Wednesday, May 24, 2006

the retail investors are driving it nuts

the last few days have witnesed madness in the market. the irrational exuberance witnessed on the kengen counter on the market is clearly not supported by fundamentals. how do you explain this: this company made 2bil in profits in the last finacial year. the number of shares now issued is approx 23mil. In the last financial yr. kengen paid 300mil to govt in dividends. if the company maintains the same dividend policy, then each share is likely to get 15cents to 30 cents p.a. in the next three years as the turnover and earnings are xpected to grow by 10% pa. this rate of return on equity if far less than most of the other listed companies. the rush to buy this stock at these prices therefore does not make sense.

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