􀀗 We update our proprietary Asian
earnings database
􀀗 Analysis includes country and sector
breakdowns, DuPont models, and P&L,
balance sheet and cash flow analysis
􀀗 Although last year was difficult, with
EPS falling 31%, ROE bottomed at 12.5%
– higher than in ’98 or ’01 and above COE
We have updated our MSCI Asia ex-Japan universe earnings
database for the period 1993-2008. This report includes detailed
analyses of aggregate earnings, plus country and sector
breakdowns. We use a DuPont framework to decompose ROE,
and we provide tables and charts of key ratios for 10 Asian
markets and nine sectors.
Key trends
􀀗 ROE fell to 12.5% in 2008 from 17.8% in 2007. But that
is higher than in previous recession years (6.3% in 1998
and 9.1% in 2001). This suggests the fall in ROE in
2008 is cyclical rather than structural.
􀀗 Indonesia produced the highest ROE last year, at 31%.
Indonesia’s ROE has been consistently above 25% since
2000. The lowest ROEs were in Taiwan and Korea:
7.0% and 7.9% respectively. These were the only
markets in which ROE was lower than COE; but, in
both, ROE was higher than the 1998 and 2001 lows.
􀀗 Telecoms was the best sector last year in terms of
ROE/COE ratio. ROE was 17.4%, up from 17.0% in
2007; it has ranged in a tight band between 16% and
20% since 1999. We estimate COE for the sector at
7.7%. Three sectors – industrials, IT, and utilities – had
ROEs lower than COE.
􀀗 Gearing increased sharply last year. Net debt rose 48%
y-o-y. Net debt to equity rose to 35% (from 25% in
2007), the highest gearing level since 2002. The 21%
rise in interest expenses brought the interest coverage
ratio (EBITDA/interest expense) down to 10.7x.