Issue #18 - Determining the earnings per share growth rate

Below are EPS of SP Setia, Island & Peninsular and IOI Property consolidated from Issue #9.

Earnings per Share (RM)
Years   SP Setia   IOI Prop   I & P
2005    0.324      0.72       0.202*       
2004    0.285      0.69       0.324
2003    0.227      0.53       0.137
2002    0.225      0.49       0.114
2001    0.228      0.43       0.113
2000    0.242      0.49       0.245
1999    0.275      0.50       0.423
1998    0.237      0.25       0.339
1997    N/A        0.30       N/A
1996    N/A        0.29       N/A

Growth rate = 1 - (EPS_E / EPS_B) ^ (1 / (Year_E - Year_B))

where,
EPS_B = EPS at the beginning
EPS_E = EPS at the end
Year_B = Year at the beginnning
Year_E = Year at the end

Operator ^ represents a raise to the power of operation. Square of 2 is written as 2^2.

From the EPS list above, EPS growth rate for the 3 companies from 1998 to 2005 was:

SP Setia,
EPS growth rate = 1 - (0.324/0.237) ^ (1/(2005-1998)) = 4.57%

IOI Property,
EPS growth rate = 1 - (0.72/0.25) ^ (1/(2005-1998)) = 16.31%
EPS growth rate (1996-2005) = 1 - (0.72/0.29) ^ (1/(2005-1996)) = 10.63%

Island & Peninsular,
EPS growth rate = 1 - (0.202/0.339) ^ (1/(2005-1998)) = -7.13%

The numbers obtained here are average annual compounding growth rate. If the growth rate obtained here is use to project the EPS of the company from 1998 we observed that the actual EPS deviates from those projected numbers for as much as 30%. A company with historical EPS that has small deviation from the projected numbers is preferred should the projection be extended beyond 2005. For example, projected EPS of SP Setia and IOI Propertyy in Y2006 is RM0.339 and RM0.797 respectively. Historical deviation of actual EPS from projected values gives the confidence level of both companies achievinig the projection. This relates back to the keyword of being consistent. A company that produces consistent EPS year after year should display a small deviation and hence giving a message of confident to investors that they can meet future projection of EPS.

SP Setia
Year    EPS        EPS        Deviation
        Actual     Projected  from projection
2006    ??         0.339        ??
2005    0.324      0.324        0.00%
2004    0.285      0.310      - 8.02%
2003    0.227      0.296      -23.39%
2002    0.225      0.283      -20.60%
2001    0.228      0.271      -15.86%
2000    0.242      0.259      - 6.62%
1999    0.275      0.248       10.96%
1998    0.237      0.238        0.00%

IOI Property
Year    EPS        EPS        Deviation
        Actual     Projected  from projection
2006    ??         0.797        ??
2005    0.72       0.720        0.00%
2004    0.69       0.651        6.02%
2003    0.53       0.588      - 9.90%
2002    0.49       0.532      - 7.85%
2001    0.43       0.481      -10.53%
2000    0.49       0.434       12.79%
1999    0.50       0.393       27.33%
1998    0.25       0.355      -29.57%
1997    0.30       0.321      - 6.49%
1996    0.29       0.290        0.00%