Wednesday, May 30, 2012

Olam - Exercise at Estimating Value

This is a post to establish the long term value of Olam

Parameter 2011 2010 2009 2008 2007
Net Income 510.3 420.2 258 165 126.2
Depreciation 107.6 68.5 40.5 33.8 17.2
Changes in Working Capital -2,434.20 -1,314.90 65.9 -1,083.00 -445.2
Capital Expenditures -360.6 -182.1 -189.1 -74.2 -45.8
FCF -2,176.90 -1,008.30 175.30 -958.40 -347.60
Total Current Liabilities 7,129.96 3,685.58 3,130.17 3,471.67 1,820.51
Total Equity 2,245.34 1,771.93 1,045.85 638.41 432.72
Total Liabilities 10,334.79 6,032.73 4,369.57 4,600.83 2,744.87
Common Shares Outstanding 2,241.24 2,025.93 1,720.29 1,717.60 1,588.78
Capital Employed 5,450.17 4,119.08 2,285.25 1,767.57 1,357.08

Above is a snapshot of the salient financial information about Olam

According to my calculations , Olam is worth between 2.67 to 3.68 a share over the long term.

I had gone long on Olam at around 2.54.

In hindsight, that was wrong as the share price has fallen from there.

Currently, the share price is 1.66 i.e. a 35% drop from there.

This offers a better margin of safety for entry.

I guess it will drift down to around 1.2-1.4 over the next month and a half.

I have put in a buy order at 1.5 and will look to add more around 1.2 in a month's time.

I am looking at a time frame of 1.5 years for this to play out with a six month review for this.

Attached is a link to Olam

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Thursday, May 24, 2012

SIA - Hedge Against Oil Price


There was an interesting article i read that one reason to buy an Airline is to act as a hedge against Oil price collapsing.

This is a chart of crude oil prices over the last five years



Now if we look at SIA, the best airline company,


There does not seem to be any hedge in operation here.

This is a case where, the in theory explanation does not match with actual reality.


F J Benjamin - Estimate of Earnings in FY 2012

This is a post aimed at estimating the earnings of F J Benjamin in the financial year 2011 to 2012.

A link to F J Benjamin's web-site is below


By my estimates, FJB will earn around 2.61 cents per share for the year FY 2011 /2012.

This is based on the current earnings for the first three quarters of their year as well as an assessment of what could be the earnings for their last quarter.

Based on past track record, they will announce a dividend of 2 cents per share, payable in November.

Their closing price yesterday was around 32 cents per share.

At that price, the expected yield is 6.25%.

In the last two years the price has hit a bottom of around 27 cents.

The peak has been 39 cents which was just before it went ex-dividend.

The suggestion would be to establish a small position any time during market weakness from now till July 1st week.

The results will be announced in July 1st week.

The first position could be at 32, a top up can be looked at 29 cents and further at 27 cents.

The get out price would be 36, 38 and 40 cents.

Full Disclosure : I am long F J Benjamin

Sunday, May 20, 2012

Wilmar

This is a post to establish the long term value of Wilmar.

Parameter 2011 2010 2009 2008 2007
Net Income 2,078.41 1,644.20 2,294.40 1,789.30 829.8
Depreciation 478.112 315.4 252.3 207.9 133.7
Changes in Working Capital 879.18 8.2 -641.6 588.9 446
Capital Expenditures -1,600.00 -1,064.90 -1,063.70 -1,107.10 -609.7
FCF 1,835.70 902.90 841.40 1,479.00 799.80
Total Current Liabilities 22,129.00 18,269.29 10,368.89 5,922.77 6,168.85
Total Equity 14,248.00 11,855.83 10,931.13 9,606.46 7,845.20
Total Liabilities 25,391.00 22,113.57 12,517.66 8,262.40 7,661.86
Common Shares Outstanding 6,401.10 6,396.93 6,390.12 6,385.68 6,385.68
Capital Employed 17,510.00 15,700.11 13,079.90 11,946.09 9,338.21

Above is a snapshot of the salient financial information about Wilmar.

According to my calculations , Wilmar is worth between 5.63 to 6.08 a share over the long term.

I had gone long on Wilmar at around 5.4.

In hindsight, that was wrong as the share price has fallen from there.

Currently, the share price is 3.77 i.e. a 30% drop from there.

This offers a better margin of safety for entry.

I guess it will drift down to around 2.5-3 over this month and a half.

I have put in a buy order at 3.6 and will look to add more around 2.6 in a month's time.

I am looking at a time frame of 1.5 years for this to play out with a six month review for this.

Attached is a link to Wilmar



Tuesday, May 8, 2012

M1

This post is to estimate the value of M1 share as a friend had asked for my opinion on this.

Parameter 2011 2010 2009 2008 2007
Net Income 150.1 150.3 157.1 164.1 194.5
Depreciation 123.9 128.1 117 107.1 116.7
Changes in Working Capital -5.3 -10.3 1.3 3.1 -90.5
Capital Expenditures -94.1 -119 -99.9 -102.5 -56.3
FCF 174.6 149.1 175.5 171.8 164.4
Total Current Liabilities 230.5 493.7 300 310.7 287.72
Total Equity 223.2 256.1 302.9 322.6 201.91
Total Liabilities 580.4 581.4 631.6 656 644.66
Common Shares Outstanding 907.97 899.88 898 906.7 893.88
Capital Employed 573.1 343.8 634.5 667.9 558.85

As you can see from the above, which is a snapshot of M1 financial statement, the net income is flat.

Plugging this into my model, the value of M1 ranges from $2.44 to $2.61 as on date.

The share price as I type this is 2.5.

In short, it is fairly valued.

If you buy at this price, you have got a fair price for your share.

Thursday, May 3, 2012

SATS

This post is to outline a trading idea on SATS.

SATS is announcing its results on May 14.

The price as of writing this price is 2.61.

Here is a look at the SATS price chart over the last one year.




The company declared a dividend of 12 cents last year.

The trading idea is to expect the share price to hit 2.96 by the time it goes ex dividend.

The reason for the trading idea is because there is an upside to the special dividend.

The idea is to buy around 2.61 and sell at 2.87.

The return on capital is 10%.

Full Disclosure : I am long SATS at the time of this post.

Wednesday, May 2, 2012

Keppel Land - DRS Price

This post is to capture the results of the DRS price estimation I had done back in Feb 2012.

Time does fly, does it not, seems like yesterday when I wrote that post.

Let us look at the predictions made

a) Share will range between 3.48 to 3.65 and close at 3.56

The share closed at 3.36

The price was 5% off.

b) Post ex-dividend, the share will close at 3.36 on Day 1 ex-dividend, 3.34 on day 2 and 3.3 on Day 3

The ex-dividend closing prices were 3.19, 3.17 and 3.21

The ex-dividend closing prices were also 5% off.

No surprise in that, as the ex-dividend closing price is derived from the closing price.

c) The estimated Dividend Reinvestment Scheme price will be 3.24.

The actual DRS price is 3.18

Okay, I was 2% off.

One swallow does not make a summer.

This gives me some confidence that the method i used for the forecast was quite appropriate for Keppel Land at the point in Feb when i made the forecast.

Full Disclosure : I am still long Keppel Land.

The key point I want to highlight was that if you had bought at the time of my post and held on till the closing date and sold your shares on the closing date, you would have made a 11.2% return, frictional transaction costs excluded.

If you have faith, then do look for this post next year in Jan 2013.