YTL

I don’t usually post up scorecards of companies which don’t make the grade because I find them a bit pointless really. It’s a bit like picking up a newspaper and reading a bad review of a new CD by some musician-or-other. If the CD was so bad, then why bother drawing our attention to it only to waste our time by then going onto tell us not to buy it?? This is how I also feel about stocks.

But nonetheless I fee somewhat justified about putting this one up on YTL - partly because I get quite a lot of requests to rate this one and it is a blue chip. So I guess it’s a bit like Michael Jackson or something. There are just some things which you have to write about.

Okay what do the numbers tell me?

On the positive side, this is a company which is growing. It is also in a business which has high barriers to entry and is cash rich. The negatives are that it is not very efficient - its ROA and profit to liability ratio is pretty low - meaning that it is sitting on a large amount of assets and liabilities and not generating an acceptable proportionate return. It’s a also a bit lumpy in that it had a stellar 2006 which moved its price up from about $5 to almost $9 which it did not manage to maintain and prices have come back down to earth somewhat. Sorry if you were one of those which thought that YTL was moving into a new growth phase. Expectation to illusion.

But as you can see from its share price, compared to its historical PE and based on its 2007 numbers it is still running at a PE ratio of about 15, which is too high in my book. If earnings stay where they are, it would need to come to under 10 before I will take a look at it (or a price level at around 6).