First Analysis on HSBC

I try to apply the three methods mentioned in Buffettology:

1) yield

• the current 10 year treasury yield is around 5.x%; HSBC earning yield is around 7.5%, 5-year average EPS growth rate = 21%

2) ROE

• assume ROE = 15%, diviend payout ratio = 55%, current price = $142

3) EPS

• assume EPS growth rate = 20%, diviend payout ratio = 55%

In short, if the expected P/E is 12-15 in 5 years time, the expected annual return is 9.78%-28.09%.

Note:
As of end 2006, the 5-year average EPS growth = 21%, 5-year dividend payout ratio = 62.9%, 5-year average ROE = 12.81%.
As of 1H2007, EPS growth rate = 22%, ROE = 19.1%.