Bukitdarah PLC

Im trying to estimate a minimum market value of BUKI.N, I have considered only the market values of the subsidiaries, ignoring all the other assets of the company if I consider the minimum market value of the company I get an unrealized gain of atleast Rs. 800/- Below is the analysis based on yesterdays closing price and holding balances as at March 2012. i'm planing to buy the share, would like to know the comments on the analysis, whether its fair enough to buy
thanks SriRanga for helping on the excel.

https://docs.google.com/file/d/0B-iWbYdaT3TTcnRpUDU5YlRkN2s/edit?usp=sharing

This is not correct way to analyse a holding company
I hope you have taken only shares owned by Buki of its subsidiaries
In this most unrealistic assumption, that all subsidiaries are valued fairly
This assumption is by far true

Agreed salt, that this is not the most appropriate way to value a holding company, I want to identify the minimum NAV of BUKI at market value, appreciate if you could suggest any other way to identify a minimum net asset value of BUKI (by including investments at market value).

But don't you think suppose if the investments are accounted at market value, the NAV would at least go up by 800/=

I think ALchemist can comment on this, He did a valuation of BUKI sometime ago if I recall.

slstock wrote:I think ALchemist can comment on this, He did a valuation of BUKI sometime ago if I recall.

Alchy will give you more than you bargain for on BUKI. What he wrote last time gave me a headache trying to figure it all out.

Today is the BUKI EGM. I think they are going to make the Goodhope IPO at Singapore stock exchange official today.

This firm is very difficult to value because of the circular share holdings and a number private subsidiaries which are based off shore.

To keep it simple, lets see one private firm:

Rubber Investment is a 100% subsidiary of Carsons

Rubber Investment owns 20% of Bukit Darah

Bukit Darah owns 45% of Carsons


There are many other cases like the above. Just check the top 20.
Anyway apart from this there is a offshore palm oil land bank.

lion wrote:Im trying to estimate a minimum market value of BUKI.N, I have considered only the market values of the subsidiaries, ignoring all the other assets of the company if I consider the minimum market value of the company I get an unrealized gain of atleast Rs. 800/- Below is the analysis based on yesterdays closing price and holding balances as at March 2012. i'm planing to buy the share, would like to know the comments on the analysis, whether its fair enough to buy
thanks SriRanga for helping on the excel.

https://docs.google.com/file/d/0B-iWbYdaT3TTcnRpUDU5YlRkN2s/edit?usp=sharing

Hi Lion
i think your computation is incorrect as you have not discounted minority interest and sometimes double counted some of the assets. i will show you step by step, a simplistic "back of the envelope" type method to value both carsons and buki

1. Buki owns approx 45 % of Carsons and 35 % of GoodHope Asia. those are its only two assets.

2. In order to Value Carsons, we need to consider what they own approx 53 % of Goodhope Asia, 67 % of GUAR, 75 % of BREW and other assets such as the properties and hotels (EQUIT 1&2 and PEGS)

3. For the Brew sector, since CARS owns 15.7 Million shares of BREW, i took a price of Rs 850 for BREW (although market price is rs 550 - a price arbitrage opportunity is there for you boys & girls ! ) since BREW owns 42 million shares of LION which foreign funds are snapping up at Rs 425.
Therefore, value of BREW to CARS is rs 70 per share

4. For the EQUITY and Hotels, i took the NAV from the balance sheet for these assets and this amounted to Rs 40 per share for CARS.

5. For the Investments sector, i took CARS 67 % stake in GUAR only valued at Rs 300 which is now close to its NAV. you cannot count the CINV and WAPO stakes as they are included in GUAR.
This amounts to a further Rs 70 per share for CARS.

6. Now comes the tricky one - Goodhope Asia Holdings !

a. They own the followings assets -

- 50,000 hectares - mature
- 20,000 hectares - immature
- 90,000 hectares - land bank
- Milling capacity to make CPO (i forget the rated capacity)
- downstream Premier Nutrients group - 2 refineries in malaysia, 1 in india, brands and goodwill.
- 1500 hectares prime commercial property (palm oil estates) in selangor, KL

b. My call is this is all worth between usd 1 to 1.5 Billion dollars nett of approx usd 200 mill debt
based on following assumptions and facts

- they made usd 100 million in 2012 - check the usd accounts figure including fair value for immature property
- some time ago, i was checking on the internet and came across a palm oil company research report " a billion dollar baby " which has only 30,000 hectares mature.
- if you check the latest malaysian palm oil companies accounts / reports, you will notice the NAV has almost tripled from last year (from Rs 300 to Rs 900). This is due to the fair valuation of unquoted securities i.e. Rs 3.5. Billion for 13.33 % of Shalimar Developments which owns 80 % of PT Agro Indomas, a 24,000 hectare fully matured plantation. therefore if Rs 3.5 Billion is 10 % of 24,000 fully matured, PT Agro Indomas is then valued at Rs 35 Billion.
- Also note that the 1500 Hectares in Malaysia could be worth over usd 200 Million. (in 2003, they sold the Bukit Darah estate of approx 400 hectares for usd 35 Million)

c. So all things above considered, lets keep the Goodhope Asia valuation at a conservative usd 1 Billion, although as time goes on, more maturity of plantations, better palm oil prices, improving down stream operations and possible sale of malaysian properties etc etc, the valuation can become usd 1.5 to 2.0 Billion in the near future.

7. Since Carsons owns 53 % directly in Goodhope and further 10 % indirectly through its stake in Buki directly and through GUAR/RIT, we have to assume that CARS owns approx 63 % in Goodhope Asia that works out to usd 630 Million divided by 196 million shares = usd 3.28 per share or Rs 413

8. Now lets add up the CARS components = Rs 414 (goodhope) + Rs 70 (BREW) + Rs 70 (GUAR)+
Rs 40 (property/hotels) = CARS intrinsic value Rs 594

9. Finally for BUKI, since it owns approx 90 million shares in Carsons and 35 % directly in Goodhope Asia Holdings, the equation is (90 million shares into Rs 594) + (35 % into usd 1 billion into Rs 126) divided by 102 million buki shares = Buki intrinsic valure = Rs 956

Pls note that all these are very rough calculations. please excuse errors of omission or commission.
Also note that above calculation acknowledges a slight circular / cross holding problem between buki & cars in relation to its value of holdings in Goodhope Asia and the Investment sector as RIT, which in jointly owned by CINV & GUAR, owns 20 % of BUKI.

@TheAlchemist,

Just a question, if you are allowed to invest only one company from CARS, BUKI and GOOD, which one you select?

I know it is a lazy question from a novice to this group.

@Alchemist You have too much spare time! There are so many hidden assets including multiple private subsidiaries under Goodhope Asia Holdings. Some of those lands are not freehold.

A good reference is the Felda or Wilmar Holdings market cap adjusted for land area


@seek invest in CARS - they own some of those private cross holding firms

seek wrote:@TheAlchemist,

Just a question, if you are allowed to invest only one company from CARS, BUKI and GOOD, which one you select?

I know it is a lazy question from a novice to this group.

Seek and you will find !

btw Goodhope Asia is a private company in Singapore and you cannot own those share. i think you are mistaking this for Good Hope Plantations (GOOD) which is one of 4 group malaysian plantations totalling approx 1500 hectares.

Re what to buy between Buki & Cars, to be honest, I would be tempted to buy CINV or GUAR instead. CINV & GUAR NAV now nearly Rs 150 and Rs 300 respectively. CINV Buki stake at Rs 720 amounts to Rs 75. GUAR Buki stake at Rs 720 amounts to Rs 150.

Alchemist, thank you very much for the detailed analysis, please give me some time get a grasp of the facts you have mentioned.

meantime can you please explain little more on this para -"CINV Buki stake at Rs 720 amounts to Rs 75. GUAR Buki stake at Rs 720 amounts to Rs 150"
what do you mean by this?

lion wrote:Alchemist, thank you very much for the detailed analysis, please give me some time get a grasp of the facts you have mentioned.

meantime can you please explain little more on this para -"CINV Buki stake at Rs 720 amounts to Rs 75. GUAR Buki stake at Rs 720 amounts to Rs 150"
what do you mean by this?

Cinv and Guar each own approx 10.2 million shares each of Buki in their portfolio (through RIT).
Guar also owns approx 64 % of Cinv.
Thus each Cinv share has Rs 75 worth of Buki in its portfolio when buki price is at Rs 720.
similarly, Guar has Rs 150 worth of Buki in its portfolio when buki price is at Rs 720.
If and when Buki price changes, then Cinv & Guar NAV will also change.
also note Cinv & Guar, JKH holding at Rs 300 amounts to Rs 30 and Rs 60 respectively.

The Alchemist wrote:

lion wrote:Im trying to estimate a minimum market value of BUKI.N, I have considered only the market values of the subsidiaries, ignoring all the other assets of the company if I consider the minimum market value of the company I get an unrealized gain of atleast Rs. 800/- Below is the analysis based on yesterdays closing price and holding balances as at March 2012. i'm planing to buy the share, would like to know the comments on the analysis, whether its fair enough to buy
thanks SriRanga for helping on the excel.

https://docs.google.com/file/d/0B-iWbYdaT3TTcnRpUDU5YlRkN2s/edit?usp=sharing

Hi Lion
i think your computation is incorrect as you have not discounted minority interest and sometimes double counted some of the assets. i will show you step by step, a simplistic "back of the envelope" type method to value both carsons and buki

1. Buki owns approx 45 % of Carsons and 35 % of GoodHope Asia. those are its only two assets.

2. In order to Value Carsons, we need to consider what they own approx 53 % of Goodhope Asia, 67 % of GUAR, 75 % of BREW and other assets such as the properties and hotels (EQUIT 1&2 and PEGS)

3. For the Brew sector, since CARS owns 15.7 Million shares of BREW, i took a price of Rs 850 for BREW (although market price is rs 550 - a price arbitrage opportunity is there for you boys & girls ! ) since BREW owns 42 million shares of LION which foreign funds are snapping up at Rs 425.
Therefore, value of BREW to CARS is rs 70 per share

4. For the EQUITY and Hotels, i took the NAV from the balance sheet for these assets and this amounted to Rs 40 per share for CARS.

5. For the Investments sector, i took CARS 67 % stake in GUAR only valued at Rs 300 which is now close to its NAV. you cannot count the CINV and WAPO stakes as they are included in GUAR.
This amounts to a further Rs 70 per share for CARS.

6. Now comes the tricky one - Goodhope Asia Holdings !

a. They own the followings assets -

- 50,000 hectares - mature
- 20,000 hectares - immature
- 90,000 hectares - land bank
- Milling capacity to make CPO (i forget the rated capacity)
- downstream Premier Nutrients group - 2 refineries in malaysia, 1 in india, brands and goodwill.
- 1500 hectares prime commercial property (palm oil estates) in selangor, KL

b. My call is this is all worth between usd 1 to 1.5 Billion dollars nett of approx usd 200 mill debt
based on following assumptions and facts

- they made usd 100 million in 2012 - check the usd accounts figure including fair value for immature property
- some time ago, i was checking on the internet and came across a palm oil company research report " a billion dollar baby " which has only 30,000 hectares mature.
- if you check the latest malaysian palm oil companies accounts / reports, you will notice the NAV has almost tripled from last year (from Rs 300 to Rs 900). This is due to the fair valuation of unquoted securities i.e. Rs 3.5. Billion for 13.33 % of Shalimar Developments which owns 80 % of PT Agro Indomas, a 24,000 hectare fully matured plantation. therefore if Rs 3.5 Billion is 10 % of 24,000 fully matured, PT Agro Indomas is then valued at Rs 35 Billion.
- Also note that the 1500 Hectares in Malaysia could be worth over usd 200 Million. (in 2003, they sold the Bukit Darah estate of approx 400 hectares for usd 35 Million)

c. So all things above considered, lets keep the Goodhope Asia valuation at a conservative usd 1 Billion, although as time goes on, more maturity of plantations, better palm oil prices, improving down stream operations and possible sale of malaysian properties etc etc, the valuation can become usd 1.5 to 2.0 Billion in the near future.

7. Since Carsons owns 53 % directly in Goodhope and further 10 % indirectly through its stake in Buki directly and through GUAR/RIT, we have to assume that CARS owns approx 63 % in Goodhope Asia that works out to usd 630 Million divided by 196 million shares = usd 3.28 per share or Rs 413

8. Now lets add up the CARS components = Rs 414 (goodhope) + Rs 70 (BREW) + Rs 70 (GUAR)+
Rs 40 (property/hotels) = CARS intrinsic value Rs 594

9. Finally for BUKI, since it owns approx 90 million shares in Carsons and 35 % directly in Goodhope Asia Holdings, the equation is (90 million shares into Rs 594) + (35 % into usd 1 billion into Rs 126) divided by 102 million buki shares = Buki intrinsic valure = Rs 956

Pls note that all these are very rough calculations. please excuse errors of omission or commission.
Also note that above calculation acknowledges a slight circular / cross holding problem between buki & cars in relation to its value of holdings in Goodhope Asia and the Investment sector as RIT, which in jointly owned by CINV & GUAR, owns 20 % of BUKI.

This must be the most complex structure of a Sri lankan company.What is the purpose of this maze of cross holdings ? Is there any management/administrative/accounting/tax advantage or is it all smoke and mirrors to siphon cash without the minority shareholders noticing ?

Who is the big boy of this group or the ultimate owner?

seek wrote:Who is the big boy of this group or the ultimate owner?

Ill answer both questions. Selvanathan controlled private firms control this.
Other cross holdings improve their effective power

This was done to prevent takeovers.

There is a long story to this firm. It was once owned by a British establishment.

I fished out a Colombo Brokers Association Hand book of Rupee companies from 1979-1983.

Details for Buki in 1978/1979

Profit - Rs 2.5 million
Number of shares issued - 100,000 (increased to 400,000 in 1979/1980)
NAV - Rs 333
EPS - Rs 25
Dividend - Rs 12.50
Share Price as at 31st March 1979 - Rs 55

Can you imagine the value proposition 34 years ago ? Oh God - Why was it A'Level time for me ?

By 31st march 1979, I was a few days old baby.

You still have a 34 year old Broker guide at home!


Oh my god what info :-)


NAV 333 , EPS 25 and Dividend 12.5 ( 50% dividend against eps ) and share price is Rs 55 !

PB : 0.16, dividend yield 25%, PE 2.


Sound like a dream. Sound like TWOD now except for dividend :-).


Make all current shares in 2013 overvalued.

Also 400,000 shares ! Illquidity would not have been a concern with 1000 investors haha.

Alchem was your father an investor then( and maybe bought BUKI)? You would be a billionaoire.

The Alchemist wrote:I fished out a Colombo Brokers Association Hand book of Rupee companies from 1979-1983.

Details for Buki in 1978/1979

Profit - Rs 2.5 million
Number of shares issued - 100,000 (increased to 400,000 in 1979/1980)
NAV - Rs 333
EPS - Rs 25
Dividend - Rs 12.50
Share Price as at 31st March 1979 - Rs 55

Can you imagine the value proposition 34 years ago ? Oh God - Why was it A'Level time for me ?

slstock wrote:You still have a 34 year old Broker guide at home!


Alchem was your father an investor then( and maybe bought BUKI)? You would be a billionaoire.

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No such luck ! My dad died in 1977 but he was a avid investor. as a kid i still remember broker dressed in shorts comming on bicycle in a bowler hat every sunday with a fullscap share quotation sheet. then he would take the bids / offers and cycle to some other house. this was in the early 70's. The book i found was my brothers which i just had bound and in mint condition ! still a few titbits of shares such as Millers, New Eraliya Hotels etc was left behind and long sold by me !

So sorry to hear. I feel your pain to loose your father in your young age.
Your father was ahead of his times.

Maybe there was only 1000 investor in Sri Lanka those days.

The Alchemist wrote:

slstock wrote:You still have a 34 year old Broker guide at home!


Alchem was your father an investor then( and maybe bought BUKI)? You would be a billionaoire.

No such luck ! My dad died in 1977 but he was a avid investor. as a kid i still remember broker dressed in shorts comming on bicycle in a bowler hat every sunday with a fullscap share quotation sheet. then he would take the bids / offers and cycle to some other house. this was in the early 70's. The book i found was my brothers which i just had bound and in mint condition ! still a few titbits of shares such as Millers, New Eraliya Hotels etc was left behind and long sold by me !

[/quote]