/UOL_Annual_Report_2017.pdf
Can you assist me please? Thank you.

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Victor Chng answered 4 years ago

Hi Jayden,

Do not focus too much on what figure the management give you. You have to calculate your own ROE.
The earnings should be profit attributed to shareholders excluding non-controlling interest. Please see my calculation below:

2017
Equity holders of the Company: \$891m
Other gains/(losses): \$524.6m (This are one off item that should be remove)
Fair value gains/(losses) on investment properties: \$15.6 (This are one off item that should be remove)
Hence the real earning for UOL is \$350.8m (\$891m-\$524.6m-\$15.6m). The equity is \$9445.1m, hence the ROE for 2017 is 3.7%.

2016
Equity holders of the Company: \$287m
Other gains/(losses): negative \$23.3m (This are one off item that should be added back)
Fair value gains/(losses) on investment properties: negative \$9.7m  (This are one off item that should be added back)
Hence the real earning for UOL is \$320m (\$287m+\$23.3m+\$9.7m). The equity is \$8127.2m, hence the ROE for 2016 is 3.9%.

Jayden Lee replied 4 years ago

Hi Victor,

Thank you very much for showing me the detailed calculations.

Really learnt a lot from you.

One of the best decisions this year – signing up with The Fifth Person.

Have a great weekend!

Regards,
Jayden

Victor Chng replied 4 years ago

Hi Jayden,

Thank you for your kind words. :)

Have a great weekend