07 February 2014

Annual Report Vs Annual Audited Report in Bursa Malaysia: 1st Step for Evaluation

I still remember when I was just getting started investing in Stock Market in Bursa Malaysia, I read a couple of books about how to evaluate a company or business. The most important thing is to ensure the financial report that used for evaluation is audited. Thus, I was quite frustrated when I found difficulty to find an Annual Audited Report of some companies in Bursa Malaysia.
After struggling few days, finally, I realised that, in Bursa Malaysia, all the financial statements or reports in annual report have been audited. Consequently, some companies only publish annual report in Bursa Malaysia.

Audited financial statements

In fact, you can easily find a sentence of "The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended" in an annual report that published in Bursa Malaysia.

Auditors' Opinion

In addition, my senior also told me that we should read the opinion of External (or independent) Auditor before using the financial report for evaluation. A typical healthy Opinion should be:  "In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at XXX (date)  and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia."
After ensuring the information of financial report of a company is reliable, we can proceed to the next step to evaluate the intrinsic value of the company. The next step should be to figure out whether this company is worthy for us to spend time for evaluation (unless you have plenty of time to evaluate  each company comprehensively). That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our latest sharings.

Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.



Jeff Fatt said...

Hello, I am fresh graduate.
What's the book you recommend for starting in investment?

Xaivier Chia said...

Hi Jeff,

If you can read Chinese, then you can try books written by Cold Eyes and articles shared by KLSE.8K.

For English, try The Snowball and Berkshire Hathaway Letters to Shareholders: Warren Buffett.

For free online resources, you may consider my collection at http://xaivierchia.blogspot.com/2010/10/some-useful-links-for-stock-market.html.

All the best to your investment journal.

Xaivier Chia said...

For financial report analysis, I think most books are the same. That is, how to compute EPS, NTA, etc and how to analysis financial statements. Most of them are just mathematics.

However, how to use them to achieve ones investment goal, it is highly dependent on each individual ability and experiences.

Rome was not built in one day. All the best!

megatti said...

Not forgetting The Intelligent Investor by Ben Graham. A book Warren Buffett personally thinks its the best book for value investing.
A Walk Down Wall Street. I also started to read BH Letters to Shareholders. Very interesting story by Mr. Buffett.
but I read somewhere that Fundamental Analysis does not really work in our market. how true is it? Thanks.

Xaivier Chia said...

Thanks Megatti for those good recommended.

Personally, I think fundamental analysis helps investors to estimate the value of a business. Just like acquiring an unlisted business, buyers need to know whether the price is reasonable or not. And if we manage to acquire a good business with fair price or discounted price, in the long run, we do able to make huge profits from the business.

I think they are right. Mr Market does not follow fundamental analysis, in all markets in the world. Thus, there are plenty opportunities for value investors get good deal from stock market.


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