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QuestionsCategory: Valuation QuadrantShareholder Equity & Book Value
Ray Titus asked 9 months ago

Hi Team, for shareholder equity; do we include RESERVES as well as Irredeemable Convertible Preference Shares into calculation or those to be omitted? I understand from the module we’re to exclude minority interest.
As to book value valuation consideration, do we include in the irredeemable convertible preference shares into the computation or to be omitted?

Looking forward to your assistance. Thank you.

1 Answers
Victor Chng answered 9 months ago

Hi Ray,
 
Irredeemable convertible preference shares are a type of debt so it should be included into the book value.

Ray Titus replied 9 months ago

Hi Victor,

Thank you for the response. Mind to share how to work out as debt computation for book value? I’m using the excel sheet provided from this site on the calculation to engage tangible book value which uses equity attributable to shareholder – intangible assets. Whereby equity attributable, I’m using what was provided by the company AR balance sheet that includes ordinary shares / irredeemable convertible preference shares & reserves.

As to the book value per share I divided the book value above with total shares (ordinary shares + irredeemable convertible preference shares) . Do let me know if I’ve compute it incorrectly.

Thank you.

Victor Chng replied 9 months ago

Hi Ray, can you point me to the annual report that you are looking at. So I can have a look through before confirming that the method is right.

Ray Titus replied 9 months ago

Hi Victor,
Sure it’s AR 2019 for Allianz Malaysia pg 138.

Victor Chng replied 9 months ago

Hi Ray,

I took a quick look at the balance sheet. You don;t need to add the preference shares into the equity cause the figure is inclusive already

Total equity attributable owners of the Company – RM3,673,6 million

Also do take note that Investment quadrant method cannot be use to analyse insurance business as the ratio and analysis require a different set of perspective to look at them.

Ray Titus replied 9 months ago

Hi Victor,

thanks again for the response. noted on the update of information as equity instead of debt as well as IQ is not suitable to analyse insurance business.

putting insurance aside, if say this information provided were a utility company; would my calculation method described previously is correct? also would the preference shares would be used as part of total number of outstanding shares to be divided for calculation for EPS / Sales Per Share etc since the preference shares is convertible without time limit?

Victor Chng replied 8 months ago

Hi Ray,

the method is the same for utility since the preference shares is included in the equity already. If you want to be conservative, you can use the number of shares that assume fully converted of preference shares.

Ray Titus replied 8 months ago

Hi Victor, noted on the updated information. Thank you once again for the assist.

Victor Chng replied 8 months ago

Welcome Ray. Feel free to ask if you still have doubts :)