Hi! I have a few question while doing the exercise on calculating intrinsic value using the P/E method on company Tencent
- I find that using the EPS from previous FY to have very choppy. However if I using the trailing twelve months (TTM) seem to be smoother on the graph. I have attached the Graph and would like to hear your input on which type is most suitable for calculating IV?
a)Previous FY EPS?
c) Quarter EPS instead?
2) I noticed that Tencent have been posting non-IFRS EPS since 2015 and the numbers are quite different from the normal EPS. Which will be better to follow?
3) Tencent Has quite significant “Other gains” in the operating profit every quarter , I have been using the reported EPS but am wonder if I should consider them as exceptional items every quarter to calculate the EPS?
Looking forward to your reply, thanks!
Hi Lee Jun,
You may want to use underlying EPS (yearly) which Tencent has removed out the exception items, i.e. fair value gain/loss to derive your valuation.
For example 2021Q2, I’m comtemplating to take 42,587 – 20,763 = 21,824 , which is lower than the non-IFRS. As the exception gain is half of the quarter profit(quite substantial).
Or is the non-IFRS amount meaningful enough for valuation?
Yes, it’s quite alot of work to breakdown quarter report however the graph is much more sensitive to trend. Thanks for pointing out that it is -ve 2sd, which I think it’s meaningful to valuate :)
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