I am writing this to remind myself that, I have once "show hand" in the Bursa Call warrant share.
I will start with my analysis, and make some conclusion.
Why do I say the price can be at 9.40 when next quarter result is out?
Before even start anything, first, one must understand what is P/E ratio.
P/E is basically Price divide the Earning. Example is, if you can earn RM1 in one quarter, but if someone think that, you actually worth 3RM, then the someone will be willing to use 3RM to invest on you. This will results in 3 divide by 1, and get the PE of 3.
So, in Malaysia, different industry has different PE but will always stay at the average for each industry. Unless there is cases such as COV, and those glove counters fly like mad and the PE may increase dramatically from 50 to 70. An average good stock will always have the PE following the market's PE if comparing the same industry.
However, bursa is a special one, as their nature of business is to earn from people transacting the share over KLSE, and charged commission on it. So, it looks like there is no reference on what PE should Bursa belong to. Thus, what we can do is to refer back to the previous quarters, to get a reference of PE. Prior to 2020, Bursa PE has an average of 28. Starting year 2020, for Quarter 1, the average PE is 30 to 35.
Thus, this is the first key figure that you need to understand in terms of predicting the price of a share.
Next, we will talk about how Bursa earn money. Our main aim is to be able to come out with the EPS (Earning Per Share). EPS formula is Earning divide number of share. Then, next is to ask how to calculate Earning. Earning is Revenue minus expenses. so, the following section explain how to get the calculation to the EPS.
The daily volume and the transact value (they called ADV - average daily trading value) is not a secret. Everyone can see and sum up the total ADV for each of the month. So, the next quarter results will be announced on either 30 July or 1 Aug. This quarter results will reflect the Profit (Earning) that happened in month of April, May, June.
Based on the ADV for April May June (2.67 + 3.35+5.16), the average is 3.726.
Comparing to the previous Quarter (month of Jan to March) which has an average ADV of 2.5. This becomes an increase in ADV of 49%. Next is to convert ADV to the Revenue.
I will use some term to describe how to calculate the revenue but it may not be the term used in the real financial world.
When I read the Bursa financial statement (page 7), I understand that, the revenue is calculated based on ADV multiply the commission fee. Bursa business has 3 types of products. Let say, we called it Product A, B, C. Those ADV that falls under Product A will have commission 0.03% (example only har), and Product B will have 0.02%, Product C will have 0.01%. By multiplying the commission with the ADV, you get the commission amount that you earned. So, if you sum up all the commission that you earn from these 3 products, that is the Revenue. However, we are not the auditor, so, we can only do a prediction on how much is falling into which product, A, B or C. The easiest way and also the conservative assumption is to compare with the previous quarter ADV. Looking at the stats given above, the ADV increase 49%. So, we can assume the % increase in ADV equal % increase in Revenue (same parallel). So, we conclude, Revenue for coming quarter will be 49% better than 1st Quarter.
We then talk about expenses, I have gone through their last 2 years (total 8 quarters results), their expenses is all within 60 - 66 M per quarter. so, with this stats, we can safely assume, the coming quarter expenses will be quite stable and normal.
The formula to calculate Earning is Revenue - Expense. So if expense is the same, Revenue = Earning. So from above, we saying Revenue increase 49%, so Earning should be also increase 49% if you understand the logic I described above. My assumption at every point above is already the most conservative assumption.
So, once we know this, we look at the last quarter EPS is 8. With 49% increase, it will become 12.
If you use the KLSE screener apps, the way they display the EPS is based on the latest 4 quarters. So, I will do the same, but actually, this kind of calculation is super conservative. looking at the last 3 quarters, the EPS are 5.6, 5.8, 8. So adding the 12 will become 31.4.
This is the annual EPS that we want.
Now, if we know Earning per share power is 31.4, if we were to maintain PE of 30. The share price must be 9.40.
So, next question is, how fast the market can reflect this into the share price?
If we see the quarter 1 results, based on the EPS, the price should be 7.5, so, you can see form the graph, end of quarter 1 is May, and the price start pick up from 6.5 to 7.5 and eventually 8.5. This pick up speed is slow because the previous quarters is not on good results.
However, this round, the upcoming quarter is proven to be the best in history for their Earning. With Q1 in positive and with all the facts, it is definitely the share price will push up to 9.40 even before the quarter result released.
Conclusion, Bursa is having the best earning in the upcoming quarter at all time. There is no reason why the price not touch 9.40. The only risk is, if the world crisis come, then that is my fate. I can only say, too bad. I start from scratch again !! haha
At the time of writing this, I already put all my money into the bursa warrant. It is too long to explain which warrant to buy now. I actually have a spreadsheet with all the predicted price with predicted premium, so that I can see all the call warrant prices at each stages, and I even calculated my profit if the price rise to what what, I will beg xxxxxx amount of money. It is not possible to teach here, so I will just give my summary advice here. Take your own risk.
1. Buy the mother share if you are super low risk taker. You will probably end up with 20-40+% profit.
2. Buy the Bursa-C27, if you are a below average risk taker, you will end up 50-100+% profit.
3. Buy the Bursa-C33, if you are above average risk taker, you will end up 100-500% profit.
4. Do like what I did, put all your money, you will end up either 0 or at least a quarter millionaire. (I am sure everyone is richer than me, so, your sai lang is definitely more than the money I throw in)
5. Don't do anything, happy reading. :)
Lastly, I know this is crazy. People all see call warrant as high risk. Sai lang on call warrant is extremely high risk! People will say I am crazy and too brave. Actually..... I should tell them, I am crazy yes! , but I am not brave. You guys who dunno how to calculate the return of call warrant or don't even know how call warrant works....... I can only salute. You guys are SUPER brave to throw money inside, buying call warrant without having any knowledge or wrong knowledge of call warrant. Isn't that true?
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