FLCH Undervalued?

ndnk · 1 FLCH Undervalued? Tue Mar 08, 2011 9:45 pm

ndnk

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Anyone looked at their prospectus? I think Rs 5 is kind of undervalued scenario.... It should b trading beyond 10 i guess.. If v look at sector PE of diversified holdings sector 34 it is highly undervalued but to b pessimistic v use market PE even at that PE it is undervalued... Since it is a diversified holding i think they hav a higher earning potential in the future.....

Last edited by Quibit on Wed Mar 09, 2011 5:51 am; edited 1 time in total (Reason for editing : Format condensed)

UKboy · 2 Re: FLCH Undervalued? Wed Mar 09, 2011 12:09 am

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ndnk wrote:

Anyone looked at their prospectus? I think Rs 5 is kind of undervalued scenario.... It should b trading beyond 10 i guess.. If v look at sector PE of diversified holdings sector 34 it is highly undervalued but to b pessimistic v use market PE even at that PE it is undervalued... Since it is a diversified holding i think they hav a higher earning potential in the future.....

PE of diversified holdings sector is 34...!! Thats one of the main reason why we can see the market is going down..
That is way toooooooooooooooooooooooooo much figure for any sector in any stock market in the world.

People can argue with me saying that oh no CSE is an emerging market , these companies have better future, these companies have brilliant projects in the horizon bla bla....

All these stories are true but a bare land has to have a less price than a land with a house.

(By the way I didnt give you a negative feedback)

tubal · 3 Re: FLCH Undervalued? Wed Mar 09, 2011 8:04 am

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UKBoy is making his usual sensible comments. Why would any company want to sell their shares to the general public at a value lower than the fair value? No that doesn't happen. IPO stocks are usually over valued. I can think of only two for the whole of last year that wasn't over valued.

Last edited by tubal on Wed Mar 09, 2011 9:05 am; edited 1 time in total

cse.alpha · 4 Re: FLCH Undervalued? Wed Mar 09, 2011 9:02 am

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Free Lanka Capital (FLC) reported 9mths net profit of Rs391 mn - based on the existing 1,068 mn shares outstanding (before new 300 mn shares from IPO), the 9mths EPS is Rs0.36.

Over 90% of group PAT of Rs921 mn (before minority) for the 9mths ended 31st Dec 2010 are though from plantations (rubber, timber and tea) - refer pg 126 of prospectus.

The 9mths results included Rs307 mn profit on change in fair value of timber stocks - this is non cash - and other income of Rs180 mn (of which also Rs101 mn was from timber).

FLC wants to be a diversified conglomerate, but its earnings are still very much dependent on plantations - and as such it should not be compared with diversified sector valuations, but with plantation sector valuations, perhaps with some small premium for diversification plans.

But earnings from the volatile and unpredictable plantation sector should be valued at steep discounts - remember that the wage hike is also around the corner. Annualising recent quarter earnings may not be wise.

For a plantation, even a valuation at 10 times future earnings may be considered as expensive by some, but it will also depend on crop mix.

tubal · 5 Re: FLCH Undervalued? Wed Mar 09, 2011 9:05 am

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After reading cse.alpha's post, I realize that my previous comment needs editing Very Happy

econ · 6 Re: FLCH Undervalued? Wed Mar 09, 2011 10:05 am

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I do not think it is undervalued. but surely it is fairly valued compare to Union Bank.
NAPVS - 4.41 , EPS - 0.37 (nine months)

ndnk · 7 Re: FLCH Undervalued? Wed Mar 09, 2011 10:45 am

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econ wrote:I do not think it is undervalued. but surely it is fairly valued compare to Union Bank.
NAPVS - 4.41 , EPS - 0.37 (nine months)

In terms of NAVPS yes it is not, But based on eps it is undervalued

tubal · 8 Re: FLCH Undervalued? Wed Mar 09, 2011 11:14 am

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ndnk wrote:

econ wrote:I do not think it is undervalued. but surely it is fairly valued compare to Union Bank.
NAPVS - 4.41 , EPS - 0.37 (nine months)

In terms of NAVPS yes it is not, But based on eps it is undervalued

Read cse.alpha's post above. And please explain to me why on earth a company would want to sell their shares at a lower valuation?