# 242 信德集團

Market price (2/2/06) at $ 8.7 X 20.8 億 of issued share ==> whole co's market price is 181 億 vs existing equity of 70.5 億.
i.e. i pay extra 110.5 億 for existing profit of 5 億 + future growth

assume 10% compound growth in coming 10 yrs,
i.e. 5 + 5.5 +...11.8 in yr 10 => 80 億

Say, if i invest for 10 yr, i will get back 150.5 億 (existing equity of 70.5 億 + 10 yrs's profit of 80 億 )

in summary:
we have to pay 181 億 NOW to exchange 150.5 億 AFTER 10 yrs
i.e. we are making loss of (30.5 億 + potential profit if we invest in other better stock )
also, do you have 100% confidence of this co's management (e.g. willingness to share with small investor for the profit earned, with share option plan for their own management to dilute your $ in coming future-supported by the increment of issued share in annual report )

i think i will invest $ 181 億 NOW in other stock with even 5% compound growth only ==> i will get back $ 281 億 vs 150.5 億 if i invest in #242. This mean 87% more than investing #242 !!!!!!!

from above, do you think it is a GOOD investment at this price level

N.B. unless you assume > 30% compound & non-stop growth in coming 10 yrs !! (i use excel to caluate the breakeven pt to compare with $ 181 億 investment with only 5 % compond growth after 10 yr)
but who can ensure such a high growth of 30% non-stop in 10 years. Even it happen , it just breakeven with putting the $ in other stock with requirement of 5% only)

so, be careful when investing in stock with high price/book by hoping that the co will get you back more return in coming future. Many experience tell us that many investor like bubble a lot and think they are smart to escape before bubble burst !!

God bless all !

thks for sharing