Analysis on Li & Fung (0494)

I try to apply the three methods mentioned in Buffettology again on 0494:

1) yield

• current stock price is $28.4, historical P/E is 42.33
• the current 10 year treasury yield is around 5%; Li & Fung earning yield is around 2.36%, 5-year average EPS growth rate = 15.59%

2) EPS

• assume EPS growth rate = 15%, diviend payout ratio = 90%

3) ROE

• assume ROE = 30%, diviend payout ratio = 90%, current price = $28.4

In short, if the expected P/E is 10-30 in 5 years time, the expected annual return is from -11.22% to 14.73%.

Note:
As of end 2006, the 5-year average EPS growth = 31%, 5-year dividend payout ratio = 92.37%, 5-year average ROE = 30.77%.

In 2006, the dividend payout ratio is 84%

As of 1H2007, EPS growth rate = 31%, ROE = 25.6%.