RICH, KGAL, NAMU prices after reports

mono wrote:UKboy, i don't get your point.

Dear mono,

Last year they made 722 million and this year they made Rs 2.1 billions

Last year they had 128 million shares & now it is 1937 million.

Last year EPS 4.5 & this year EPS0.87

So how come people think this is an undervalued share & should be trading around Rs 20.00...?

UKboy wrote:

mono wrote:UKboy, i don't get your point.

Dear mono,

Last year they made 722 million and this year they made Rs 2.1 billions

Last year their share capital was 128 million & now it is 1937 million.

Last year EPS 4.5 & this year EPS0.87

So how come people think this is an undervalued share & should be trading around Rs 20.00...?

people were expecting much higher earnings that's why. I told you about the rubber deal. last quarter when they posted .33 eps the price of rubber was averaged 200 this quarter the price of rubber averaged at 250. That should have pushed their earnings much higher, considering RICH is heavily exposed to rubber. their retail business was also talking off nicely. that's why people were expecting 20.

Interim Financial Sttements
RICH
KGAL

I like to read you guys thrash it out throwing facts and figures at each other sitting outside of the ring.

Since all three of these shares are fundamentally strong and the overall outlook is positive i see no reason for panicking.

UKboy wrote:

mono wrote:UKboy, i don't get your point.

Dear mono,

Last year they made 722 million and this year they made Rs 2.1 billions

Last year they had 128 million shares & now it is 1937 million.

Last year EPS 4.5 & this year EPS0.87

So how come people think this is an undervalued share & should be trading around Rs 20.00...?

I'm just doing a valuation based on Year Ended Results; So not talking abt the company performance much..
Facts taken - Sector PE is for plantations taken as 8,24 as reported by NDB reports. And for diversified Sectro PE = 25.06.

NAMU

EPS = 17.23
While Rubber has contributed much to the bottom line, Oil Palm expectation was hindered.
So compared to 2010, we're seeing much lesser contribution from Oil Palm.
Sector Valuation - 17.23*8.24 = 141.97
Current PE = 132/17.23 = 7.66 still undervalued..
Share holders Fund = 1311.07 Mn
ROE = 409.33/1311.07 = 31.2%

KGAL

EPS = 33.66
Compared to last year a decline of cost of sales to be clearly seen with the revenue growth.
Rev/COS in 2011 = 1.64 Bn compared to 1.26 Bn in 2010.
Declaration of final Dividend of Rs. 12.5Mn (Rs. 0.50 per share).
Revenue on Rubber is 1.96 Bn and its a 53.1% increase compared to 2010.
But risen finance cost was a bit issue.
Sector Valuation - 33.66*8.24 = 277-/
Current PE = 221/33.66 = 6.56 way undervalued..
Share holders Fund = 2409.4 Mn
ROE = 837.75 / 2409.4 = 34.7%

RICH

Diluted EPS = 0.84
Revenue = 27.2 Bn
Equity Holders = 1.68 Bn
No of shares = 1.94 Bn
The company has declared a final dividend of Rs.0.10 per share for the financial year ended
31st March 2011.
Employees Provident Fund has entered with 5.12% stake
Sector Valuation - 0.84*25.06 = 21/-
Share holders Fund = 5002.93 Mn
ROE = 2140.52/5002.93 = 42.7%

Conclusion;
Totally disappointed with NAMU.
Fingers crossed on KGAL Price..
Given a 30% discount to sector even RICH is worth 14.7/- Now whose sayin RICH is still not worth 20???

I think you should not get panic about RICH financial report. Rich is still the most undervalued share in the diversified sector.If you are saying that RICH is not worth 20 what do you say about JKH and other diversified sector shares . Their PE ratio is way above RICH. I still think RICH is one of the best companies to invest even though RICH's performance in Q4 hasn't been up to the expectation. But they are still very very strong.

What If we calculate the fair value of a company deviating from the standard method. This is what I propose...

Say if you take KGAL
current share price is Rs. 220/=
for Rs.220 they earn Rs.33.66
which means the return is 33.66*100/220=15.3%
Thats many multiple times the present bank interest rate. And you can do the cal deducting the total dividends paid from the current price. Which makes the return even higher.

rich 6% and namu 13% roughly.

go figure

NEM wrote:I think you should not get panic about RICH financial report. Rich is still the most undervalued share in the diversified sector.If you are saying that RICH is not worth 20 what do you say about JKH and other diversified sector shares . Their PE ratio is way above RICH. I still think RICH is one of the best companies to invest even though RICH's performance in Q4 hasn't been up to the expectation. But they are still very very strong.

RICH performance is not bad at all. But though RICH is listed under diversified sector, it's more in to plantation sector. Hence it should trader lower PE ratio. As per current earnings RICH is fairly valued.

gann wrote:What If we calculate the fair value of a company deviating from the standard method. This is what I propose...

Say if you take KGAL
current share price is Rs. 220/=
for Rs.220 they earn Rs.33.66
which means the return is 33.66*100/220=15.3%
Thats many multiple times the present bank interest rate. And you can do the cal deducting the total dividends paid from the current price. Which makes the return even higher.

rich 6% and namu 13% roughly.

go figure

That argument would be fine if you didn't live in a country where the risk free rate has been much higher than the fixed deposit rate for the best part of 3 decades.

In segmental analysis Rubber segment for RICH ahs made a Loss
Any reason why?

We have to admit profit for this Quarter is not up to expected level. but look at growth factor.
NAVPS is increased. 82.84% is holding by major 20 shareholders while Employees Provident Fund has increased its holding to 5.12%. 59% foreign holding.

it is not fair to evaluate RICH as plantation. look at LCEY. it is also heavily plantation. for 31st dec 2010, 765,796,000 from plantation out of 1,335,542,000 Profit before tax.

ok, we'll see the crowd philosophy on monday. at 0.867 EPS it is worth more than 17.40.

tubal wrote:

gann wrote:What If we calculate the fair value of a company deviating from the standard method. This is what I propose...

Say if you take KGAL
current share price is Rs. 220/=
for Rs.220 they earn Rs.33.66
which means the return is 33.66*100/220=15.3%
Thats many multiple times the present bank interest rate. And you can do the cal deducting the total dividends paid from the current price. Which makes the return even higher.

rich 6% and namu 13% roughly.

go figure

That argument would be fine if you didn't live in a country where the risk free rate has been much higher than the fixed deposit rate for the best part of 3 decades.

That was before the nanthikadal incident. I see things in a different light after that (I am banking on the fact the light wouldn't burn out though )

gann wrote:

tubal wrote:

gann wrote:What If we calculate the fair value of a company deviating from the standard method. This is what I propose...

Say if you take KGAL
current share price is Rs. 220/=
for Rs.220 they earn Rs.33.66
which means the return is 33.66*100/220=15.3%
Thats many multiple times the present bank interest rate. And you can do the cal deducting the total dividends paid from the current price. Which makes the return even higher.

rich 6% and namu 13% roughly.

go figure

That incidence hasn't effected this ridiculous gap between the risk free rate and bank rates. Latest TBill rate for 30 days is 7.09% the fixed deposit rate for 3 months is between 6 and 7.

Most banks made their profits in recent times by actually borrowing from people at 4% (savings rate) and lending to the government between 7-8% it's risk free!!

References: http://www.hnb.net/data/tools/fixed_deposits.php?ref=4
http://www.cbsl.gov.lk/htm/english/_cei/ir/i_3.asp



That argument would be fine if you didn't live in a country where the risk free rate has been much higher than the fixed deposit rate for the best part of 3 decades.

That was before the nanthikadal incident. I see things in a different light after that (I am banking on the fact the light wouldn't burn out though )

Ouch, I don't know how this came out empty the first time? server error network error?

Anyway, in short what I said was: the fixed deposit rates being lower than risk free rate hasn't changed. Now T Bill rate is 7.09 for 91 day while 3 month FD is about 6.5%

@tubal your last post is empty

xhora wrote:In segmental analysis Rubber segment for RICH ahs made a Loss
Any reason why?

I didnt see any can u extract and post?

UKboy wrote:

mono wrote:

UKboy wrote:

tubal wrote:Well the results are out
http://www.cse.lk/cmt/upload_report_file/725_1306491042098.PDF
http://www.cse.lk/cmt/upload_report_file/711_1306489935485.pdf
http://www.cse.lk/cmt/upload_report_file/509_1306490010415.PDF

And I don't think this is what many of you were expecting

I can still remember few months ago many many people recommended that RICH should be trading around Rs20. wondering where all those people now...

They all easily forgot that this share was appreciated from Rs 35 - Rs 170 ( before the split) in just few months.

I dont say that RICH is a bad counter but around Rs 13 - 14 this is fairly valued...

what does the bold bit have to do with anything? when rich was moving from 35-170 rubber prices were half of what they were now and RICH was making a much smaller profit.

Most of us expected RICH to improve on last quarter's performance given that the rubber prices have appreciated quite a bit more. I thought they'd post an EPS of .3 or higher. i was wrong and they didn't.

Yes mono as same as they were making small profits & their share prices was also small at that time.

As you said year before they made only Rs 722 millions for the whole year and EPS was 4.50. In May 2010 share price was around Rs 75. So we say the P/E is 16.67.

As you said yes this year they made Rs 2.1 billion as profits. Again Yes as you said it is very impressive.
EPS is 0.87 and we can say the P/E is 15.7..

mono wrote:
what does the bold bit have to do with anything?

So you decide whats the meaning of that bold bit

I think you all got wrong, what UKBoy was trying to say.
In the past RICH has always traded according to its EPS.
If not for the split, the share would be in sky at the current earnings.

The P/E has not changed much over the years. Therefore we can not expect the same P/E ratio of Diversified sector from RICH. Considering the fact that RICH is more exposed to plantation, RICH got its own P/E of around 14 to 16. Therefore its unfair to point out the diversified sector P/E and say its undervalued.
Hope you all got the point now.

Well in UKboy's portfolio RICH must be laying therefore years and years. May be he got minus avg cost even. lol

smallville wrote:

xhora wrote:In segmental analysis Rubber segment for RICH ahs made a Loss
Any reason why?

I didnt see any can u extract and post?

on the ninth page
See the .jpg I attached here
https://i.servimg.com/u/f28/16/48/24/73/rich_s10.jpg

xhora wrote:

smallville wrote:

xhora wrote:In segmental analysis Rubber segment for RICH ahs made a Loss
Any reason why?

I didnt see any can u extract and post?

on the ninth page
See the .jpg I attached here
https://i.servimg.com/u/f28/16/48/24/73/rich_s10.jpg

This is the manufacturing unit of rubber products. Due to heavy cost of raw material, this segment didn't make profit. Refer REXP interim financial report.

It's not fair to consider RICH as a plantation company.Anyway why do u expect to have a lower PE for plantation? Plantation's future is bright specially in Sri lanka with fertilizer concession and as a main producer of rubber.So i think plantation is no more an uncertain thing in the modern world.
But i think RICH will not move up hugely because there will be more selling due to unexpected results. So probably 15 will be touched.

mono wrote:

UKboy wrote:

mono wrote:UKboy, i don't get your point.

Dear mono,

Last year they made 722 million and this year they made Rs 2.1 billions

Last year their share capital was 128 million & now it is 1937 million.

Last year EPS 4.5 & this year EPS0.87

So how come people think this is an undervalued share & should be trading around Rs 20.00...?

people were expecting much higher earnings that's why. I told you about the rubber deal. last quarter when they posted .33 eps the price of rubber was averaged 200 this quarter the price of rubber averaged at 250. That should have pushed their earnings much higher, considering RICH is heavily exposed to rubber. their retail business was also talking off nicely. that's why people were expecting 20.

increase of rubber price seems to be one of rich's strength but also a cost.

P/E for RICH is somewhere between plantation and diversified sector PE.

xmart wrote: we'll see the crowd philosophy on monday. .

According to CSE crowd philosophy there is a good chance that the RICH price will go up in next week. But it won’t be something called a “rally”.

UKboy wrote:

xmart wrote: we'll see the crowd philosophy on monday. .

According to CSE crowd philosophy there is a good chance that the RICH price will go up in next week. But it won’t be something called a “rally”.

if it buyers cannot penetrate 14, i will be happy. because still i'm collecting this one from 13 to 13.50. still in thirsty for RICH. I don't want to see a rally for sure. but for next 1 year, yes, I may see RICH at 20+ by way of rally or tortoise appreciation.

xmart wrote:

UKboy wrote:

xmart wrote: we'll see the crowd philosophy on monday. .

According to CSE crowd philosophy there is a good chance that the RICH price will go up in next week. But it won’t be something called a “rally”.

if it buyers cannot penetrate 14, i will be happy. because still i'm collecting this one from 13 to 13.50. still in thirsty for RICH. I don't want to see a rally for sure. but for next 1 year, yes, I may see RICH at 20+ by way of rally or tortoise appreciation.

next quarter rubber prices are supposed to come down to 200ish but there is supposed to be a massive commodities rally starting from sepish. rubber will most likely cross 300. that's where the money will be made.

Comparing latest income statement and the previous, I couldn't understand why administrative expenses and other operating expenses are high in 4Q. Finance cost is over 100 million compare to the previous.

I remember they took a 1 billion loan few months back

Monster wrote:
Comparing latest income statement and the previous, I couldn't understand why administrative expenses and other operating expenses are high in 4Q. Finance cost is over 100 million compare to the previous.

that's what has puzzled me. all things being equal RICH should have posted .35

13 is the bottom strong support while 13.50 being the first resistance, now 13.50 resistance level become a support. 13.50 support is going to be the next level. next resistance is 14. if RICH break 14 with considerable volume
, i would say sky is unlimited.

guys, I can observe the same trading pattern on stochastic at early January. both the situations are similar. at that time, RICH was in huge profit, deserve to run. market sentiment was also good because postponing of credit clearance.
now, even RICH results are not impressive, it is healthy. market condition also favorable for a run.
if i'm correct we may see RICH @15.50~16 level in a week.

- this is not a recommendation, this is what i observe from charts. value you experts input in this regard.

Monster wrote:
.

I see there are positive/ negative comments on RICH after the March release.

Let us look at the situation fairly.

Firstly Yes , RICH Profit for the period was far below what many of us expected. Does this mean RICH is doing badly?

Let us analyze ..

* First the Gross Profit for March is marginally Higher than December.

* But Profit from operations came down due to Higher
a) Distribution
b) Administration
c) Other expenses

* Second blow came with the increase of Finance costs to 276,383,000 from Rs 171,251,000
* Third came from Income Tax being percentage wise much higher in March than December
* Fourth the Minority Interest allocation is significantly higher percentage wise compared to Decemeber reducing Equity Holder profit

Now though I could still not find why this happened, I did find something else

See the below

March 10 : http://www.cse.lk/cmt/upload_report_file/509_1275474297877.pdf
Dec 09 : http://www.cse.lk/cmt/upload_report_file/509_1265881408372.pdf

In March
* Equity Holder allocation is percentage wise higher
* Finance cost and Admin expenses are higher too.

It appears that this could be a re-occurring pattern for March quarter which none of us picked up before. I tried to do this for Dec 08 and March 09 to confirm further but not could find March 09 report on cse.lk

So in summary looking at Gross profit and identifying the expense shortcomings we have to re-look how we analyzes the Final March Eps for RICH.

Given the present results the valuation

RICH is in diversified sector so
Div sector PE from cse.lk is 35.00
Div sector PE from Asia Weath is 23.78

Since RICH also has plantation heavy interests if one takes Plantation sector PE

on Cse.lk it is 16.90
on Asia Wealth report 10.6

So we take PE of 16 to be fair and a 12 Month EPS of 0.84 the RICH price is fairly valued now. based on past 12 month earnings. So should we look at only March quarter report or should we look at Dec quarter also see the potential of RICH.

However , depending on Market interest ( also Dividend of 0.1) and how it treats RICH( DIV sector Blue Chip) this can be worth Rs 14-16 depending on the higher PE. Please note the keyword it is Worth. Someone having negative feeling will always argue and will say this is worth less. But just consider all the factors presented.



Note :
BTW, KGAL is clearly within my expectations. I expected around Rs 10-11 eps. KGAL to me is still one of the best managed plantations in Sri Lanka and also clearly is the largest on Rubber.







Monster , Thanks for the side by side comparison. I created a such image ( before I saw yours) but it was not as parallel as yours. I see you have to do some image editing on December to be parallel with March.