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It's about expectations
Economists generally look at stock markets as a leading indicator
for economic trends, as share prices are driven by investor
expectations of corporate performance and profits
Why shareholder value is still relevant
The implosions in the United States
of companies such as Enron and WorldCom have caused some people
to question the shareholder value movement that swept the
US and Europe over the past decade.
To avoid trouble, look at these
red flags
The following is reprinted with permission
of The Wall Street Journal, Copyright 2002, Dow Jones &
Company, Inc.
All in the family?
Value-creating companies generate returns
for shareholders by maintaining strong competitive positions,
being efficient operators and maximising capital utilisation.This
is called ``competitive advantage''. Successful companies
are continuously evaluating opportunities and investing in
those that create or enhance their competitive advantage to
deliver returns in excess of the cost of capital. These same
companies also understand that it is more value creating to
return cash to shareholders than to invest in projects likely
to earn less than the cost of capital.
Meet L.E.K. Consulting
L.E.K. Consulting is an international
corporate advisory firm with 450 professionals worldwide.
The company is run as a single resource unit with 15 offices
throughout Europe, the United States and Asia-Pacific. Offices
in the Asia-Pacific region are located in Bangkok, Singapore,
Shanghai, Beijing, Sydney, Melbourne and Auckland,
Weturns at a glance
While total shareholder returns
(TSR) of SET-listed companies were healthy in 2002, with only
five sectors in negative territory, a different picture emerges
over the longer term, as the charts below illustrate.
A rally partly fuelled by war
Punters who played
the energy sector realised hefty yields last year, with continuous
rises in international oil prices driving high shareholder
returns.
Industry riding upward cycle again
Thanks to a solid rebound in the
global semiconductor industry, Thailand's export-oriented
electronics companies are expected to register double-digit
sales and profit growth this year.
Formulating the right chemistry for successs
Last year was a bonanza for shareholders of
several listed companies in the chemicals and plastics sector,
thanks to a cyclical uptrend in the petrochemical industry
and high oil prices.
Slow recovery from a hangover
Even as many local banks began to
post a recovery in earnings and continue to clean up their balance
sheets on the back of the economic recovery, overall returns
for investors remained poor relative to the broad market.
Firm ground but rough road
The finance and securities sector was a steady
performer throughout 2002, with many firms reporting higher
revenues, as investor activity on the Stock Exchange of Thailand
picked up and finance firms enjoyed healthy returns on the
back of a consumer spending boom.
Constrasting fortunes
Zero tolerance'' inspections for chemical
residues, imposed by the European Union starting in March last
year, put a serious dent in the 2002 business performance of
listed Thai companies exporting chicken and shrimp.
Local consumers power some firms
Brisk local consumption was a key factor driving
the share prices of most listed companies in the food and beverages
sector last year, in particular those of S&P Syndicate Plc
and The Minor Food Group Plc (MFG).
Product glut and China are big issues
Strong competition and a continuing global
oversupply of apparel products continue to depress the prospects
of export-dependent Thai textiles, clothing and footwear companies.
Entertained by gains on surge in ad income
All entertainment and media firms
posted stronger shareholder returns last year due largely
to increasing revenues from advertisers as well as improvements
in the economy.
Hotels, services a solid bet in short, medium
terms
A rebound in the domestic tourism
industry and terrorist threats and unrest in some neighbouring
countries have helped boost the local hospitality business.
Leading listed hotels showed strong performances, providing
investors with an attractive punt.
Healthy economy a feast for insurers
An increase in the annual personal tax deduction
for life insurance premiums, a surge in automobile sales on
the back of the recovering economy and low interest rates
are expected to fuel growth in the insurance sector and operating
performance of listed insurers.
Building boom spurs top sector
The building and furnishing industry came
in as the best play for the year, outperforming all other
sectors, booking a 108.8% return to take the top spot in the
one-year TSR category and a SET-leading 34.6% five-year yield.
Sorry, wrong number
The communication sector continued to languish in 2002, producing
a sickly one-year total shareholder return (TSR) of -24.37%,
the lowest on the Stock Exchange of Thailand. But for investors
in for the very long haul, communication stocks have produced
the best 10-year return on the market, at 8.71%. In fact,
the sector is one of only seven with returns in positive territory
over a decade.
Revival in full swing
The steady recovery seen in the property
sector is expected to continue this year, as prospective homebuyers
feel more confident to buy houses when mortgage rates hit
record lows and when they feel secure about their jobs.
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