Tea is it the next Hidden Gem?

Nigel.Machado · 1 Tea is it the next Hidden Gem? Tue Feb 05, 2013 2:33 pm

Nigel.Machado

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3rd quarter results are being released by some companies. Some counters are are trading at a pe of around 2.

Bogawantalawa: BOPL

quarterly earnings: RS 1.75
quarterly results annualized: RS 7
forward pe ratio: 1.87
Net assets per share: 10.98
Market Price: 12.80

metropoliton resource holding: MPRH

holding company of BOPL(67.35%)
removing the minority shareholding profit of BOPL trading at a forward pe 0f below 1.2
Net assets per share: 35
Market Price: 21

Watawala plantation: WATA

quarterly earnings: 1.21
quarterly results annualized: 4.84
forward pe ratio: 2.6
net assets per share : 14.28
Market Price : 12.80

Horana Plantation : HORA

quarterly earnings: 4.03
quarterly results annualized: 16.12
forward pe ratio : 1.61
Net assets per share : 46.94
Market price : 26

other tea based undervalued plantations yet to announce quarterly results

Talawakele plantation :TPL normally divend paid in february
Elpitiya plantation :ELPL
Kahawatte plantation : KAHA

raptor · 2 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 5:28 pm

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You cannot multiply one quarterly performance by 4 to get a yearly EPS forecast. You need to look at the Last Twevle Months or LTM performance which will provide a far more accurate picture of how a company has performed. The issue with your method is that if a company has 1 good quarter and 3 bad and you based your calculations on the 1 good quarter you have grossly over valued the said company. So always look at the LTM performance, in this case I assume you need to add the last quarter of the pervious financial (3M ended 31st March 2012) year to the 9M performance upto the quarter ended 31st December 2012. Then you have a far more accurate view as to how a company did over time. It also avoids instances where a company might have 1 quarter where it makes the most of its revenues from over stating performance, for e.g if a company makes a lot of sales in christmas and you use the quarter ended 31st December you will grossly over value it.

On to tea, I hear there is another wage bargaining agreement that will be negotiated in June this year, its meant to happen every 2 years so its very hard to say what will happen. Tea suffered a lot in the year 2011/2012 given the wage risers and are doing well this year and the wages haven't gone up. I think wages will go up pushing costs up and performance will be like the year 2011/2012.

If you want plantations, palm and rubber is a better bet. Margins are much higher. For example HOPL makes 75% profits from rubber but only around 25% of revenue comes from rubber.

Rapaport · 3 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 6:30 pm

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A crippling tax increase was imposed on bulk tea exports, by a gazette notification on January 23rd. According to the Tea Exporters Association, the Ministry of Plantation Industries and the Sri Lanka Tea Board knew nothing of the tax-hike until informed by horrified tea-exporters

A wage hike is in the offing as well

Cheers!

nimantha80 · 4 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 7:03 pm

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Whatever the hidden jems don't buy anything now.Wait till march end and then think twice and if you feel ok then buy. Because you'll be able to buy lot lower.

smallville · 5 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 9:43 pm

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Plantations must always trade below their NAV value given the risky nature of the business.. Or correctly put, a certain discount to the sector PE as these are valued based on PE ratio rather than PBV.

This sector invovled risks however, For example, rubber tapping will be an issue in rainy season so plantations tend to follow seasonal effects. Imo, the last Nov-Dec season might've not been in favour for rubber plantations. Also we must understand that few seasons of high revenues can follow with less revenues in next couple of seasons..

Also its better to follow rubber + Palm in plantation sector to reduce your risk..
KGAL is the leading rubber plantation while NAMU is for Palm.. HOPL & KOTA also has a significant exposure to rubber.
Last time the wage hike issue has hit their bottom lines and KGAL cut the overheads in one go lessening their that qtr revenue. Others followed but draggin their payments for the latter part of the year as well.

Considering the NAV values posted (if true) many plantations look attractive but we gotta be selective. After all one's disadvantage is another one's advantage. When we talk about rains, power sector may have certain benefits in rainy seasons. Therefore, it could be a good idea to keep few counters in portfolios too..

But u can never say.. Even potatoes or onion will have its day Wink

Slstock · 6 Re: Tea is it the next Hidden Gem? Wed Feb 06, 2013 4:07 am

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Agree with you.

smallville wrote:

But u can never say.. Even potatoes or onion will have its day

Nigel.Machado · 7 Re: Tea is it the next Hidden Gem? Wed Feb 06, 2013 11:18 pm

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http://forum.srilankaequity.com/t25809-sri-lanka-s-bogawantalawa-tea-estate-profits-surge#152073

Feb 06, 2013 (LBO) - Profits at Sri Lanka's Bogawantalawa Tea Estates Plc, surged to 146 million rupees from a loss of 28 million rupees a year earlier, helped by stronger tea prices, interim accounts show.

The firm reported earnings of 1.75 rupees per share during the quarter. In the nine months to December it reported earnings of 3.28 rupees per share on profits of 274 million rupees, recovering from a loss of 199 million rupees a year earlier.
The stock closed at 12.90 rupees, up 30 cents Monday.

The nine months profits included a 37 million rupee 'fair value' gain on tree growth, according to unaudited accounts filed with the Colombo Stock Exchange.

In the nine months tea brought 2.6 billion rupees of revenues (up from 2.4 billion rupees a year earlier) and 335 million rupees of gross profits. Rubber brought just 4.9 million rupees in revenues and 462,000 rupees in losses.

The company is 67 percent owned by listed Metropolitan Resource Holdings Plc.
In the December 2012 quarter revenues rose 39 percent to 1.03 billion rupees, cost of sales rose at a slower 12 percent to 861 million rupees and gross profits increased over five times to 170 million rupees.
http://lbo.lk/fullstory.php?nid=1267249505

NOT potatoes or onions. tea will rally soon like the chikens did once.

smallville · 8 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 7:59 am

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Tea rally is not the case here, it a plantation rally if so..

Anyways, just becuz Tea has shown some good results shares rarely run these days in CSE. its the involvement of big boys and demand can take the shares to the next level.

Nigel.Machado · 9 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 11:08 am

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smallville wrote:Tea rally is not the case here, it a plantation rally if so..

Anyways, just becuz Tea has shown some good results shares rarely run these days in CSE. its the involvement of big boys and demand can take the shares to the next level.

In my opinion it is not plantations in general it is tea based plantations not rubber.

Given the fact that US & European stocks are advancing, if rubber price too move up we may see a plantation rally in general.

Arena · 10 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 11:42 am

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If you really noted our great analyst MW said 1 year ago that tea will be the next hidden Gem.

respect you Mr. Lakshan.........

Nigel.Machado · 11 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 1:39 pm

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Arena wrote:If you really noted our great analyst MW said 1 year ago that tea will be the next hidden Gem.

respect you Mr. Lakshan.........

Year ago wasn't the time to Enter!! Twisted Evil

Arena · 12 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 2:12 pm

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ha ha u would have bought BOPL at 7 range ELPL at 10, Madu at 9.

Now already more than 100% gone.......

Nigel.Machado · 13 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 2:58 pm

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Arena wrote:ha ha u would have bought BOPL at 7 range ELPL at 10, Madu at 9.

Now already more than 100% gone.......

you mean 6 months ago!! Exclamation

Arena · 14 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 3:16 pm

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Hayiyoooooooooooooo...........Crazy

Get the point. The analysis or the base for his prediction was the valuable thing here. See the moon. not the finger. Lol..........

tc

Nigel.Machado · 15 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 6:41 pm

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Timing Matters

DKS · 16 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 7:53 pm

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Arena wrote:If you really noted our great analyst MW said 1 year ago that tea will be the next hidden Gem.

respect you Mr. Lakshan.........

See the top share holders list of MADU, MASK, BOPL.

Arena · 17 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:02 pm

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Wow just now saw Mask and Madu..................He has done it remarkably. Sri lanka need these kind of value investors. All the best again............Looks MASK is the best counter to enter if wants.

Kinm hunter · 18 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:47 pm

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It is better to by December Co. Shares at this stage, as they declare dividend within this month. like TPL, KVAL,
would be able to enjoy healthy yield..

DKS · 19 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:56 pm

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Though earning of plantations companies are strong due to better tea prices market is not strong enough to push their share prices to the next level. But we can see strong base formation for some plantations companies (WATA,BOPL,KGAL...etc.).

Time will show us the drama. Let's wait and see......

TC

Nigel.Machado · 20 Re: Tea is it the next Hidden Gem? Fri Feb 08, 2013 6:35 pm

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http://www.cse.lk/cmt/upload_report_file/723_1360316800362.pdf

Chinwi · 21 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 10:42 am

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Arena wrote:Wow just now saw Mask and Madu..................He has done it remarkably. Sri lanka need these kind of value investors. All the best again............Looks MASK is the best counter to enter if wants.

1) Plantations always provided a good platform to performers like this.
The people like MW have the ability to understand the industries better than graphs.

2) Most of the people take Drought , loss of capital, occasional fraud etc. as negative signals. We always see prices going downwards in such cases.
For few others they are the signals to get set for future "Ashcharryaya"

3) IMO, reshaped Dollar - Rupee rate also gave a push for export oriented industries. Especially those do not rely heavily on imported crud oil.

4) When you have enough money to live you do not have to waste your time for trading everyday. Just plant a tree in the trading floor and wait calmly. It grows itself.

“Symbol - Big game.
Never rush into the hunt. Know your prey and choose it carefully. Do not waste time with small game – the rabbits that back into snares, the mink that walk into a cented trap.
Challenge is pleasure.”
- Robert Greene - Art of Seduction. ( P64 Concise)

Slstock · 22 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 11:29 am

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If this is for medium to short term then it is okay.

Look at MASK losses when the last wage revision happened ( but to be fair Tea prices were low also then) . If I recall in 1 quarter itself their - adjustment cost was well over what MASK earned after 9 month this year .

We are hoping the wage revision is not that great this time, but if it is ?

Anyway given the the current prices with valuations MASK is attractive ( but so many plantation shares are).

Like in Banking, we are hoping there will be a run on plantation before any wage issue.

Arena wrote:Wow just now saw Mask and Madu..................He has done it remarkably. Sri lanka need these kind of value investors. All the best again............Looks MASK is the best counter to enter if wants.

DKS · 23 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 9:34 pm

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DKS wrote:Though earning of plantations companies are strong due to better tea prices market is not strong enough to push their share prices to the next level. But we can see strong base formation for some plantations companies (WATA,BOPL,KGAL...etc.).

Time will show us the drama. Let's wait and see......

TC

Will tea prices be going up further???

http://www.dailynews.lk/2013/02/09/bus09.asp

Chinwi · 24 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 10:48 pm

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klpfernando · 25 Re: Tea is it the next Hidden Gem? Sun Feb 10, 2013 7:52 pm

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I saw Thailand started to promote thai rice as unique product in the world market but much talked about pure Ceylon tea promotion still not a reality.

Tea is a gem in world market(not hidden).India spend million on tea research,Starbucks moving into tea.We are loud of CEYLON TEA but we have done very little or nothing to ceylon tea since colonial times.most of 01.the plantation workers live in 100+old colonial time limes.
02.plantation road network 100+years old
03.factories 100+years old
04.tea bushes 100+year old
05. whole process oh black tea making is 100+years old
soYES it is gem but time is right to cut and polish it again if not???????

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Tea is it the next Hidden Gem?

1 Tea is it the next Hidden Gem? Tue Feb 05, 2013 2:33 pm

Nigel.Machado

2 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 5:28 pm

raptor

3 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 6:30 pm

Rapaport

4 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 7:03 pm

nimantha80

5 Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 9:43 pm

smallville

6 Re: Tea is it the next Hidden Gem? Wed Feb 06, 2013 4:07 am

Slstock

7 Re: Tea is it the next Hidden Gem? Wed Feb 06, 2013 11:18 pm

Nigel.Machado

8 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 7:59 am

smallville

9 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 11:08 am

Nigel.Machado

10 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 11:42 am

Arena

11 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 1:39 pm

Nigel.Machado

12 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 2:12 pm

Arena

13 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 2:58 pm

Nigel.Machado

14 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 3:16 pm

Arena

15 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 6:41 pm

Nigel.Machado

16 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 7:53 pm

DKS

17 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:02 pm

Arena

18 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:47 pm

Kinm hunter

19 Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:56 pm

DKS

20 Re: Tea is it the next Hidden Gem? Fri Feb 08, 2013 6:35 pm

Nigel.Machado

21 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 10:42 am

Chinwi

22 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 11:29 am

Slstock

23 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 9:34 pm

DKS

24 Re: Tea is it the next Hidden Gem? Sat Feb 09, 2013 10:48 pm

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25 Re: Tea is it the next Hidden Gem? Sun Feb 10, 2013 7:52 pm

klpfernando

26 Re: Tea is it the next Hidden Gem?

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