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2016 International Valuation Handbook
Industry Cost of Capital Grabowski
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2016 valuation handbook: industry cost of capital 1st Edition Roger J. Grabowski
The Offshore Pipeline Construction Industry: Activity Modeling and Cost Estimation in the United States Gulf of Mexico: Activity Modeling and Cost Estimation in the U.S Gulf of Mexico 1st Edition Mark J. Kaiser
Enterprise Applications Markets and Services in the Finance Industry 8th International Workshop FinanceCom 2016 Frankfurt Germany December 8 2016 Revised Papers 1st Edition Stefan Feuerriegel
Published by John Wiley & Sons, Inc , Hoboken, New Jersey
Published simultaneously in Canada
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About the Data
The information and data presented in the 2016 International Valuation Handbook – Industry Cost of Capital and its associated Semi-annual Update has been obtained with the greatest of care from sources believed to be reliable, but is not guaranteed to be complete, accurate or timely Duff & Phelps, LLC (www duffandphelps com) and/or its data providers expressly disclaim any liability, including incidental or consequential damages, arising from the use of the 2016 International Valuation Handbook – Industry Cost of Capital and its associated Semi-annual Update or any errors or omissions that may be contained in the 2016 International Valuation Handbook – Industry Cost of Capital and its associated Semi-annual Update, or any other product (existing or to be developed) based upon the methodology and/or data published herein One of the sources of raw data used to produce the derived data and information herein is Morningstar, Inc Use of raw data from Morningstar to produce the derived data and information herein does not necessarily constitute agreement by Morningstar, Inc of any investment philosophy or strategy presented in this publication
About Duff & Phelps
Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation, disputes and investigations, M&A, real estate, restructuring, and compliance and regulatory consulting The firm’s more than 2,000 employees serve a diverse range of clients from offices around the world For more information, visit www duffandphelps com
M&A advisory, capital raising, and secondary market advisory services in the United States are provided by Duff & Phelps Securities, LLC Member FINRA/SIPC Pagemill Partners is a Division of Duff & Phelps Securities, LLC M&A advisory and capital raising advisory services are provided in a number of European countries through Duff & Phelps Securities Ltd, UK, which includes branches in Ireland and Germany Duff & Phelps Securities Ltd, UK, is regulated by the Financial Conduct Authority
Additional Resources
To learn more about the latest theory and practice in cost of capital estimation, see Cost of Capital: Applications and Examples 5th edition, by Shannon P Pratt and Roger J Grabowski (John Wiley & Sons, Inc , 2014)
“Shannon Pratt and Roger Grabowski have produced a remarkably comprehensive review of the subject it is a work that valuation practitioners, CFOs, and others will find an invaluable reference ”
– Professor Richard Brealey, London Business School (from the Foreword)
“Estimating the cost of capital is critical in determining the valuation of assets, in evaluating the capital structure of corporations, and in estimating the long run expected return of investments Shannon Pratt and Roger Grabowski have the most thorough text on the subject, not only providing various estimation methods, but also numerous ways to use the cost of capital ”
– Professor Roger G. Ibbotson, Professor Emeritus of Finance at the Yale School of Management, former chairman and founder of Ibbotson Associates, chairman, founder, and CIO of Zebra Capital
Other Duff & Phelps
Valuation Data Resources Published by John Wiley & Sons
In addition to the 2016 International Valuation Handbook – Industry Cost of Capital (this book), other Duff & Phelps valuation data resources published by John Wiley & Sons are as follows:
Valuation Handbook – Guide to Cost of Capital: This annual book includes the data previously published in the Morningstar/Ibbotson Stocks, Bonds, Bills, and Inflation® (SBBI®) Valuation Yearbook and the Duff & Phelps Risk Premium Report The Valuation Handbook – Guide to Cost of Capital can be used to develop cost of equity capital estimates for an individual business, business ownership interest, security, or intangible asset
The Valuation Handbook – Guide to Cost of Capital has been published since 2014 (2014, 2015, and 2016 editions are available with data through December 31, 2013, December 31, 2014, and December 31, 2015, respectively). This book includes three optional quarterly updates (March, June, and September).
Valuation Handbook – Industry Cost of Capital: This annual book is the U.S.-centric version of the 2016 International Valuation Handbook – Industry Cost of Capital (this book) The Valuation Handbook – Industry Cost of Capital provides cost of capital estimates (i e , equity capital, debt capital, and WACC) for approximately 180 U S industries and size groupings (i e , Large-, Mid-, Low-, and Micro-capitalization companies), plus a host of detailed statistics that can be used fo r benchmarking purposes (over 300 critical industry-level data points calculated for each industry, depending on data availability)
The Valuation Handbook – Industry Cost of Capital has been published since 2014 (2014 and 2015 editions are available with data through March 31, 2014 and March 31, 2015, respectively; the 2016 edition, with data through March 31, 2016, is now available) This book includes three optional quarterly updates (June, September, and December)
International Valuation Handbook – Guide to Cost of Capital: This annual book provides countrylevel equity risk premia (ERPs), relative volatility (RV) factors, and country risk premia (CRPs), which can be used to estimate country-level cost of equity capital globally, for up to 188 countries, from the perspective of investors based in any one of up to 56 countries (depending on data availability).
The International Valuation Handbook – Guide to Cost of Capital has been published since 2014 (2014 and 2015 editions are available with data through (i) December 31, 2013 and March 31, 2014, and (ii) December 31, 2014 and March 31, 2015, respectively; the 2016 edition, with data through December 31, 2015 and March 31, 2016, is now available). This book includes an optional Semiannual Update, with data through June and September.
To learn more about cost of capital issues, and to ensure that you are using the most recent Duff & Phelps Recommended ERP, visit www.duffandphelps.com/CostofCapital.
To order additional copies of the International Valuation Handbook – Industry Cost of Capital, or other Duff & Phelps valuation data resources published by John Wiley & Sons, please go to: www.wiley.com/go/ValuationHandbooks.
A New Addition
Stocks, Bonds, Bills, and Inflation® (SBBI®) Yearbook: Starting with the 2016 edition, the Stocks, Bonds, Bills, and Inflation® (SBBI®) Yearbook is now produced by Duff & Phelps, and published by John Wiley & Sons (Hoboken, NJ) The SBBI Yearbook was previously published by Morningstar, Inc under the name “Ibbotson® Stocks, Bonds, Bills, and Inflation (SBBI) Classic Yearbook”
The SBBI Yearbook has been the definitive annual resource for historical U S capital markets data for over 30 years The SBBI Yearbook is based upon the work of Roger G Ibbotson (Professor Emeritus of Finance at the Yale School of Management, former chairman and founder of Ibbotson Associates, Chairman, founder, and CIO of Zebra Capital), and Rex A Sinquefield (co-founder of Dimensional Fund Advisors, which today oversees more than $350 billion in global assets)
The 2016 SBBI Yearbook includes total returns, index values, and statistical analyses of U S large company stocks, small company stocks, long-term corporate bonds, long-term government bonds, intermediate-term government bonds, U S Treasury bills, and inflation from January 1926 through December 2015 (monthly) The SBBI Yearbook has been (and will continue to be) updated annually
The 2016 SBBI Yearbook is on a delayed publication schedule because of the extensive work involved in gathering the data and establishing the necessary data permissions needed to produce the book under new leadership Next year’s 2017 SBBI Yearbook will be back on a “regular” schedule of shipping in March 2017
Anyone serious about investments or investing needs an appreciation of capital market history Such an appreciation, which can be gained from this book, is equally valuable to the individual and institutional investor, practitioners and scholars in finance, economics, and business; portfolio strategists; and security analysts seeking to benchmark their own investment performance The SBBI Yearbook is a thinking person’s guide to using historical data to understand the financial markets and make decisions
To learn more about the 2016 SBBI Yearbook, visit www wiley com/go/sbbiyearbook
Industry Data Exhibits
World Company Set
Industry Data Exhibit 1: World Company Set, in € EUR
Industry Data Exhibit 2: World Company Set, in £ GBP
Industry Data Exhibit 3: World Company Set, in $ USD
European Company Set
Industry Data Exhibit 4: European Union, in € EUR
Industry Data Exhibit 5: European Union, in £ GBP
Industry Data Exhibit 6: European Union, in $ USD
Eurozone Company Set
Industry Data Exhibit 7: Eurozone, in € EUR
Industry Data Exhibit 8: Eurozone, in £ GBP
Industry Data Exhibit 9: Eurozone, in $ USD
United Kingdom Company Set
Industry Data Exhibit 10: United Kingdom, in € EUR
Industry Data Exhibit 11: United Kingdom, in £ GBP
Industry Data Exhibit 12: United Kingdom, in $ USD
Acknowledgements
Authors
Roger J Grabowski, FASA
Managing Director, Duff & Phelps
James P Harrington Director, Duff & Phelps
Carla Nunes
Managing Director, Duff & Phelps
Thank you
The authors give special thanks to Analysts Kevin Madden and Aaron Russo, and intern Andrew Vey of Duff & Phelps for their assistance in assembling the exhibits presented herein, analysis, editing, and quality control We thank Executive Assistant Michelle Phillips for production assistance and Director Kelly Hunter for securing data permissions
Introduction
In early 2016, Duff & Phelps introduced the International Valuation Handbook – Industry Cost of Capital The International Valuation Handbook – Industry Cost of Capital provides the same type of rigorous industry-level analysis published in the U S -centric Valuation Handbook – Industry Cost of Capital 1
The inaugural 2016 International Valuation Handbook – Industry Cost of Capital (this book) includes industry-level analyses for four global economic areas: (i) the “World”, (ii) the European Union, (iii) the Eurozone, and (iv) the United Kingdom. Industries in the book are identified by their Global Industry Classification Standard (GICS) code.2, 3
Each of the four global areas’ industry analyses are presented in three currencies: (i) the Euro (€ or EUR), (ii) the British Pound (£ or GBP), and (iii) the U S Dollar ($ or USD)
The 2016 International Valuation Handbook – Industry Cost of Capital provides industry-level cost of capital estimates (cost of equity, cost of debt, and weighted average cost of capital, or WACC), plus detailed industry-level statistics for sales, market capitalization, capital structure, various levered and unlevered beta estimates (e g , ordinary-least squares (OLS) beta, sum beta, peer group beta, downside beta, etc ), valuation (trading) multiples, financial and profitability ratios, equity returns, aggregate forward-looking earnings-per-share (EPS) growth rates, and more
The 2016 International Valuation Handbook – Industry Cost of Capital is published with data through March 31, 2016 and includes one intra-year Semi-annual Update (data through September 30, 2016) 4
The International Valuation Handbook – Industry Cost of Capital, like the other Duff & Phelps valuation data resources published by John Wiley & Sons, is updated annually The inaugural 2015 version of the International Valuation Handbook – Industry Cost of Capital and its associated Semiannual Update were on a delayed publication schedule because of the extensive work involved in gathering the data, establishing the needed data permissions, developing new procedures and
1 The U S -centric Valuation Handbook – Industry Cost of Capital (Wiley & Sons) provides cost of capital estimates (i e , equity capital, debt capital, and WACC) for approximately 180 U S industries and size groupings (i e , large-, mid-, low-, and micro-capitalization companies), plus a host of detailed statistics that can be used for benchmarking purposes (over 300 critical industry-level data points calculated for each industry, depending on data availability) To purchase copies of the Valuation Handbook – Industry Cost of Capital, or other Duff & Phelps valuation data resources published by John Wiley & Sons, please go to: www wiley com/go/ ValuationHandbooks
2 In this book, “World” companies are defined as companies that (i) are components of the MSCI ACWI IMI Index, and (ii) satisfy the rigorous screening requirements that are employed to define the company sets used herein The MSCI ACWI IMI captures large-, mid-, and small-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries With over 8,000 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set To learn more, visit: https://www msci com/resources/factsheets/index fact sheet/msci-acwi-imi pdf
3 In 1999, MSCI and Standard & Poor’s developed the Global Industry Classification Standard (GICS), seeking to offer an efficient investment tool to capture the breadth, depth, and evolution of industry sectors GICS is a four-tiered, hierarchical industry classification system It consists of 10 “sectors” (2-digit GICS), 24 “industry groups” (4-digit GICS), 67 “industries” (6-digit GICS), and 156 “sub-industries” (8-digit GICS) For more information, visit: www msci com
4 The Semi-annual Update is optional, and is not sold separately
methodologies to appropriately deal with international financial data in multiple currencies, and producing the inaugural 2015 book and its associated Semi-annual Update
In 2016 and beyond, the delivery schedule for the International Valuation Handbook – Industry Cost of Capital and its associated Semi-annual Update will be modified because of timing when complete data will be available from our data sources (i e , some of the “international” data needed to produce the book is on a delayed release schedule relative to, say, U S data) This modified schedule applies only to the International Valuation Handbook – Industry Cost of Capital and its associated Semi-annual Update, and does not apply to any other Duff & Phelps valuation data resources published by John Wiley & Sons The modified schedule is as follows:
The annual (hardcover) International Valuation Handbook – Industry Cost of Capital will be published with the same “data through” date (March-end), and be delivered in midSeptember
The associated (PDF format) Semi-annual Update to the International Valuation Handbook – Industry Cost of Capital will be published with the same “data through” date (September-end), and be delivered in mid-March
Who Should Use the International Valuation Handbook – Industry Cost of Capital 5
The 2016 International Valuation Handbook – Industry Cost of Capital is designed to serve the needs of:
Traditional professional valuation analysts when valuing public and private companies with operations located in multiple countries
Corporate finance officers when pricing or evaluating proposed cross-border mergers and acquisitions (M&A), raising private or public equity in different jurisdictions, and/or dealing with cross-border stakeholder disputes
Corporate officers when evaluating investments for capital budgeting decisions in different countries.
Investment bankers when pricing initial (or follow-on) public offerings, proposed M&A transactions, and private equity financing for target entities located in a variety of countries
5 Wiley publishes two Duff & Phelps data resources that provide essential “international” valuation data: (i) the 2016 International Valuation Handbook – Industry Cost of Capital (this book), which provides industry-level valuation data for the World, EU, Eurozone, and United Kingdom, in three different currencies (Euros, British Pounds, and U S Dollars), and (ii) the 2016 International Valuation Handbook – Guide to Cost of Capital, which includes country-level valuation data in expansive data exhibits that provide (i) countrylevel country risk premia (CRPs), (ii) relative volatility (RV) factors, and (iii) equity risk premia (ERPs) which can be used to estimate country-level cost of equity capital globally, for up to 188 countries, from the perspective of investors based in any one of up to 56 countries To purchase copies of Duff & Phelps valuation data resources published by John Wiley & Sons, please go to: www wiley com/go/ValuationHandbooks
International Valuation Handbook
Industry Cost of Capital
Private equity investors when pricing or evaluating proposed cross-border M&A transactions, making capital budgeting decisions for entities located in different countries, or updating quarterly valuations of portfolio companies with operations located in foreign countries
Portfolio managers evaluating investments outside of the country where they are based
Real estate investors when pricing or evaluating proposed real estate investments, o r updating valuations of portfolio companies with operations located in foreign countries.
CPAs and valuation professionals dealing with either valuations for financial and tax reporting purposes, or with dispute and bankruptcy valuation issues involving companies with operations located in multiple countries
Transfer pricing economists dealing with valuation and transfer of intellectual property and other intangible assets across jurisdictions
Judges and attorneys dealing with valuation issues in M&A, shareholder and partner disputes, damage cases, solvency cases, bankruptcy reorganizations, regulatory rate setting, transfer pricing, and financial reporting involving entities with operations located in multiple jurisdictions
Industry-Level Cost of Capital Estimates
The 2016 International Valuation Handbook – Industry Cost of Capital provides five (5) cost of capital estimates for each of the industries covered in the book:6, 7
1) Capital Asset Pricing Model (CAPM)8
2) 1-Stage Discounted Cash Flow (DCF) model
3) 3-Stage DCF model
4) Cost of Debt
5) Weighted Average Cost of Capital (WACC)9
6 Depending on data availability; some industries may not include all estimates
7 A recent paper by Professors Eugene Fama and Ken French discusses the results of an application of a five-factor cost of equity capital estimation model to European companies (and companies in other global regions) We are studying the feasibility of addin g this model to future editions of the International Valuation Handbook – Industry Cost of Capital See Eugene F Fama and Kenneth R French, “International Tests of a Five-Factor Asset Pricing Model”, Tuck School of Business Working Paper No 2622782, http://ssrn com/abstract=2622782
8 CAPM estimates of cost of equity capital presented herein are calculated prior to any additional adjustments for “size”, country risk, or “company-specific” risk premia that the individual valuation analyst may deem appropriate
9 WACC is calculated using the cost of equity capital estimated by the CAPM, 1-Stage DCF, and 3-Stage DCF models (in turn), plus the cost of preferred capital input and the cost of debt capital input
Industry-level Statistics, Capital Structure, Valuation Multiples, and Betas
The 2016 International Valuation Handbook – Industry Cost of Capital also provides detailed statistics for sales, total assets, industry performance, capital structure, various levered and unlevered beta estimates (e g , ordinary least squares (OLS) beta, sum beta, peer group beta, downside beta, etc ), valuation (trading) multiples, financial and profitability ratios, equity returns, aggregate forward-looking earnings-per-share (EPS) growth rates, and more
Methodology
“Data Through” Date
All cost of capital estimates and other statistics presented herein are calculated with the most recent monthly or fiscal year data through March 31, 2016
Countries of Incorporation
All companies included in the analyses herein are incorporated or legally registered in countries that are constituents of the four global areas covered in this book (the World, the European Union, the Eurozone, and the United Kingdom), in accordance with Standard & Poor’s (S&P’s) Research Insight Global Vantage database
Company Type
All companies used in the analyses presented herein are publically-held entities
Currencies Used
The industry analyses included in each of the four global areas covered in this book are, in turn, separately calculated and presented in each of the following three currencies: (i) the Euro (€ or EUR), (ii) the British Pound Sterling (£ or GBP), and (iii) the U S Dollar ($ or USD)
The analyses herein are expressed in three different currencies for a reason According to corporat e finance theory, the currency of the projections should always be consistent with the currency of the discount rate In practice, this means that the inputs used to derive a discount rate (an input in the denominator of a DCF model) should be in the same currency used to project cash flows (the numerator in a DCF model) For example, if the projections are denominated in Euros, then the riskfree rate and equity risk premium inputs should also be denominated in Euro terms There are two basic methods to address foreign currency cash flows in valuations, assuming the analysis is being conducted in nominal terms:
Perform the valuation in the local (foreign) currency, discount the projected cash flows with a local (foreign) currency denominated discount rate (i e , using foreign currency inputs), and convert the resulting value into the home currency (e g , EUR, GBP, USD) at the spot exchange rate
Convert cash flows at a forecast exchange rate into the home currency (e g , EUR, GBP, USD) and discount the projected cash flows with a home country discount rate (using home currency inputs) In this case, the forecast exchange rate already includes the risk associated with exchange rate fluctuations
To be clear, analysts using the information in the 2016 International Valuation Handbook – Industry Cost of Capital (this book) should select the industry exhibits expressed in the same currency that matches the currency used to project their cash flows For example, if you are performing analyses where the cash flow projections are denominated in Euros (EUR), then you should select the industry exhibits that are also presented in Euros Similarly, if you are performing analyses with cash flows projections in British Pounds (GBP), then select industry exhibits that are also presented in Pounds Finally, if you are performing analyses with cash flows projections in U S Dollars (USD), then select industry exhibits that are also expressed in USD
Global Areas Covered
The 2016 International Valuation Handbook – Industry Cost of Capital provides industry-level analyses of industries comprised of companies incorporated or legally registered in each of four global areas, as summarized below:10
The World: “World” companies are defined as companies that (i) are components of the MSCI All Country World Index (ACWI) Investable Market Index (IMI) (“MSCI ACWI IMI”), and (ii) satisfy the rigorous screening requirements that are employed to define the company sets used herein 11
Approximately 80% of the 5,094 companies included in the industry-level World analyses herein are companies incorporated or legally registered in the EU, the U S , Asia, and “All Others” as summarized in Exhibit 1 12
10 Source of company incorporation/legal registration information: S&P Research Insight Global Vantage database
11 The MSCI ACWI IMI captures large-, mid-, and small-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries With over 8,000 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set To learn more, visit: https://www msci com/resources/factsheets/index fact sheet/msci-acwi-imi pdf
12 Companies incorporated or legally registered in “Asia” are defined here as those companies that are incorporated or legally registered in the 11 countries that are constituents of the MSCI AC Asia Index These countries are: China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand To learn more, visit: https://www msci com/documents/10199/9410ddfc-4561-4268-8e33-42b1b43d26d7
Exhibit 1: Percentage of Companies in the “World” Company Set Incorporated or Legally Registered in (i) the EU, (ii) the United States, (iii) Asia, and (iv) “All Others”
The European Union (EU): The EU is a unique economic and political partnership between 28 European countries that together cover much of the continent The EU has approximately 510 million inhabitants, representing the world’s third largest population after China and India While the official currency of many EU members is the Euro, there are significant exceptions to this (e g , the United Kingdom's official currency is the Pound Sterling; the official currency of Sweden is the Swedish Krona, etc ) By surface area, France is the biggest EU country and Malta is the smallest EU country By size of the economy (nominal gross domestic product measured in Euros), Germany is the largest EU country, whereas Malta is still the smallest The 28 countries included in the EU analyses herein are summarized in Exhibit 2 13, 14, 15
Exhibit 2: The 28 Countries that Comprise the EU as of March 31, 2016
Austri a L a tvi a Bul ga ri a Bel gi um L i thua ni a Croa ti a
Cyprus Luxembourg Cz ech Republ i c
Estoni a Ma l ta Hung a ry
Fi nl a nd Netherl a n ds Po l a nd
F ra nce Portuga l Ro ma ni a
Germa ny S l ova k i a S weden
Greece S l oveni a D enma rk
Irel a nd S pa i n U ni ted Ki ngdom
Ita l y
13 Source of EU country constituents is the European Commission “Economic and Financial Affairs” website To learn more, visit: http://ec europa eu/economy finance/index en htm
14 Source for nominal GDP, visit: http://ec europa eu/eurostat/web/national-accounts/overview
15 The Euro is not the currency of all EU Member States Two countries (Denmark and the United Kingdom) have ‘opt-out’ clauses in the Treaty exempting them from participation, while the remainder (several of the more recently acceded EU members plus Sweden) have yet to meet the conditions for adopting the single currency To learn more, visit: http://ec europa eu/economy finance/euro/index en htm
The Eurozone: The Eurozone consists of those Member States of the EU that have adopted the Euro (€) as their currency Today, around 340 million citizens in 19 countries live in the Eurozone The 19 countries included in the Eurozone analyses herein are summarized in Exhibit 3 16
Exhibit 3: The 19 Countries that Comprise the Eurozone
Austri a L a tvi a
Bel gi um L i thua ni a Cy prus Luxembourg
Estoni a M a l ta
F i nl a nd Netherl a nds
F ra nce Portuga l
Germa ny S l ov a ki a
Greece S l ov eni a
Irel a nd S pa i n
Ita l y
The United Kingdom: The United Kingdom is an active member of the EU, but is not a Eurozone member (as of March 31, 2016) The official currency of the United Kingdom is the Pound Sterling (£)
16 Source of Eurozone country constituents is the European Commission “Economic and Financial Affairs” website To learn more, visit http://ec europa eu/economy finance/index en htm
Industry Identification by GICS Code
The 2016 International Valuation Handbook – Industry Cost of Capital is published with industries identified by Global Industry Classification Standard (GICS) code 17 GICS is a four-tiered, hierarchical industry classification system 18
GICS codes can be grouped into progressively more specific industry levels, from the least specific (i e , broadest) 2-digit “sector” GICS level, to more specific 4-digit “industry group” GICS, to even more specific 6-digit “industry” GICS, and finally to the most specific (i e , narrowest) 8-digit “subindustry” GICS level 19 In the industry-level analyses herein, 2-, 4-, and 6-digit GICS codes are analyzed in each of the four global areas covered 8-digit GICS are not analyzed
In this book, rather than using three different terms (“sector”, “industry group”, and “industry” for 2-, 4-, and 6-digit GICS, respectively), we refer to each set of analysis – regardless of whether th e analysis is at the 2-, 4-, or 6-digit GICS level – simply as “industry” analysis
More specific (i e , narrower) GICS “roll up” into less specific (i e , broader) GICS For example, in Exhibit 4, GICS 30 (Consumer Staples) is a broader, less specific category than GICS 3020 (Food, Beverage, & Tobacco), which in turn is less specific than GICS 302010 (Beverages) The most specific GICS shown in Exhibit 4 is the 8-digit GICS 30201030 (Soft Drinks)
All GICS that are “duplicative” are eliminated For example, if GICS 302010 and GICS 3020 bot h comprise the same exact companies, the broadest GICS (GICS 3020) is kept, and the less broad GICS (GICS 302010) is discarded
Exhibit 4: Global Industry Classification Codes (GICS) Vary in Specificity
18 In 1999, MSCI and Standard & Poor’s (S&P) developed the Global Industry Classification Standard (GICS) To learn more about Standard & Poor’s, visit www standardandpoors com To learn more about MSCI, visit www msci com
19 The total number of 2-digit, 4-digit, 6-digit, and 8-digit GICS industry codes available (as of the “data through” date of this book, March 31, 2016) are 10, 23, 65, and 147, respectively S&P and MSCI regularly review the GICS industrial classification system, and revise the universe of GICS as needed
Minimum Number of Companies Required
An industry must have at least five (5) companies in order to be included in the analyses presented herein
Data Sources
Company-level Data
The primary source of company-level data (income statement and balance sheet data, price data, shares outstanding, etc ) used in the calculation of the industry statistics presented herein is S&P’s Research Insight Global Vantage database 20
Corporate Bond Yield and Credit Ratings
Bloomberg and Thomson Reuters Eikon are the source of corporate bond yield data (used as an input in the calculation of cost of debt). S&P credit ratings by company, when available, are sourced from S&P Capital IQ database. For companies that do not have an S&P credit rating, a long-term credit score from S&P Global Market Intelligence Credit Analytics is substituted. For companies without an S&P credit rating, or a credit score from S&P Global Market Intelligence Credit Analytics, an average credit rating for the most specific GICS code in which the company appears, and in which there are at least five companies with an S&P credit rating and/or credit score from S&P Global Market Intelligence Credit Analytics, is substituted For example, if hypothetical Company ABC in GICS 251010 does not have a credit rating, the average credit rating for the other companies in GICS 251010 are used If GICS 251010 does not have at least five other companies with credit ratings, then the calculation is performed using GICS 2510 (up one level, and thus less specific), etc 21 For additional details on how synthetic ratings were estimated, see the section entitled “Cost of Debt”
Beta Calculation Inputs
The MSCI ACWI IMI is the market benchmark used in all individual company (and portfolio) beta calculations for industries composed of companies in the “World” company set 22
The MSCI Europe Index is the market benchmark used in all individual company (and portfolio) beta calculations in the analyses of industries in (i) the European Union, (ii) the Eurozone, and (iii) the United Kingdom 23
22 The MSCI ACWI IMI captures large-, mid-, and small-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries With over 8,000 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set To learn more, visit: https://www msci com/resources/factsheets/index fact sheet/msci-acwi-imi pdf
23 The MSCI Europe Index captures large- and mid-cap representation across 15 developed markets countries in Europe, has over 400 constituents, and covers approximately 85% of the free float-adjusted market capitalization across the European developed markets equity universe The developed countries in the MSCI Europe Index are: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom To learn more, visit: https://www msci com/resources/factsheets/index fact sheet/msci-europe-index pdf
To calculate the debt betas used as an input in the calculation of “asset” (i e , unlevered) betas, Barclays Corporate total return indices were used 24
Growth Rates
Thomson Reuters I/B/E/S (Institutional Broker’s Estimate System) Consensus Estimates database was the source used for analysts’ estimates of future earnings growth Most analysts define longterm growth as an estimated average rate of earnings growth for the next three to five years The exact time frame will differ from broker to broker These growth rates are utilized in the 1-stage DCF model and in the first and second stages of the 3-stage DCF model The I/B/E/S long-term growth rate estimates were retrieved from S&P’s Capital IQ database 25
The long-term growth rate used as an input in the third stage (years 11+) of the 3-stage DCF model is based on average real Gross Domestic Product (GDP) growth estimates (rounded) for years 2026 2046 for the World, European Union, Eurozone, and the United Kingdom, respectively The source of the underlying data used for these estimates is IHS Markit 26 A summary of the long-term real GDP growth rates used in the calculation of this method are provided in Exhibit 5
Exhibit 5: Long-term Real GDP Growth Rates Used as Inputs in the Calculation of the Long-term Growth Rates Used in the Third Stage (years 11+) of the 3-Stage DCF Model (as of March 31, 2016)
These average real GDP growth estimates are then (i) reduced for a “dilution” effect, and then (ii) increased by the average long-term inflation estimates (rounded) for years 2026 2046 associated with the currency of the analysis 27 Specifically, if the analysis is presented in Euros, the A rea € EUR £ GB P $ USD
25 Also, see “Methodology for Estimates – A Guide to Understanding Thomson Reuters Methodologies, Terms and Policies for I/B/E/S Estimates Databases”, April 2014, by Thomson Reuters
26 Source of underlying data used in the calculation of (i) long-term average real GDP growth estimates and (ii) long-term average inflation forecasts: IHS Markit Ltd IHS (NasqdGS: INFO) provides critical information, analytics, and solutions to customers in business, finance, and government worldwide To learn more about IHS Markit, visit: www ihsmarkit com
27 Long-term growth is based on long-term expected GDP growth attributable to the existing companies included in the industries plus expected inflation Long-term GDP growth is a function of existing companies and new companies Long-term GDP growth estimates were reduced to account for the portion of the expected growth attributable to new companies Source of estimate of dilution for the U S GDP is the work of Professor Bradford Cornell See Bradford Cornell, Economic Growth and Equity Investing, Financial Analysts Journal, Volume 66, Number 1, pp 54–64 To learn more, visit: http://www hss caltech edu/~bcornell/ We adjusted the concluded dilution for the U S for the differences in new companies’ contribution to GDP growth in the World, EU, Eurozone, and the United Kingdom
long-term Eurozone inflation estimates are used Likewise, if the analysis is presented in British Pounds, the long-term U K inflation estimates are used Finally, if the analysis is presented in U S Dollars, the long-term U S inflation estimates are used A summary of the long-term inflation estimates used in the calculation of this method are provided in Exhibit 6
Exhibit 6: Long-term Inflation Forecasts Used as Inputs in the Calculation of the Long-term Growth Rates Used in the Third Stage (years 11+) of the 3-Stage DCF Model (as of March 31, 2016)
C urrenc y Inflation Forec as t
€ EU R 1 8%
£ GBP 2 0%
$ U S D 2 3%
These steps are used to arrive at a nominal long-term growth estimate for equity earnings The result of these procedures is then rounded to the nearest 25 basis points (b p ):28
For example, as of March 31, 2016 the estimated long-term growth input in the third stage (years 11+) of the 3-stage DCF model, using projections denominated in Euros, for companies and industries located in the Eurozone is 2 75%, calculated in the following fashion:29
Long-term Growth Estimate = Long-term Real GDP (estimated) x Adjustment Factor for Dilution + Long-term Inflation Forecast
2 67% = 1 3% x 2/3 + 1 8%
This 2 67% is then rounded to the final result, 2 75%, which is the “nearest 25 b p” A summary of the resulting long-term growth rates used as an input in the third stage of the 3-stage DCF model for each of the four areas, and in each of the three currencies, is found in Exhibit 7
28 A basis point, or b p , is a common unit of measure for interest rates and other percentages in finance One basis point is equivalent to 0 01%
29 This same framework is used in the U S -centric Valuation Handbook – Industry Cost of Capital The Valuation Handbook – Industry Cost of Capital provides cost of capital estimates (i e , equity capital, debt capital, and WACC) for approximately 180 U S industries and size groupings (i e , large-, mid-, low-, and micro-capitalization companies), plus a host of detailed statistics that can be used for benchmarking purposes (over 300 critical industry-level data points calculated for each industry, depending on data availability) The Valuation Handbook – Industry Cost of Capital has been published since 2014 (2014, 2015, and 2016 editions are available with data through March 31, 2014, March 31, 2015, and March 31, 2016, respectively) This book includes three optional quarterly updates (June, September, and December) To purchase copies of the U S -centric Valuation Handbook – Industry Cost of Capital, or other Duff & Phelps valuation data resources published by John Wiley & Sons, please go to: www wiley com/go/ValuationHandbooks
Exhibit 7: Concluded Long-term Growth Rates Used as an Input in the Third Stage of the 3-Stage DCF Model for Each of the Four Areas, in Each of the Three Currencies (as of March 31, 2016)
Derivation of Company Tax Rates
Company tax rates (used as an input in the calculation of weighted average cost of capital (WACC)) are sourced from S&P.
For companies that did not have tax rate information, the market-capitalization-weighted tax rate for the most specific GICS code in which the company appears, and in which there are at least five companies with tax rates, is substituted For example, if hypothetical Company ABC in GICS 251010 (Auto Components) does not have tax rate information, the market-capitalization-weighted tax rate for the other companies in GICS 251010 is used If GICS 251010 does not have at least five other companies with tax rates, then the calculation is performed using GICS 2510 (“Automobiles & Components”, which is up one level, and thus less specific), etc This process is continued until a GICS with at least five companies which have tax rates is identified Independently calculated sets of tax rates were calculated in this fashion as of March 31, 2016, for each of the four global areas (World, European Union, Eurozone, and United Kingdom)
The risk-free rate and the equity risk premium (ERP) are important inputs in the development of cost of capital estimates
A risk-free rate is the return available, as of the valuation date, on a security that the market generally regards as free of the risk of default The ERP (often interchangeably referred to as the market risk premium) is defined as the extra return over the expected yield on “risk-free” securities, that investors expect to receive from an investment in a diversified portfolio of common stocks, represented by a broad-based market index
For a detailed discussion on how to estimate the ERP and risk-free rate, see the 2016 Valuation Handbook – Guide to Cost of Capital, Chapter 3, “Basic Building Blocks of the Cost of Equity Capital – Risk-free Rate and Equity Risk Premium” To download free copies of related cost of capital articles, visit: www duffandphelps com/CostofCapital
The Risk-free Rate and Equity Risk Premium: Interrelated Concepts
As further explained in the U S -centric 2016 Valuation Handbook – Guide to Cost of Capital, when developing cost of capital estimates, the valuation analyst should match the term of the risk-free rate used in the Capital Asset Pricing Model (CAPM) or build-up formulas with the duration of the expected net cash flows of the business, asset, or project being evaluated
In addition, the term of the risk-free rate should also match the term of the risk-free rate used to develop the ERP
The use of (i) long-term government bonds (issued by governments considered “safe”), and (ii) an ERP estimated relative to yields on long-term bonds most closely match the investment horizon and risks that confront business managers who are making capital allocation decisions, as well as valuation analysts who are valuing a “going concern” business In many of the cases in which one is valuing a business, a “going concern” assumption is made (i e , the life of the business is assumed to be indefinite) Therefore, selecting longer-term bond yields (e g , 20 years) issued by governments considered “safe” as a proxy for the risk-free rate is appropriate
For valuations denominated in U S Dollars, valuation analysts have typically used the spot yield to maturity (as of the valuation date) on U S government securities as a proxy for the risk-free rate
The two most commonly used risk-free bond maturities have been the 10- and 20-year U S government bond yields
For valuations denominated in Euros, it is not unusual for German data to be used as inputs in valuation analyses in Europe. For example, the yields on German government debt instruments are often used as the risk-free security. In determining the risk-free rate in Euros, government bond yields with a term of 10, 15, or 30 years are common.
For valuations denominated in British Pounds, yields on U K government debt instruments are used as the risk-free security In determining the risk-free rate in British Pounds, government bond yields with a term of 10, 20, or 30 years are common
Methods of Risk-free Rate Normalization
Beginning with the global financial crisis of late 2008 (the “Financial Crisis”), analysts have had to reexamine whether the “spot” rate is still a reliable building block upon which to base their cost of equity capital estimates
After the start of the Financial Crisis, the increased demand for liquid and risk-free assets led to further decline in yields on assets that are considered close to risk-free For countries considered as safe-havens, such as the United States, United Kingdom, and Germany, there was a reduction in yields partially driven by a “flight to quality,” with government bonds preferred by investors relative to other asset classes
This was further exacerbated by the ensuing Euro sovereign debt crisis in early 2010, which led investors to further flights to quality The effects from the Euro sovereign debt crisis are still lingering at the date of publication of this book
At the same time, quantitative easing (“QE”) programs and similar policies were launched by major central banks around the world, including the Federal Reserve (the “Fed”) in the United States, the Bank of England in the United Kingdom, and the European Central Bank (the “ECB”) in the Eurozone In simple terms, these QE policies involve massive purchases of government securities and other financial assets by central banks, thereby driving down yields on these securities even further
The Financial Crisis challenged long-accepted practices and highlighted potential problems of simply continuing to use the spot yield-to-maturity on a safe government security as the risk-free rate, without any further adjustments
During periods in which risk-free rates appear to be abnormally low due to flight to quality or massive central bank monetary interventions, valuation analysts may want to consider normalizing the risk-free rate By “normalization” we mean estimating a risk-free rate that more likely reflects the sustainable average return of long-term government bond yields
Normalization of risk-free rates can be accomplished in a number of ways, including (i) simple averaging, or (ii) various “build-up” methods
The first normalization method entails calculating averages of yields to maturity on long-term government securities over various periods This method’s implied assumption is that government bond yields revert to the mean
The second normalization method entails using a simple build-up method, where the component s of the risk-free rate are estimated and then added together Conceptually, the risk-free rate can be (loosely) illustrated as the return on the following two components:30
Risk-free rate = Real Rate + Expected Inflation
For more information on how these normalization methods can be applied, refer to the 2016 Valuation Handbook – Guide to Cost of Capital
We relied on both of the aforementioned normalization methods to estimate long-term risk-free rates as of March 31, 2016 for analyses conducted in Euros, British Pounds, and U S Dollars German government bond and inflation expectations were used as the basis to derive a risk-free rate for projections expressed in Euros
A summary of the long-term normalized risk-free rates used in the calculations of this book are provided in Exhibit 8.
30 This is a simplified version of the “Fisher equation”, named after Irving Fisher Fisher’s “The Theory of Interest” was first published by Macmillan (New York), in 1930
Exhibit 8: Long-term Normalized Risk-free Rates (Rf) Used as Inputs in the Calculations in This Book (as of March 31, 2016)
A summary of the long-term ERPs used in the calculations of this book are provided in Exhibit 9 31, 32
Exhibit 9: Long-term Equity Risk Premium (ERP) Used as Inputs in the Calculations in This Book (as of March 31, 2016)
Company Screening Process
The company screening process for the analyses presented herein mimics the rigorous screening process employed in the Risk Premium Report Study Exhibits that are published in the Valuation Handbook – Guide to Cost of Capital 33
The result of this rigorous screening process is a set of “healthy” companies (“main set”) that are (i) “seasoned” companies in that they have been traded for several years, (ii) have been selling at least a minimal quantity of products or services, and (iii) have been able to achieve a degree of positive
31 ERP estimates in USD were based on Duff & Phelps’ U S recommended ERP, as further discussed in the U S -centric 2016 Valuation Handbook – Guide to Cost of Capital
32 ERP estimates in GBP, EUR, as well as the World ERP were based on data published in Chapter 3, “International Equity Risk Premia” of the 2016 International Valuation Handbook – Guide to Cost of Capital ERP estimates in GBP were based on the longest available horizon historical ERP for the United Kingdom in local currency ERP estimates in EUR were based on the longest available horizon historical ERP for Germany in local currency Finally, the World ERP was based on the World historical (arithmetic average) ERP as estimated by Elroy Dimson, Paul Marsh, and Mike Staunton, Credit Suisse Global Investment Returns Sourcebook 2016
33 The Valuation Handbook – Guide to Cost of Capital includes the data previously published in the Morningstar/Ibbotson Stocks, Bonds, Bills, and Inflation (SBBI) Valuation Yearbook and the Duff & Phelps Risk Premium Report The Valuation Handbook – Guide to Cost of Capital can be used to develop cost of equity capital estimates for an individual business, business ownership interest, security, or intangible asset To purchase copies of the Valuation Handbook – Guide to Cost of Capital, or other Duff & Phelps valuation data resources published by John Wiley & Sons, please go to: www wiley com/go/ValuationHandbooks
cash flow from operations. “High-financial-risk” companies are identified and analyzed separately. In Exhibit 10, the resulting company counts for the main set of companies used in the calculations of this book are provided
Note that the respective company sets for each of the four areas, in each of the three currencies, are identical (only the currency changes, not the constituency of the company set) For example, the same 4,384 companies in the main set of “World” companies in € EUR are the same 4,384 companies in the main set of “World” companies in £ GBP and $ USD This is also true for the company sets in the EU, the Eurozone, and the United Kingdom
Exhibit 10: Company Counts, Main Sets of “Healthy” Companies for the World, EU, Eurozone, and United Kingdom (as of March 31, 2016)
Ar ea € EUR £ G BP $ USD
Worl d 4 ,3 84 4,384 4,384
Europea n U ni on 1 ,8 52 1,852 1,852 Eurozone 942 942 942 U ni ted Ki ngdom 431 431 431
Identifying Initial Company Sets
The companies in the “healthy” main set of companies and in the set of high-financial-risk companies used in the analyses herein are pure-play companies “Pure-play” companies, as defined herein, derive at least 75% of their revenues from a single GICS code To view the full list of companies in any of the Industry Data Exhibits herein, download the “2016 International Industry Data Exhibit Company List Report” at www DuffandPhelps com/CostofCapital
Identifying the Initial “World” Company Set
The initial list of companies in the “World” set is based on the companies that are constituents of the MSCI ACWI IMI index as of March 31, 2016 34
All companies in the initial set of World companies that did not have a valid 8-digit Global Industry Classification Standard (GICS) code assigned to them in the S&P Global Vantage database were discarded
Identifying the Initial EU, Eurozone, and United Kingdom Company Sets
The initial list of companies in the European Union, Eurozone, and United Kingdom company sets are defined as companies in the pre-defined S&P Global Vantage database “$G” set and “$F” set, as
34 The MSCI ACWI IMI captures large, mid and small cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries With over 8,000 constituents, the index is comprehensive, covering approximately 99% of the global equity investment opportunity set To learn more, visit: https://www msci com/resources/factsheets/index fact sheet/msci-acwi-imi pdf
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the continuity of life; that suffering is inseparable from life; that all life is suffering; and that suffering is to be gotten rid of by the suppression of desires, and by the extinction of personal existence.”
Here he makes his first great contrast in the teachings of Christ and Gautama, and says in part: “It is noteworthy that both Christianity and Buddhism agree in asserting that all creation groaneth and travaileth in pain, in suffering, in tribulation. But mark the vast, the vital distinction in the teaching of each. The one taught men to be patient under affliction, and to aim at the utter annihilation of the suffering body.” Further: “But, say the admirers of Buddhism, at least you admit that the Buddha taught men to avoid sin, and to aim at purity and holiness of life! Nothing of the kind. The Buddha had no idea of sin as an offense against God; no idea of true holiness. What he said was, Get rid of the demerit of evil actions, and accumulate a stock of merit by good actions. And let me remark here, that the determination to store up merit, like capital at a bank, is one of those inveterate propensities of human nature, one of those deep-seated tendencies in humanity which nothing but the divine force imparted by Christianity can ever eradicate. It is forever cropping up in the heart of man, as much in the West as in the East, as much in the North as in the South; forever reasserting itself like a pestilential weed, or like tares amidst wheat, forever blighting the fruit of those good instincts which underlie man’s nature everywhere.”
He shows the contrast of Gautama and Christ; the former claiming to be self-sent, having no divine commission and no external revelation, while the latter claimed to be sent from God; to be the Son of God, whose every word has divine authority; that the gospel is to be proclaimed to every man in all generations, and that Christ himself was the Way, the Truth, and the Life. He proceeds to contrast the Christian Bible with the Buddhist: “The characteristics of the Christian’s Bible are that it claims to be a supernatural revelation, yet it attaches no mystic, talismanic virtue to the mere sound of words. On the other hand, Buddhism utterly repudiates all claim to be a supernatural revelation; yet the very sound of its words is believed to possess a meritorious efficacy capable of elevating any
one who hears it to heavenly abodes in future existences. In illustration, I may advert to a legend current in Ceylon, that once on a time five hundred bats lived in a cave where two monks daily recited the Buddha’s law. These bats gained such merit by simply hearing the sound of the words, that when they died they were all reborn as men, and ultimately as gods.”
We are given another contrast in the kinds of self-sacrifice taught by the two systems. “But again I hear the admirers of Buddhism say: Is it not the case that the doctrine, like the doctrine of Christ, has self-sacrifice as its keynote? Well, be it so. I admit that he related of himself that, on a particular occasion in one of his previous births, he plucked out his own eyes, and that on another he cut off his own head as a sacrifice for the good of others; and that again, on a third occasion, he cut his own body to pieces to redeem a dove from a hawk. Yet note the vast difference of the sacrifice taught by the two systems. Christianity demands the suppression of selfishness; Buddhism demands the suppression of self, with the one object of extinguishing all consciousness of self. In the one the true self is elevated and intensified. In the other the true self is annihilated by a false form of non-selfishness, which has for its real object not the good of others, but the annihilation of the Ego, the utter extinction of the illusion of personal individuality.”
The doctrines which Christ and Gautama bequeathed to their followers present an equally great contrast. From the vast difference between them it is comparatively easy to believe the statement from Christ that he brought a divine revelation, and from Gautama that he was self-sent and had no revelation to make to his followers. The contrast between the two systems has been arranged by the same author.
“According to Christianity: Fight, and overcome the world. According to Buddhism: Shun the world, and overcome it.
“According to Christianity: Expect a new earth when the present earth is destroyed; a world renewed and perfected; a purified world in which righteousness is to dwell forever. According to Buddhism: Expect a never-ending succession of evil worlds coming into
existence, developing, decaying, perishing, and reviving, and all equally full of everlasting misery, disappointment, illusion, change, and transmutations.
“According to Christianity, bodily existence is subject to only one transformation. According to Buddhism, bodily existence is continued in six conditions, through countless bodies of men, animals, demons, ghosts, and dwellers in various hells and heavens; and that, too, without any progressive development, but in a constant jumble of metamorphoses and transmutations.
“Christianity teaches that life in heaven can never be followed by a fall to a lower state. Buddhism teaches that life in a higher heaven may be succeeded by a life in a lower heaven, or even by a life on earth or in one of the hells.
“According to Christianity, the body of a man may be the abode of the Spirit of God. According to Buddhism, the body, whether of men or higher beings, can never be the abode of anything but evil.
“According to Christianity: Present your bodies as living sacrifices, holy, acceptable to God, and expect a change to a glorified body hereafter. According to Buddhism: Look to final deliverance from all bodily life, present and to come, as the greatest of all blessings, highest of all boons, and loftiest of all aims.
“According to Christianity, a man’s body can never be changed into the body of a beast, or bird, or insect, or loathsome vermin. According to Buddhism, a man, and even a god, may become an animal of any kind, and even the most loathsome vermin may again become a man or a god.
“According to Christianity: Stray not from God’s ways; offend not against his holy laws. According to Buddhism: Stray not from the eight-fold path of the perfect man, and offend not against yourself and the perfect man.
“According to Christianity: Work the works of God while it is day. According to Buddhism: Beware of action, as causing rebirth, and aim at inaction, indifference, and apathy.
“According to the Christian Bible: Regulate and sanctify the heart, desires, and affections. According to the Buddhist: Suppress and destroy them utterly, if you wish for true sanctification.
“Christianity teaches that in the highest form of life, love is intensified. Buddhism teaches that in the highest state of existence, all love is extinguished.
“According to Christianity: Go and earn your own bread and support your family. Marriage, it says, is honorable and the bed undefiled, and married life is a field on which holiness may grow and develop. Nay, more: Christ himself honored a wedding with his presence, and took up little children in his arms and blessed them. Buddhism, on the other hand, says: Avoid married life; shun it as if it were a burning of live coals; or, having entered on it, abandon wife, children, and home, and go about as celibate monks, engaging in nothing but in meditation and recitation of the Buddha’s Law—that is to say, if you aim at the highest degree of sanctification.”
Then comes greatest of all distinctions, which separates Christianity and Buddhism.
“Christianity regards personal life as the most sacred of all possessions. Life, it seems to say, is no dream, no illusion. ‘Life is real. Life is earnest.’ Life is the most precious of all God’s gifts. Nay, it affirms of God himself that he is the highest example of intense life, of intense personality, the great ‘I Am That I Am,’ and teaches us that we are to thirst for a continuance of personal life as a gift from him, nay, more, that we are to thirst for the living God himself and for conformity to his likeness; while Buddhism sets forth as the highest of all aims the utter extinction of the illusion of personal identity—the utter annihilation of the Ego—of all existence in any form whatever, and proclaims as the true creed the ultimate resolution of everything into nothing.”
“What shall I do to inherit eternal life?” says the Christian. “What shall I do to inherit the eternal extinction of life?” says the Buddhist.
Surely in this comprehensive list of contrasts the great scholar has shown that there is an immeasurable height of moral and
spiritual philosophy, and revealed truth concerning God and man in the Christian religion that Buddhism never conceived. It has no excellence in moral precept that is not better stated by Christianity. Christianity sheds a broad, clear light on the way to find salvation from sin. Buddhism has no light, and no consolation. The human heart finds rest in the one, but the other can not bring a moment’s peace to any anxious or agonizing soul. Buddhism is a pessimistic, dark, and desolate system of philosophy, mistaken for religion.
CHAPTER XI
Ripened Fruit of Non-Christian Faiths
IN setting before the reader the following account of painful scenes, most of which I have witnessed, in connection with religious rites, I am aware that some may say that these facts, though admitted to have taken place, are not characteristic of the religion in which they are found. Having given much attention to this pertinent question, I am convinced that they are some of the legitimate fruit of religious systems without Christ. This book is not written to theorize about religion, so much as to give an account of what a missionary sees living in Burma in direct contact with its varied people.
The theoretical teaching of Buddhism, Mohammedanism, or Hinduism may be one thing, while the practical religious usages may bear quite another character. A people may naturally be very agreeable and have many lovable traits, and yet their religious rites may degrade and not uplift the natural man. The saddest part of the following account is found in its degradation of the ordinary healthful sentiments of the people, in the name of religion.
Then, again, what is done openly in the name of any religion, is done that it may be seen and recognized as of that religion. Therefore, it is certainly characteristic. If the observance of this is repeated, or is related to that which is of frequent occurrence, it is certainly characteristic. That which is here recorded is the natural fruitage of the religions which cheat the natural hunger of the human heart for the favor of God, whom all have sinned against, but whose loving mercy is not known among these Christless millions.
Before giving an account of the cruelties still observed by devotees and fanatics, it is well to remember some terrible practices which have been abolished in recent years. These include suttee, or widow-burning, hook-swinging, the Juggernaut, and marriage of little girls. These were all religious practices, but they were abolished by the Government. Theoretically and practically, the English Government in India is neutral in religion. Only a Christian Government could be strictly neutral in religious matters, though other Governments at times have been tolerant of other faiths to some extent. By proclamation, the English rule in India is neutral in religion. This proclamation is adhered to literally, so that a Mohammedan, Hindu, or Buddhist has just as much protection under the law as a Christian, and neither has any powers above the other.
How, then, does it come to pass that the Government has interfered in religious rites? This was done only when such rites actually took life, or endangered life. The Government’s first duty is to protect the lives of its subjects, even against self-destruction, where that is possible. Many questionable deeds are yet done by devotees in which the Government has not interfered, though some of them are exceedingly cruel, because they have not actually endangered life.
But suttee, or widow-burning, has been prohibited by the Government, though still practiced among the Hindus beyond the English border. Bishop Thoburn gives an account of the burning of four widows in Nepal, a little more than a quarter of a century ago. The dead husband had been high in the service of the Indian Government, and had been honored with a title by Queen Victoria. He was a Hindu, and he died over the border in Nepal, and four of his widows were burned with his body. This shows the spirit of Hinduism where it is not restrained by a Christian law. You can not burn people on any pretext under the British flag.
Hook-swinging was another horrible practice, which was put down in the same way. Devotees were placed on hooks suspended on long ropes fastened high above, and the hooks fastened deep in the flesh of the devotees. The body was then swung from side to side till its momentum tore the hooks from the flesh, and the torn and
bleeding body fell to the ground, perhaps to die, certainly to be permanently maimed. The law suppressed this practice, and it is no longer perpetuated except in remote regions and under great secrecy.
The car Juggernaut, with its great idol, when drawn along the roads at the Juggernaut festival evoked such fanaticism that men threw themselves under its great wheels, and were crushed. This practice has been prohibited by law. The festival is still observed, but men do not throw themselves under the wheels. I have seen the great car, with its hideous idol, drawn past our mission-house in Rangoon, attended by thousands of Hindus, with all the noise and confusion of an Oriental procession; but there is no blood on its wheels now, and no crushed bodies are left in the street.
There was another even more terrible custom prevalent in India for ages, in which the Government had to interfere. It has for centuries been the custom of Hindus to give their little girls in marriage when tender children. They were married at ten or eleven years of age, or even at nine years. To appreciate this monstrous cruelty it should be remembered that a child of the same age in Western lands is much stronger than a child in India. There were many mothers in India at twelve years of age. The cruelties of this practice of child marriage were such that they can not be written. Let it be remembered that this practice existed for hundreds of years, and that practically all the Hindus approved it, although the sufferers were their own children. And when the terribleness of the practice was so pressed on the Government that it could not avoid taking action, and consequently framed a bill to raise the age of consent to twelve years, before which it would be unlawful to consummate marriage, the whole Hindu world rose up in protest. They charged the bill to the oppression of the Government. Fifty thousand Hindus met in public protest in the city of Calcutta. This protest was from Hindus directed against a righteous law for the protection of their children from this age-old cruelty!
To the writer it has been an experience of a painful kind to find a few Americans crying out against the “Oppression of England in India,” when they are only echoing the cry of the Hindus against the
righteous law But the law was enacted, and has had a wholesome effect so far as it is not evaded by false statements of the age of the girls, which are often made.
But if England had no other justification for her Government in India than these four enactments, the Government would have much to its credit. But these are legal protections thrown around her people to prevent them taking life, or perpetuating cruelty in the name of religion. If monstrous things are still done, it is a comfort to know that these named have been abolished.
Once each year a sect of Mohammedans torture themselves by running through the fire. This torture occurs during the feast which follows the Mohammedan fast, or lent. During this fast the Mohammedan community eat nothing from sunrise to sunset. They may eat a great deal after sunset and before sunrise. Having fasted in this manner for forty days, they feast for three days. But this does not include all of the community. There is a division of the Mohammedans dating back to the death of Mohammed. A quarrel then arose over his successor as leader of the Mohammedans. One party held to Hassan and Hoosan, the sons of the prophet; and the opposing party stood for another leader. This division led to war, in which Hassan and Hoosan were slain and their party defeated. This contention has been maintained until the present, and those of the conquering party are known as Sunni Mohammedans, and the followers of Hoosan and Hassan are called Shia Mohammedans. The latter will not feast with the other party, and take this occasion to torture themselves by running through the fire, as a protest against the opposing sect.
The preparations for this torture by fire are made deliberately, and it is carried out on a large scale. First of all, they must secure the permission of the Rangoon magistrate to this ordeal. Then they publish the places where it will occur, for it is celebrated in several localities on the same night. Ditches are dug deep enough to hold a great mass of coals, and two or more rods in length. On the day appointed, a large supply of dry wood being provided, a fire is kindled in the ditches about noon, and is kept burning until long after dark. Meantime the ditch has been filled with coals smoldering, and
kept alive, but not allowed to burn to ashes. As the earlier hours of the night have been passing, multitudes of all nationalities have gathered at the scene of fire-running. They have to be kept at a distance by a cordon of rope stretched about a considerable circle. As midnight passes, a spirit of expectancy takes possession of the waiting multitude, which is increased by shouts and excitement in a side street not far away. These are all according to the Oriental’s idea of working up a climax of interest in his spectacular display. A little after midnight the fanatics who have been selected to undergo this torture come rushing from a side street, carrying banners and shouting in increasing excitement as they enter the arena and approach the fire on the run. Crowding close together at the end of the ditch of fire, they wave their banners, chant, shout, and shriek until a frenzy possesses them, and then they plunge into the fire with their bared feet and legs! The first man to leap into the fire sinks more than half way to his knees in the fiery pit, and the next step also, and so through the ditch. As might be supposed, he plunges through as fast as possible with his greatest strides. He is followed in turn by every other of the twenty or more fanatics of his company.
They immediately collect at the other end of the ditch, and with even greater frenzy than before scream, stamp the coals from feet, and plunge again through the ditch. So from end to end they rush till the coals are dragged out of the ditch clinging to their feet and legs, or are kicked out on the surrounding ground. Then the fanatics disappear, and the multitude of curious onlookers disperse.
This cruel practice is carried out every year among these Mohammedan immigrants to the province of Burma. The idea seems to be a frenzied appeal to God that their contention, settled by the sword in the defeat of their party twelve centuries ago, was right. This particular revolting exhibition may be a modern development; but if so, it is but another evidence of the growth of fanatical extravagance of an imperfect faith. But viewed in any light, it is a sad commentary on the Christless Mohammedan world in this twentieth century of the Christian era. It is a fact to be lamented that Christian missions are not generally directed to the adherents of the Mohammedan faith.
Lest it be thought that such fanaticism is only representative of the lower class of people, let this circumstance be noted. On one occasion my wife saw this “fire-running.” Just before the expected approach of the company designated to run through the fire, a finelydressed Mohammedan merchant came within the ropes, with the air of a man who intended to act as a self-appointed master of ceremonies over these fanatics, lest they act too outrageously. But when the excitement of the occasion was on, and these common people were rushing through the fire, he began to show every indication of rising excitement. He sat down, rose up, sat down again. He took off one shoe, jumped up, and sat down again; then off came both stockings, and he plunged into the fire like any other of these frenzied people. This shows the terrible power of such enormities over even the self-poised Mohammedan merchant.
Another scene we witnessed among the Hindus, even more revolting than this annual exhibition among the Mohammedans. It was on a Sabbath-day, and Bishop Thoburn was with us on his biennial visit to Burma. The early morning service at the English Church had been concluded, and we were going to the missionhouse in the cantonments. The day was growing almost intolerably hot, especially under the direct rays of the sun, as it was in the latter part of April, the hottest time of the year. As we rode along under the protection of our covered tum-tum, we saw just ahead of us in the middle of the Signal Pagoda Road, the main street between the city and the suburbs, an excited company of Hindu pilgrims and their attendants. It is a striking fact, too, that the scene we beheld was very near a Christian church located on that road—a Christian church dedicated to the worship of Him who died for all men—and here by the side of that edifice on that Lord’s-day, nearly twenty centuries after the gospel was proclaimed to a sin-darkened world, was enacted one of the most distressing cruelties of heathenism, and it is doubtful if the devotees, or their attendants, even dreamed of the salvation which every Christian temple should suggest! That Church does nothing for missions, being content to preach only to those who bear the Christian name.
There was a company of about twenty men, eight of whom were devotees, while the others urged them on their terrible way. Around each devotee’s neck was an iron ring supporting twenty-four small chains about two feet in length. On the end of each chain was a large hook made of wire, and these two dozen hooks were buried deep in the chest, sides, and back of each poor man. The flesh was raised in great welts over the buried hooks! But to add to the horrors of this torture, each man had an iron rod about the size of a slatepencil thrust through both cheeks, passing through the mouth, of course. Another rod of equal size pierced the tongue, which was drawn out of the mouth as far as could be done without plucking it from its roots, the rod holding it in that drawn condition, as it was held against the face by the strained muscles. These hooks and iron rods piercing the flesh of body and face must have produced all the agony that the human frame could endure. Yet the cruelties of the heathen could add to even this. Most of the poorer natives of India go barefooted. But these devotees wore wooden sandals, not to protect the feet, but to torture them. Through these sandals from below nails were driven and sharpened above, so that every step each poor man took the weight of his body pressed upon the upturned nails, and must have produced a refinement of agony. To the natural weight of the body was added a wooden arch often used among this class of Hindus in Rangoon as a symbol, this arch being carried on the shoulder and adding possibly twenty pounds to press down his tortured body upon those upturned nails! These poor deluded sons of our unhappy race, these devotees of a Christless faith, were agonizing along this highway under a pitiless tropical sun, making their way to a Hindu shrine eight miles away! Their condition was indescribable. Their attendants were urging them forward with shouts, and were dashing water on their protruding tongues, seemingly untouched with pity at their agony.
The very sight of this torture made the heart sick. I doubt if any Christian man could have endured the sight for any length of time. An indescribable faintness began to sweep over me; and the bishop, who has a heart of great tenderness, could hardly speak; but as he turned to me I noted an expression of anguish on his face, as he
said in broken tones: “That is the worst sight I have witnessed in thirty-five years in India; but that is the ripened fruit of idolatry.”
Let the reader again recall that this occurred in the closing years of the nineteenth century of our gospel era. Let him also be informed that among all these thousands of Hindu immigrants to India there is not one missionary giving his time to preaching Christ. The only reason there is not such a missionary is because there is no money in any mission treasury to send him. There is plenty of money in Christian hands. If the Christian men and women of those lands that are the heirs of all temporal blessings, and of the Christian joys of the gospel centuries, could realize the blackness of the night that has settled down on the Christless nations, who are heirs of thousands of years of increasing idolatry, they would hasten the messengers of life and light to these poor people.
If we turn to Buddhism and ask for correspondingly desperate conditions, we are at once assured that they are not found. Its friends would assure us of its elevated character as a religion. But I am sure we find a sad enough condition among some of the most faithful Buddhists, and a refinement of cruelty in all classes of the adherents of the teachings of Gautama. The building of a pagoda is regarded as the most meritorious deed, and even its repair or partial regilding gives a man honor and merit. But the serving of a pagoda renders a man an outcast. The only real outcast ever recognized in Burmese Buddhism, which is free from the Indian caste system, is the “pagoda slave.” Perhaps we ought to speak of this in the past tense, as the English rule has made it possible for these slaves to find their freedom, which was impossible under Burmese rule, though even this legal liberty is not recognized by the Buddhists.
Under Buddhist, or Burmese, order, whole families were set apart for the pagoda service. Once in that service they were despised by their self-respecting co-religionists, and their children after them forever suffered their disabilities. Sometimes a certain number of families in a village were arbitrarily picked up and set down at the pagoda for this purpose, henceforth to be banished from the circle of respectability. Never could any man get out of this
degraded service. The heaviest penalties were laid upon any who tried to aid him or his family to escape to any other calling.
Why this strange degradation of men and women who serve the pagoda, when the building of a pagoda exalts its builder here and hereafter, does not seem to be explained. Personally, I think it one of the stony-hearted cruelties natural to this faith. The priests were fed daily out of the household’s store; but the pagoda caretaker had to fight with the ownerless dogs, with which Burma abounds, for some of the food offered to the images of Gautama! When the slave died he could not have respectable burial. Sometimes his body was thrown out with the refuse for the dogs to eat. This settled policy of Buddhism may be truly said to be one of its perfected fruits, not mentioned by the friends of the faith from Western lands.
Under British rule these people were allowed to become sellers of supplies for the pagoda service, or to go away where, unknown and carefully disguising their former life, they might work into some respectable occupation, but never with the consent of Buddhist priests or self-respecting laymen, who had always despised the servant of the temple. But the sight which always met the observers when visiting the great Sway Dagon Pagoda in Rangoon until recent years, was the line of lepers always piteously begging along its ascending steps. They were classed with the pagoda slave, and were despised. It can not be said that they were really pitied, even though some corn or rice and an occasional copper coin were thrown them by the Buddhist climbing the stair to Gautama’s shrine. These lepers were born on these steps, diseased, rotted, and died there! A more pitiable sight was never witnessed than these poor, suffering creatures, practically expelled outside the bounds of Buddhist sympathy for no fault of character or conduct. Of course, the Buddhist would say that the leper’s foul disease was the demerit of some past existence, and therefore he suffers justly in his loathsome condition, and his ostracism from human sympathy! But this is only another heartless invention of a much overrated religion.
The reader will have made the contrast. Centuries of labor and millions in gifts to raise and perfect the great pagoda and to gild it and to bejewel its tinkling bells, all in honor of eight human hairs;
while its own faithful adherents suffer and die without so much as a shed being built to shelter them! Millions for gilding brick and mortar, and not the least coin to build a hospital for suffering and despairing men! This is Buddhism’s fruitage of the centuries. Let him praise the tender sympathies of this faith who will. To me it is one of the most heartless systems taught among men. The leper was an outcast here, and taught to believe millions of years of existence in hell were awaiting him hereafter. This was his portion in Buddhism.
Turn now and witness what Christianity has done for him. Within the decade of my writing, the Christian missions of Burma became strong enough to put their sympathies underneath the long suffering lepers. A Scotch leper mission is aiding the Wesleyans at Mandalay. Later the Baptists in Moulmein, and the Catholics on their own account in Rangoon, built leper asylums, the Government aiding also in their support; and the lepers in every municipality in Burma have been gathered into these Christian institutions, their sores bound up, medicines to alleviate their sufferings given, abundant food and suitable clothing provided, the first time to most of them during their agonized lives. Best of all, the gospel, with its help, love, and hope, is preached to them who had been bound to suffering for ages to come by their own religious system! If to the question, “Do missions to the Burmese Buddhists pay?” there could be offered only these three leper asylums, they would warrant the answer, “Yes.”
One very hot afternoon I went with an assistant of the Wesleyan Leper Asylum, and took twenty-five of those lepers off the steps of the Sway Dagon Pagoda, and securing their passage money from the Rangoon municipality, I sent them off to Mandalay. Later I visited that city and the asylum, and there beheld one hundred and forty of the lepers gathered from many places in Burma. They were so well cared for as to seem almost content in spite of their physical suffering. They were fed, clothed, and had the gospel preached to them in the true Christian spirit. Some of them were filled with peace and joy by conscious communion with Him who is so mightily preached by this institution of mercy. There was one leper, with hands and feet fallen off, an eye gone, and the tongue nearly eaten away; still on the piece of a face that remained there shone a light
seen only on the face of the man who communes with God. In this glad vision I had my reward in having aided in a small way to send so many afflicted ones to this Christian haven. A thousand times since I have been made glad with the memory of what seemed that hot afternoon a very commonplace piece of work. But as it retreats into the past, and I know every poor sufferer will have had Christian care all his days, it came to be recognized as one of my greatest privileges as a missionary to have had some part in this work.
When in the future the traveler comes to Burma and visits the pagoda, and when the resident passes through Rangoon’s streets, and is not pained with the vision of lepers begging at his feet, let them remember that for centuries these Buddhist lepers were spurned by their own race and countrymen, and that it was the Christian missionaries who gathered them into homelike asylums, there to receive loving Christian care. Let them reflect that this contrast is one of principle in the two faiths. The leper, agonizing in hopeless despair on the pagoda steps, was the perfected fruit of centuries of the teaching of the purest Buddhism to be found.
One more illustration of the practical teaching of Buddhism presents itself. At Kemmendine, near Rangoon, is a Buddhist burialground. There is a large pavilion near the entrance to the graveyard, on the ceiling of which there have been various pictorial representations of the teachings of Buddhism. Much of this is a portrayal of the many Buddhist hells. But there was for years a succession of pictures along one border representing the Buddhist priest in the process of crushing out all sentiment and sympathy with even the greatest human distress. The candidate for neikban must destroy all desire; the last desire to give way is that for existence. This pictorial representation was evidently made to show the process of this suppression in progress. The yellow-robed priest, who should represent the system, is seated in perfect composure looking on the distress of a sick man. There is none to attend the sick, and the priest, of course, gives no aid. The next picture shows the man approaching the crisis of death; in the next he is actually dying. Then follows a succession of pictures showing other stages of dissolution, until only the scattered bones remain. Through all the series of
representations the priest sits with a face as expressionless as marble, and has not moved a muscle. Complete indifference to all experiences of human life is the virtue aimed at.
To show that this crushing out of all natural sensibility is a difficult process, the artist has made another picture with a little humor in it. The scattered bones suddenly become articulated, and the skeleton makes a wild leap upon the priest. This unexpected jump of the skeleton would be calculated to affright ordinary mortals to a degree; but not so the priest. He only slightly turns his head. He has nearly conquered all natural sentiment. The last picture shows a skull and crossbone, and the motionless priest sitting in perfect composure of features and of person. He has conquered all desire!
This is the picture on the pavilion; but now with the writer look on the living reality. On one occasion I attended a cremation in that burial-ground. Sometimes bodies are buried, and sometimes cremated if the person was rich or much respected in life. The funeral pyre was crudely made, and the burning presented a revolting sight that need not be given in detail. When the body was nearly consumed some of the people returned to the pavilion, and with them the widow, a grown son and daughter, and some smaller children of the deceased. Meantime five priests had come in from the monastery, and sat in a row upon a platform at one end of the structure. They had not been present at the place of burning. They had rendered no service of consolation at all, though they may have preached at the home the usual pronouncement of Buddhism, that all existence leads to misery, and therefore the way out of misery is to strive to get into neikban and cease to exist. More than this, the funeral is the occasion over all others in which costly presents far above the ability of the family are given to the poungyis, or priests. But real consoling service to the sorrowing they give none. There is nothing springing from sympathy, pity, or hope in this religion.
As these five well-fed priests sat on that platform, the brokenhearted widow, son, and daughters came forward, and bowed down and worshiped them. The bruised and broken human heart cried in anguish and must cry for help, and Buddhism offers only the worship of a yellow-robed priest! Buddhism has no God. It tries to crush all
human pity But where shall the broken-hearted find rest? Worship these yellow-robed priests! That is all. What about the priests? There they sat, and chewed betel-nut and tobacco, spitting lazily at the cracks in the platform, looking about idly and vacantly, utterly indifferent to the prostrate and broken-hearted family before them! Not a look of sympathy or pity, not even a glance of recognition cast in the direction of the prostrate forms! This is the very real illustration in the living priest, of the pictorial representation of the priest of the Buddhist religion given above! The Buddhist system is devoid of hope, pity, consolation, or even ordinary human sympathy It is as heartless as its own stony or brazen images of Gautama so universally worshiped. Men become like their gods.
CHAPTER XII
Outline of Christian Missions in
Burma
CHRISTIANITY entered Burma with the incoming of traders and Governments from the West, as it did in the other portions of Southern Asia. Some of these traders and some of these representatives of nominally Christian Governments were unscrupulous adventurers. They were seldom men of strict moral integrity, much less spiritual Christians. They would not measure very high by present-day social standards, much less by the lofty standards of the gospel. They were Christians in name only. The Portuguese gained some footing in Burma, as in all this tropical world, in the sixteenth century, and continued with varying influence for nearly two hundred years. They gained a foothold in Burma, and built a city called Syrian, and still bearing that name, just across the Pegu River from the present site of Rangoon. Here, however, they met utter defeat and destruction at the hands of the great Alombra, the founder of the Burmese Dynasty, of which King Thebaw, deposed at Mandalay in 1886, was the last sovereign. This great king completely overthrew the Portuguese Government, and with it the only form of Christianity then known among them, that represented by the Roman Catholic Church of that day.
These venturesome Portuguese carried with them their religious observances, and their priests always were active missionary agents. They built a church at Syrian, the well-defined ruins of which still remain. They made converts among the Burmans. Whether their methods in converting the Burmese were as unscrupulous as the Portuguese traders’ methods were, we have no detailed account. But in this matter we are not left in much doubt, as their attempts to convert the Burmese could not have been much different from that
employed in India at the same period, which unhappily we know only too well were in utter disregard of the true Christian spirit. But these missionaries of the Catholic Church counted their converts by possibly the hundred thousand.
These foreigners on their shores were then, as all are now, regarded as representatives of the Christian religion. In Asia every man is regarded as an adherent of some religion. Little account is taken of whether he represents his faith or misrepresents it. His Government and his personal and social life are supposed to flow from his religion; so that the Christian religion, as represented by the Portuguese, was probably despised as cordially by the Buddhists as their commercial prestige and Government authority were hated by the Burmese people. And when they made war to the extermination of the Portuguese settlements and their fortified city, and sunk their ships in the river, they also dealt a fatal blow to Catholic missions in Burma. There remains little trace of their old-time teaching. This is very unfortunate; for it is only just to say that even the Catholicism of two centuries ago taught more truth concerning God and God’s dealings with men than Buddhism ever did in its best state. Nominal Christianity, even when half idolatrous, kept the name of God alive in the minds of men, while they waited for a better day in which the gospel would be preached in its purity.
With the beginning of the nineteenth century the British began to get control of Burma, and this advantage has been followed by further acquisitions of territory until in 1886 Upper Burma was annexed, and so the whole land has come under the English flag. During this century, with its better Governmental conditions, the Catholic Church has re-established its institutions in all parts of the province. For many years its growth was slow, and even now, in numbers, it is far exceeded by the Baptist mission. But in the last ten years there has been a marked growth in the Catholic community. This has been to some extent by immigrants from India, who are Catholics. But the Church has been aggressive in every respect. Its priests are multiplying in the cities, and they also have occupied strategic points in the interiors. They are especially far-seeing in the acquisition of great properties in cities like Rangoon and in building
