Growth in share prices is often used as a proxy to the assess the returns of a company to its shareholders, but this can be misleading, as investors receive returns in a number of other ways, including dividends, simple capital transactions such as rights issues, and complex capital changes such as share restructuring.

A single, composite measure is required to combine them, and this is the purpose of the Total Shareholder Return (TSR). In this Shareholder Scorecard, listed Thai companies are compared using this measure, based on basic financial data provided by Datastream and corroborated through the Stock Exchange of Thailand. The period of the one-, three-, five- and 10-year TSR calculations is from December 2004, December 2002, December 2000 and December 1995, to December 2005, respectively.

TSR is defined as the "annualised total return to shareholders from maintaining their investment in a stock over a given period''. Maintaining the investment means not taking any net cash out during the period. This involves immediately reinvesting all cash receipts (such as dividends), participating in all capital transactions (such as rights issues) and selling stock as required, so as not to contribute any new capital.

Let's look at the TSR for PTT Exploration and Production (PTTEP) for the last 10 years. As of Dec 30, 1995 the company had a share price of 264 baht. After a number of rights issues and share splits, PTTEP's share price was at 472 baht as of Dec 31, 2005. If we had invested 100 baht in PTTEP stock in December 1995 and reinvested all dividends into the stock, we would have had an investment with a value of 444 baht at the end of 2005. This value creation of 344 baht comes from both share price appreciation and dividend reinvestment. Therefore, this investment is giving an annualised Total Shareholder Return of 16% over the 10-year holding period.

However, consideration must also be given to the risk profile of companies when comparing their relative performance. Naturally, investors expect a higher rate of return from companies with higher levels of risk.

For example, investors will have different expectations for returns from a mobile phone company compared with an exporter of food products. To make some allowance for risk, the Scorecard groups companies by industry, using the sectors defined by the SET.

TSR queries can be directed to L.E.K.'s Bangkok office at 02-654-3500, or e-mail score@lek.com