Online stock filtering and screening by ROE and ROA

In fundamental analysis, Return of Equity (ROE) and Return of Assets (ROA) are among the most important indicators used to evaluate the investability of targetted stock counters.

There are generally 4 components that make up the shareholders' equity:

• The shares that are sold out to the shareholders, and tradable in the market.
• The shares that are repurchased by the company and kept as treasury shares.
• Company's profit that is reinvested into the business as retained earnings.
• Additional paid-in capital pumped into the company by its shareholders.

In short, shareholders' equity is the money that the company's shareholder had invested into its business, together with the retained earnings from the company's business profit.

ROE is therefore a measurement to evaluate how effective is the company's management team in managing the business and bringing in annual profit to the company.

ROE = Net Profit / Shareholder Equity

The main different between ROE and ROA is that, ROE does not take into account the financial leverage or debt of the company, whereas ROA includes it.

As you might have aware of the basic financial equation as illustrated in the diagram below:

Total Assets = Shareholders' Equity + Total Liabilities

The company needs assets to run its business. The assets can be funded either from shareholders' equity, or from 3rd parties (non-shareholders) as liabilities, for example, in the form of financing loans.

ROA is a measurement to evaluate how effective is the company's management team in utilizing the company's assets to make profit.

ROA = Net Profit / Total Assets

ROA = Net Profit / (Shareholder Equity + Liabilities)

For those companies that are in net cash position (without any debts), its ROE = ROA.

For those companies with liabilities, its ROE is normally higher than ROA, as assets are increased by taking debt.

As a benchmark, if the ROA is lower than bond return rate or even fixed deposit return rate, the shareholders might as well put their money (and borrowed money) in those low-risk money-generating financial instruments, rather than in the business, which is more risky.

When picking target stocks for investment from thousands of counters in the stock market, one of the initial fundamental shortlisting methods is to filter the target stocks to those that meeting the criteria of ROE > 20% and ROA > 15%.

In Rakuten Trade, you can easily do your shortlisting with just a few mouse clicks.

You just need to login to Rakuten Trade online trading website, select the Stock Screener menu, add a new filtering criterion, and select ROE (%).

After that, do the same to select another filtering criterion ROA (%).

Set the minimum of ROE to 20%, and the minimum of ROA to 15%.

You will instantly get the list of matching stocks on your screen, which is around 30 to 40 counters at the time being.

If you don't have a Rakuten Trade account to access to the Stock Screener above, you can use this link to open a new Rakuten Trade account for free, including no charge for opening new CDS account. By opening account with the link, you can get 500 RT Points within 30 days upon your account activation. Beside that, if you start your trading within the first 10 business days after account activation, your first online trading brokerage fee will be rebated as additional RT Points as well.

How to use RT Points in Rakuten Trade to offset brokerage fee

Rakuten Trade is currently the first and the only Malaysian stockbroking online platform with a loyalty point system and also allows offset of stock trading brokerage fee by using your accumulated RT Points.

With this mechanism, if you have enough RT Points in your account, you can literally trade with zero brokerage fee when you wholly offset it with your RT Points.

Each RT Points carries a value of RM0.01. As such, if you have 1,000 RT Points, that is equivalent to RM10 value that you can use to pay for brokerage fee.

Rakuten Trade offers 3 different types of stock trading accounts: Cash Upfront, Contra, and RakuMargin. Each of them will have a separate CDS number, but you can access to all of them using a single Rakuten Trade user account.

Normally, a brokerage firm will charge you RM10 for each new CDS number account opening, but opening stock trading account with Rakuten Trade (including the CDS account) is free of charge and can be completed wholly online without the need to fill up paper forms or meeting in person.

If you use this link to open a new Rakuten Trade account, you can get 500 RT Points within 30 days upon your account activation. Beside that, if you start your trading within the first 10 business days after account activation, your first online trading brokerage fee will be rebated as additional RT Points as well.

The brokerage fee of Rakuten Trade online platform is among the cheapest in Malaysia, ranging from a minimum of RM7 to a maximum of RM100. If you trade in large amount per transaction, the maximum cap of RM100 will be a very attractive rate.

If you do day trading (buying and selling the same share within the same day) using your contra account, the brokerage fee for your selling transaction will also be rebated.

Below are some of the ways to accumulate RT Points:

• Refer your friends to Rakuten Trade (500 RT Points each)
• Trading brokerage fee (RM2 = 1 RT Point)
• Deposit at least RM5,000 into your trading account within 5 business days after account activation (150 RT Points for each type of accounts)
• Transfer shares from your other CDS to your Rakuten Trade CDS (150 RT Points)
• Participate in Rakuten Trade's online and offline events, seminars, talks, survey, etc.

Online trading with Rakuten Trade can be performed either with the Rakuten Trade web platform or the iSPEED.my mobile app.

To offset your brokerage fee with your RT Points, make sure you select the "Use RT Pts to lower Brokerage" option in your Buy/Sell order, before you click on the Confirm button.

The same applies in iSPEED.my mobile app.

Beside able to use for brokerage offsetting, you can also transfer your RT Points to AirAsia BIG, Bonuslink or Boost at a 1:1 conversion rate.

i-Saraan voluntary EPF contribution with retirement incentive for freelancers, social media influencers & non-salaried workers

Nowadays, apart from the traditional career roles being a businessman, entrepreneur, or employee, there are more and more people working as self-employed, or working with broker/agent on a profit-sharing basis, including but not limited to the following roles:

• Freelancer
• Coach, instructor, consultant, ...
• Online sellers
• E-commerce drop-shipper
• Commission-based sales agent (insurance, property, unit trust, MLM, ...)
• Artist, actor, singer, magician, comedian, dancer, stage performer, ...
• Photographer, videographer, composer, writer, translator, self-media, ...
• Youtuber, Instagrammer, TikToker, social media influencer, ...
• Hawker
• Farmer
• Fisherman
• Taxi/Grab driver
• Delivery man
• Nanny, babysitter
• ...

If you do not have an Employees Provident Fund (EPF, a.k.a. KWSP) account that is compulsory for all employed persons in Malaysia, you have the option to open one under the i-Saraan voluntary EPF contribution scheme.

Other than the roles above, i-Saraan is also currently opened for application to:

• Retired government servant under pension scheme
• Housewife

The benefits of having an i-Saraan account include:

• Savings for your future retirement avenue
• Receive additional government special incentive of 15% of your contribution, up to RM250 annually. This annual incentive is given to members below 55 years old, from 2018 until 2022, with the possibility to extend further.
• Earn annual EPF dividend
• Enjoy personal income tax relief up to RM4,000 for each assessment year
• Incapacitation benefit of RM5,000 for withdrawal under the reason of incapacitation
• Death (before age of 60) benefit of RM2,500

To apply for i-Saraan, you need to be a Malaysian citizen who is below 55 years of age. You can open a new i-Saraan account at your nearby EPF service counters.

There is no specific payment schedule for i-Saraan. You can contribute to your account at any time you wish. The maximum contribution per year is up to RM60,000.

Contribution can be made via online bank transfer, bank counters (Maybank, Public Bank, RHB Bank, BSN) and EPF counters.

Persons who already have an EPF account can also make EPF contribution under a separate scheme called Caruman Pilihan Sendiri (Self-Contribution).

The benefits under the self-contribution scheme are the same as this one, but it is without the 15% government additional special incentive (up to RM250 annually).