Exchange rate and Palm oil prices impact CARS/BUKI

Backstage · 1 Exchange rate and Palm oil prices impact CARS/BUKI Wed Apr 18, 2012 12:58 pm

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As discussed in previous posts Palm oil prices have a major impact on CARS/BUKI bottom line.Some are of the opinion that the CARS group is overvalued at current levels. With Palm oil going at over 3500 Ringgit and the Rupee depreciation can we now expect something attractive from the group in the coming quarters ?

madhatter · 2 Good Prospects for Carsons Group ? Thu Apr 19, 2012 12:51 pm

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Am new to the forum but these are amongst my favourite stocks and I think Backstage is on the right track. Going through Buki shareholder list and CSE disclosures in 2011, I noticed that Directors and Related Parties were buying and increasing their stakes in Buki at around 1050-1100. This was when the Rupee was 110 to the Dollar. i.e. usd 10 Per Share. Now Buki is trading at 860 and the Rupee is around 130 to the Dollar i.e. usd 6.50 per share. Share price is down 35 % in dollar terms now. Meanwhile, the Rupee has depreciated around 15 % to the Dollar since November. At the same time, the Malaysian Ringitt has appreciated by 6 % to the Dollar since Jan. Palm Oil prices are up from RM 3100 in Jan to RM 3500 now (up 12-15 %) and CPO crop may be increasing due to more fields maturing and better output. I think all this could translate into a huge positive impact on profits in coming quaters Would like to hear other’s views on this ?

Backstage

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madhatter wrote:Am new to the forum but these are amongst my favourite stocks and I think Backstage is on the right track. Going through Buki shareholder list and CSE disclosures in 2011, I noticed that Directors and Related Parties were buying and increasing their stakes in Buki at around 1050-1100. This was when the Rupee was 110 to the Dollar. i.e. usd 10 Per Share. Now Buki is trading at 860 and the Rupee is around 130 to the Dollar i.e. usd 6.50 per share. Share price is down 35 % in dollar terms now. Meanwhile, the Rupee has depreciated around 15 % to the Dollar since November. At the same time, the Malaysian Ringitt has appreciated by 6 % to the Dollar since Jan. Palm Oil prices are up from RM 3100 in Jan to RM 3500 now (up 12-15 %) and CPO crop may be increasing due to more fields maturing and better output. I think all this could translate into a huge positive impact on profits in coming quaters Would like to hear other’s views on this ?

Welcome to the forum hatter, glad to know that there are others keeping an eye on the CARS group.
Btw does anyone know how the CINV portfolio is doing ?

The Alchemist

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Re CINV, the current market value of their portfolio is around Rs 140-150 per share . Market price around Rs. 80. They own approx 10.2 million Buki shares through their approx 50 % stake in RIT, Approx 10 million shares in JKH (through RIT + their own long & short term portfolio) and between Rs 30-40 in other shares in portfolio and cash). A quick formula to determine NAV of CINV is take Buki current price, divide by 10 and multiply by 1.04, add to that 10 % of JKH price and finally add approx 35 for other shares/ cash. Thus as current Buki trading price is 870 divided by 10 is 87 into 1.04 is Rs 91, JKH is @ 207 divided by 10 is approx 20, + Rs 30-40 other shares = 140-150 Per share. (all these calculations are based on CINV share capital of approx 98 mill shares + shares they own from last annual report and current shareholder lists and current market prices of shares they own).
Also further to Backstage & MadHatter’s comments on this group, and reading past posts of members , it appears that some are under impression that Buki especially is overvalued on a P/E basis. IMHO that BUKI is trading at 8-10 times forward earnings when you take the following under consideration :
Last years reported earnings = Rs 32 per share
Add to that Rs 18 for their consolidation policy of not accounting for their GoodHope Asia - 35 % share of profit (refer page 4 of Buki Annual Report 2010/2011 Para in Red)
Add to that Accounting change for Fair Value of Biological Assets = Rs 17 ( refer page 75 Note i of Buki Annual Report 2010/2011 for calculation)
Add to that currency impact of Rupee devaluation + Ringitt appreciation to the Dollar) totally 20 % add to EPS
Add to that Palm Oil prices appreciating in 2012 by 10-15 % currently .
Add to that Palm oil output increasing by at least 20 % as per maturity profile in Annual Report.
When you make these adjustments, you will note that Buki EPS is actually close to Rs 100 per share and it is trading at 8-9 times forward earnings. This is compared to a JKH trading at 20 times earnings.

Backstage

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Add to that currency impact of Rupee devaluation + Ringitt appreciation to the Dollar) totally 20 % add to EPS

Are the plantation earnings in Ringitt or USD ?

madhatter

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My views on CINV - and the other CARS investment company GUAR - are as follows: As far as I can see these are both great counters going relatively cheap right now, at a significant discount to their underlying portfolio value. If you look at their portfolios, you will see that they are comprised entirely of Blue chip stocks such as COMM BANK, HNB, JKH, CARGILLS, NESTLE, DURDANS, SAMPATH ETC and you can get these significantly cheaper by buying into one of these two shares than if you purchase the stocks directly. Most importantly though, they both have significant shareholdings - either directly or indirectly - in the Jewel in the CARS crown - BUKI, CARS through BUKI and now Good Hope Asia - is one of the Worlds biggest players in the Global palm oil sector. Unlike many other Blue Chips in SL who seem to shoot off with large investments in random directions, CARS are very focused on the palm oil sector. They have been making investments both upstream & downstream in Asia - and now in Africa. Given all the other factors outlined by others such as palm oil pricing, dollar devaluation etc. and perhaps most telling of all - that directors and related top twenty 20 shareholder parties have increased their stakes in BUKI in 2011, at higher prices than currently prevailing, makes CINV & GUAR and the CARS group in general for me one of the few bright lights in the otherwise fairly dismal CSE !!

With regard to whether the plantation earnings are in Ringitt or USD - the currency aspect of the plantation sector is a little confusing to would also like some clarification on this from anyone else ? Either way though with the rupee devaluation against both these currencies, they're on a good wicket !!

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Thanks for sharing. How the exchange rate scenario works out in the accounting is very confusing for me. So is the profit distribution among all the companies.
From what alchemist says, the June quarter results should be attractive.

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While looking around for more information on what BUKI is up to, I came across these links.

http://www.goodhopeasia.com/
http://www.premiumveg.com/

Why is all this information on their strong market position being kept out of the limelight in SL where the parent company is listed ?

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Exchange rate and Palm oil prices impact CARS/BUKI

1 Exchange rate and Palm oil prices impact CARS/BUKI Wed Apr 18, 2012 12:58 pm

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2 Good Prospects for Carsons Group ? Thu Apr 19, 2012 12:51 pm

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3 Re: Exchange rate and Palm oil prices impact CARS/BUKI Thu Apr 19, 2012 1:01 pm

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4 Re: Exchange rate and Palm oil prices impact CARS/BUKI Fri Apr 20, 2012 2:06 pm

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5 Re: Exchange rate and Palm oil prices impact CARS/BUKI Fri Apr 20, 2012 2:44 pm

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6 Re: Exchange rate and Palm oil prices impact CARS/BUKI Sun Apr 22, 2012 5:03 pm

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8 Re: Exchange rate and Palm oil prices impact CARS/BUKI Wed May 02, 2012 12:10 pm

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9 Re: Exchange rate and Palm oil prices impact CARS/BUKI

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