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Sri Lanka Equity Forum » Stock Market Talk » CARGO BOAT DEVELOPMENT COMPANY PLC (CABO.N0000)

CARGO BOAT DEVELOPMENT COMPANY PLC (CABO.N0000)

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1CARGO BOAT DEVELOPMENT COMPANY PLC (CABO.N0000) Empty CABO - Balance Sheet Analysis on Sat Jun 25, 2011 4:41 pm

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Company profile as extracted from cse.lk website.

Name and address:

CARGO BOAT DEVELOPMENT COMPANY PLC
328,Galle Road, Colombo 3.
Telephone : 011-2448968-9 | Fax : 011 2574137

Details:

• Established: 1980
• Quoted Date: 1981
• Financial Year Ends: 31st March
• Secretaries: Mrs. M. A. Jayawardena
• Auditors: BDO Burah Hathy
• Sector: Land & Property

Officers and Directors:

R. B. Thambiayah: Executive Chairman of the Board, Managing Director
M. A. Jayawardena: Company Secretary, Executive Director
Arnila Lakshmi Thambiayah: Executive Director
Subodhini R. Thambiayah: Executive Director
Niruja Rajeswari Thambiayah: Director
N. A. Thambiayah: Non-Executive Director
Merril J. Fernando: Independent Non-Executive Director
R. S. Tissanayagam: Independent Non-Executive Director
Clement Sunimal Wijeyeratne: Independent Non-Executive Director

Remarks:

Cargo Boat Development Company PLC engages in property development activities in Sri Lanka. It primarily involves in renting out premises.

Balance Sheet Analysis

Company’s Investment Property:

Accordingly information gathered from last available annual report (2009/2010), the company the company owns following investment properties.

1. Property at No. 41, Janadhipathi Mawatha, Colombo 1
2. Property at No. 29, Braybrook Street, Colombo 2
3. Property at No. 35, 35 1/1 & 37 at Janadhipathi Mawatha, Colombo 1

The carrying value of these properties is Rs. 140.3 million and are recorded in the Balance Sheet based on cost less depreciation. Accordingly the market value of these properties are not reflected in the Balance Sheet and therefore the reported NAVPS is considerably low.

For an example, the carrying value of property at No. 41, Janadhipathi Mawatha, Colombo 1 is approx Rs. 34.6 million whereas Mr. T. Hilmy Farook (Fellow member of Institute of Valuers in SL) has valued this property at Rs. 252 million on 19th August 2009. Note that this valuation includes a discount of market value by 25% to reflect the risk of reduction of market value due to poor investment market, global recession and high security zone risk. The market value of this property is Rs. 336 million if not for this adjustment and that is about 10 times of the carrying value of this property in the Company’s balance sheet.

The other two properties have been acquired recently and the Board of Directors have confirmed that the carrying values of these properties in the Balance Sheet as of 31st March 2010, represents the fair market values.

Considering the substantial increase in the value of property at No. 41, Janadhipathi Mawatha, Colombo 1, the market value of the investment properties held by the company should be in the region of Rs. 450 million if not more than that.

Company’s Investment:

The company maintains a considerable investment in listed and unlisted companies. (Approx 95% of this investment is in listed companies as per last annual report). Similar to company’s investment in properties, these investments in listed/unlisted companies are also reflected in the Balance Sheet at cost less a provision for fall in value.

As per last available annual report (2009/2010), the companies investment are recorded in the Balance Sheet at Rs. 373 million whereas the market value of the same as of 31st March 2010 was at Rs. 884 million (864+20). The share prices of most of the companies held in CABO’s portfolio had appreciated as of 31st March 2011 and therefore we can expect an increased market value for these investments in the forthcoming annual report for 2010/2011. Let’s try to calculate this figure.

Company’s major investments in listed companies, extracted from 2009/2010 annual report are as follows.

1. DFCC Bank – 1,024,000 shares (CABO still holds onto this as per DFCC’s report for May 2011 – quantity doubled due to split)
2. Chevron Lubricants – 2,000,000 shares (CABO still holds onto this as per LLUB’s report for May 2011)
3. Renuka City Hotel – 455,440 shares (CABO still holds onto this as per RENU’s report for May 2011)

Change in the market value of above investments from 31st March 2010 to 31st March 2011 is analyzed below.

1. DFCC – Market value increased to Rs. 351.8 million (Rs. 171.80 X 2,048,000) from Rs. 184.8 million
2. LLUB – Market value decreased to Rs. 320 million (Rs. 160.00 X 2,000,000) from Rs. 340 million.
3. RENU – Market value increased to Rs. 151.5 million (Rs. 332.70 X 455,440) from Rs. 105.5 million

Therefore aggregate market value above investments has increased to Rs. 823.3 million from Rs. 630.3 million. This is approx 30% increase. When company’s total investment in listed companies factored by this percentage, it is standing at Rs. 1123 million. Therefore we can reasonably expect a market value of CABO’s investment at Rs. 1143 (1123+20) where 20 million is other investments which are not valued at market price. Note that this value is based on the assumption that CABO did not engage with any significant share dealings within the fiscal year ended 31st March 2011.

Also note that the market value of investments in listed company’s will fluctuate with the market behavior. I have used the prices as of 31st March 2011 to ascertain the market value that will be reported in CABO’s pending annual report.

Current Assets

The value of company’s current assets is Rs. 190.4 million as per the provisional financial statement for the year ended 31st March 2011.

NAVPS Based on Estimated Market Value of Assets

The NAVPS bases on estimated market value of company’s assets can be calculated as below.

Investment property – Rs. 450 million
Investments – Rs. 1143 million
Current Assets – Rs. 190.4 million

Total Assets – Rs. 1783.4 million

NAVPS adjusted for estimated market value is approx Rs. 175 (Rs. 1783.4 / 10.2 shares)

The reported NAVPS in the financial statement is Rs. 66.61.

As of 24.06.2011, the market price of share is Rs. 133.60 which is 24% discount to the estimated NAVPS and approx 100% premium to reported NAVPS.

The PE ratio at Rs. 133.60 based on current earning is 8.74 (133.60/15.28 – where 15.28 is EPS as per provisional financial report for the year ended 31/03/2011)

I will post an earnings based analysis for this company in due course if time permits. (For the moment, I will just mention about the huge dividend declared by DFCC which is Rs. 7 per share and this dividend income will be reflected in CABO’s next financial report for June 2011 – Rs. 7 X 2,048,200 shares = Rs. 14.34 million. This itself will contribute Rs. 1.41 (Rs 14.34/10.2) to EPS of CABO’s June 2011 quarter.)

I recommend further research before making a decision buy/hold/sell this share.

Like to hear comments from fellow members.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Good post + rep.

CABO portfolio certainly adds value to it core business. So like RENU it can also be treated an investment company apart from core business. It will be interesting to watch their annual report to see whether the property will be revalued. I noticed that RENU does not do market to market valuation each year of their portfolio probably because it is a long term investment. I think same applies to CABo.( we need to double check on this). So am not sure whether their annual report will include the portfolio gain updates.

But both CABO and RENU are good long term shares to hold.

BTW is there free access to No. 41, Janadhipathi Mawatha, Colombo 1 now. Earlier was not this road blocked is I am not mistaken? If it is open the property value will be more attractive.

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@slstock, thanks for your comments.

Yes RENU and CABO both have similar chractaristics. Both companies maintain considerable investment portfolio in listed companies in addition to being engaged in their core business activities.

As I have observed, both companies will calculate and show the market value of their investments in listed companies when they publish the annual report but the carrying value in the balance sheet is based on cost.

If CABO undertakes a revaluation of its properties in Colombo and reflects the same in the pending annual report, there is a higher chance that the value may exceed my estimate.

Also agree with you, both RENU and CABO are good for long term holding. These may not suit for those who are looking for short-term gains.

factFINDER

factFINDER
Manager - Equity Analytics
Manager - Equity Analytics
Will it be mendatory to reflect "fair value" in financial reports as per proposed SLFRS to be effective from 1st Jan 2012??? If it is so both CABO & RENU will have to report capital gains from 1Q2012 onwards!
cheers
http://forum.srilankaequity.com/t5329-only-6-months-more-time-to-discuss-new-slfrs-and-its-impacts-to-stocks

mark

mark
Expert
Expert
good one stockwatch,no rep left......
btw look for COLO too.....

http://forum.srilankaequity.com/t4118-colonial-motors#27835

http://forum.srilankaequity.com/t4239-is-colo-still-undervalued?highlight=colo#28528


Free hold land of 208 perches at Union Place as well as an investment portfolio of approximately Rs.1 bn at current prices (carried on the balance sheet at Rs.309m) means that the net asset value per share of Rs.125 is significantly understated

MoneyLover

MoneyLover
Senior Equity Analytic
Senior Equity Analytic
When they will take these massive GAINs in to accounts? Isn't this like a hidden reserves, which is not par with the best practices.

mark

mark
Expert
Expert
@StocksWatch wrote:@slstock, thanks for your comments.

Yes RENU and CABO both have similar chractaristics. Both companies maintain considerable investment portfolio in listed companies in addition to being engaged in their core business activities.

As I have observed, both companies will calculate and show the market value of their investments in listed companies when they publish the annual report but the carrying value in the balance sheet is based on cost.

If CABO undertakes a revaluation of its properties in Colombo and reflects the same in the pending annual report, there is a higher chance that the value may exceed my estimate.

Also agree with you, both RENU and CABO are good for long term holding. These may not suit for those who are looking for short-term gains.


normally we should look for operational results,but many companies gained heavily by capital gains in last quarters...whatever strategy adopted by directors,the last aim is to maximize the shareholder's wealth......these companies investments will give a strong base to their sustainability in the environment and to minimal the risk exposure by operations,ill recommend these shares to long term hold as they will hold their position in coming years,reps for bring this out..

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@mark wrote:good one stockwatch,no rep left......
btw look for COLO too.....

http://forum.srilankaequity.com/t4118-colonial-motors#27835

http://forum.srilankaequity.com/t4239-is-colo-still-undervalued?highlight=colo#28528


Free hold land of 208 perches at Union Place as well as an investment portfolio of approximately Rs.1 bn at current prices (carried on the balance sheet at Rs.309m) means that the net asset value per share of Rs.125 is significantly understated


COLO - why that hadn't caught my attention before? Looks interesting and worth studying. Thanks mark for pointing this out.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Good analysis Stockswatch.

I'm looking for an answer for one thing. Can you please let me know what we called Janadhipathi Mawatha in early days.

Ex; Bauddhaloka mawatha used to call Bullers road.

I'm also trying find the name we used to call for "W.A.D. Ramanayake Mawatha".



Last edited by UKboy on Sun Jun 26, 2011 2:31 am; edited 2 times in total (Reason for editing : BTW I managed to locate these two roads on google maps. Wow its a very impressive tool :))

Monster

Monster
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Good analysis SW (Can I call you SW Wink ) + Rep from me as well.

RENU, CABO and COLO should valuated based on the investment they hold apart from their core business.

If you further analyze as of CABO annual report 2009/2010, the equity investment worth more than the current market price. They have disposed some their investments during 2QFY10 and re-invested during 3QFY2010. It will be interesting to see the annual report.

As of 2009/2010 annual report company was able to maintain full occupancy of all the floors with M/S Julius & Creasy and other tenants. Hence company is safe on it's core business.

CABO and RENU are part of my long term investments.

RockStock


Manager - Equity Analytics
Manager - Equity Analytics
@Monster wrote:Good analysis SW (Can I call you SW Wink ) + Rep from me as well.

RENU, CABO and COLO should valuated based on the investment they hold apart from their core business.

If you further analyze as of CABO annual report 2009/2010, the equity investment worth more than the current market price. They have disposed some their investments during 2QFY10 and re-invested during 3QFY2010. It will be interesting to see the annual report.

As of 2009/2010 annual report company was able to maintain full occupancy of all the floors with M/S Julius & Creasy and other tenants. Hence company is safe on it's core business.

CABO and RENU are part of my long term investments.

ALLI is another stock which have such a large stock portfolio, with only around 1 million shares in issue.

Out of CABO,RENU,COLO,ALLI, If we consider their Core businesses as well , what would be the best out of them,
My order of preference,

1.COLO-Because of strong demand for KIA SUV and other ranges of vehicles, They have a significant income from spare parts business,Now Sri Lanka is flooded with all sorts of vehicles and all may need spare parts from next few years.Union place land have a huge value, even some property companies don't have such an asset.

2.ALLI-Being a Finance stock, Strong credit demand and demand for leasing and higher purchases along with continous economic development.

3-RENU-Income from their CITY hotels Slowly gearing up,but not as rapid as above two

4.CABO- Income generated from the properties are still at very low levels compare to other businesses, though their ASSET value is high.They may take some years to generate good income along with economic development

What are your views

duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@UKboy wrote:Good analysis Stockswatch.

I'm looking for an answer for one thing. Can you please let me know what we called Janadhipathi Mawatha in early days.

Ex; Bauddhaloka mawatha used to call Bullers road.

I'm also trying find the name we used to call for "W.A.D. Ramanayake Mawatha".

W.A.D. Ramanayake Mawatha = Alston Place
Janadhipathi Mawatha = Queens Street

aladdin

aladdin
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@StocksWatch wrote:Company profile as extracted from cse.lk website.

Name and address:

CARGO BOAT DEVELOPMENT COMPANY PLC
328,Galle Road, Colombo 3.
Telephone : 011-2448968-9 | Fax : 011 2574137

Details:

• Established: 1980
• Quoted Date: 1981
• Financial Year Ends: 31st March
• Secretaries: Mrs. M. A. Jayawardena
• Auditors: BDO Burah Hathy
• Sector: Land & Property

Officers and Directors:

R. B. Thambiayah: Executive Chairman of the Board, Managing Director
M. A. Jayawardena: Company Secretary, Executive Director
Arnila Lakshmi Thambiayah: Executive Director
Subodhini R. Thambiayah: Executive Director
Niruja Rajeswari Thambiayah: Director
N. A. Thambiayah: Non-Executive Director
Merril J. Fernando: Independent Non-Executive Director
R. S. Tissanayagam: Independent Non-Executive Director
Clement Sunimal Wijeyeratne: Independent Non-Executive Director

Remarks:

Cargo Boat Development Company PLC engages in property development activities in Sri Lanka. It primarily involves in renting out premises.

Balance Sheet Analysis

Company’s Investment Property:

Accordingly information gathered from last available annual report (2009/2010), the company the company owns following investment properties.

1. Property at No. 41, Janadhipathi Mawatha, Colombo 1
2. Property at No. 29, Braybrook Street, Colombo 2
3. Property at No. 35, 35 1/1 & 37 at Janadhipathi Mawatha, Colombo 1

The carrying value of these properties is Rs. 140.3 million and are recorded in the Balance Sheet based on cost less depreciation. Accordingly the market value of these properties are not reflected in the Balance Sheet and therefore the reported NAVPS is considerably low.

For an example, the carrying value of property at No. 41, Janadhipathi Mawatha, Colombo 1 is approx Rs. 34.6 million whereas Mr. T. Hilmy Farook (Fellow member of Institute of Valuers in SL) has valued this property at Rs. 252 million on 19th August 2009. Note that this valuation includes a discount of market value by 25% to reflect the risk of reduction of market value due to poor investment market, global recession and high security zone risk. The market value of this property is Rs. 336 million if not for this adjustment and that is about 10 times of the carrying value of this property in the Company’s balance sheet.

The other two properties have been acquired recently and the Board of Directors have confirmed that the carrying values of these properties in the Balance Sheet as of 31st March 2010, represents the fair market values.

Considering the substantial increase in the value of property at No. 41, Janadhipathi Mawatha, Colombo 1, the market value of the investment properties held by the company should be in the region of Rs. 450 million if not more than that.

Company’s Investment:

The company maintains a considerable investment in listed and unlisted companies. (Approx 95% of this investment is in listed companies as per last annual report). Similar to company’s investment in properties, these investments in listed/unlisted companies are also reflected in the Balance Sheet at cost less a provision for fall in value.

As per last available annual report (2009/2010), the companies investment are recorded in the Balance Sheet at Rs. 373 million whereas the market value of the same as of 31st March 2010 was at Rs. 884 million (864+20). The share prices of most of the companies held in CABO’s portfolio had appreciated as of 31st March 2011 and therefore we can expect an increased market value for these investments in the forthcoming annual report for 2010/2011. Let’s try to calculate this figure.

Company’s major investments in listed companies, extracted from 2009/2010 annual report are as follows.

1. DFCC Bank – 1,024,000 shares (CABO still holds onto this as per DFCC’s report for May 2011 – quantity doubled due to split)
2. Chevron Lubricants – 2,000,000 shares (CABO still holds onto this as per LLUB’s report for May 2011)
3. Renuka City Hotel – 455,440 shares (CABO still holds onto this as per RENU’s report for May 2011)

Change in the market value of above investments from 31st March 2010 to 31st March 2011 is analyzed below.

1. DFCC – Market value increased to Rs. 351.8 million (Rs. 171.80 X 2,048,000) from Rs. 184.8 million
2. LLUB – Market value decreased to Rs. 320 million (Rs. 160.00 X 2,000,000) from Rs. 340 million.
3. RENU – Market value increased to Rs. 151.5 million (Rs. 332.70 X 455,440) from Rs. 105.5 million

Therefore aggregate market value above investments has increased to Rs. 823.3 million from Rs. 630.3 million. This is approx 30% increase. When company’s total investment in listed companies factored by this percentage, it is standing at Rs. 1123 million. Therefore we can reasonably expect a market value of CABO’s investment at Rs. 1143 (1123+20) where 20 million is other investments which are not valued at market price. Note that this value is based on the assumption that CABO did not engage with any significant share dealings within the fiscal year ended 31st March 2011.

Also note that the market value of investments in listed company’s will fluctuate with the market behavior. I have used the prices as of 31st March 2011 to ascertain the market value that will be reported in CABO’s pending annual report.

Current Assets

The value of company’s current assets is Rs. 190.4 million as per the provisional financial statement for the year ended 31st March 2011.

NAVPS Based on Estimated Market Value of Assets

The NAVPS bases on estimated market value of company’s assets can be calculated as below.

Investment property – Rs. 450 million
Investments – Rs. 1143 million
Current Assets – Rs. 190.4 million

Total Assets – Rs. 1783.4 million

NAVPS adjusted for estimated market value is approx Rs. 175 (Rs. 1783.4 / 10.2 shares)

The reported NAVPS in the financial statement is Rs. 66.61.

As of 24.06.2011, the market price of share is Rs. 133.60 which is 24% discount to the estimated NAVPS and approx 100% premium to reported NAVPS.

The PE ratio at Rs. 133.60 based on current earning is 8.74 (133.60/15.28 – where 15.28 is EPS as per provisional financial report for the year ended 31/03/2011)

I will post an earnings based analysis for this company in due course if time permits. (For the moment, I will just mention about the huge dividend declared by DFCC which is Rs. 7 per share and this dividend income will be reflected in CABO’s next financial report for June 2011 – Rs. 7 X 2,048,200 shares = Rs. 14.34 million. This itself will contribute Rs. 1.41 (Rs 14.34/10.2) to EPS of CABO’s June 2011 quarter.)

I recommend further research before making a decision buy/hold/sell this share.

Like to hear comments from fellow members.

excellent. This is what expected from you. I have given u a positive rep.

Monster

Monster
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@RockStock wrote:
@Monster wrote:Good analysis SW (Can I call you SW Wink ) + Rep from me as well.

RENU, CABO and COLO should valuated based on the investment they hold apart from their core business.

If you further analyze as of CABO annual report 2009/2010, the equity investment worth more than the current market price. They have disposed some their investments during 2QFY10 and re-invested during 3QFY2010. It will be interesting to see the annual report.

As of 2009/2010 annual report company was able to maintain full occupancy of all the floors with M/S Julius & Creasy and other tenants. Hence company is safe on it's core business.

CABO and RENU are part of my long term investments.

ALLI is another stock which have such a large stock portfolio, with only around 1 million shares in issue.

Out of CABO,RENU,COLO,ALLI, If we consider their Core businesses as well , what would be the best out of them,
My order of preference,

1.COLO-Because of strong demand for KIA SUV and other ranges of vehicles, They have a significant income from spare parts business,Now Sri Lanka is flooded with all sorts of vehicles and all may need spare parts from next few years.Union place land have a huge value, even some property companies don't have such an asset.

2.ALLI-Being a Finance stock, Strong credit demand and demand for leasing and higher purchases along with continous economic development.

3-RENU-Income from their CITY hotels Slowly gearing up,but not as rapid as above two

4.CABO- Income generated from the properties are still at very low levels compare to other businesses, though their ASSET value is high.They may take some years to generate good income along with economic development

What are your views
@RockStock, I have never analyzed investment portfolio of ALLI. Thanks for pointing out. I need to study that. BTW any one analyzed CTCE? If I am not mistaken, they too hold some good investment portfolio. Need to study further on these two companies.

Further CFI and CIT hold excellent investment portfolio. However the problem on these companies, their major investments is on their associated companies. They will not sell their portfolio but mark to market value adjustment is possible.

duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
This discussion gives out an important point about the CSE. The companies under discussion are valued by the portfolios and assets they hold which consists of the already over valued shares of the same CSE. We consider what if these companies sell off all their assets like JKH, BRWN, DFCC, SAMP etc. were doing over the last quarters to keep up their profits? But these companies are holding those companies again. This is just like a credit crisis (just like each other buying on credit expecting others will buy and expecting everything will go up.) All the CSE companies are depending on each other for their worth. One companies worth is not because of they're doing business well but because they own shares of other similar companies and expect them to perform well so that they can get a higher value by owning those other companies. I hope you get my point.
If you look at the core business the performance would be flat. Some of these companies has increased the profit by over 10 times in a single one off quarter compared to other quarters just by revaluations or sell offs.
That means there's no growth in companies in the CSE. Because of this I don't think we can consider CSE as an 'emerging market' it's only a 'speculative market'. May be we have already paid the price sufficient for another 5 years of the so called fundamental stocks which are now all jsut a bunch of speculative shares.

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Monster wrote:Good analysis SW (Can I call you SW Wink ) + Rep from me as well.

RENU, CABO and COLO should valuated based on the investment they hold apart from their core business.

If you further analyze as of CABO annual report 2009/2010, the equity investment worth more than the current market price. They have disposed some their investments during 2QFY10 and re-invested during 3QFY2010. It will be interesting to see the annual report.

As of 2009/2010 annual report company was able to maintain full occupancy of all the floors with M/S Julius & Creasy and other tenants. Hence company is safe on it's core business.

CABO and RENU are part of my long term investments.

Very well spotted Monster, yes CABO seems to have disposed some of their investment in the 2QFY2010. This is clearly visible when you compare their non-operating income for the four quarters ending 31st March 2011.

Comparison of CABO’s Quarterly Non-operating Income

1QFY2010 – Rs. 12.3 million
2QFY2010 – Rs. 113.2 million
3QFY2010 – Rs. 11.6 million
4QFY2010 – Rs. 7.1 million

See the huge increase in non-operating income in 2QFY2010 – This is likely to be an income generated by disposing some of CABO’s investments. I also observed the same pattern in 4QFY2009 and 1QFY2008. Therefore it can be reasonably inferred from these observations that CABO has been systematically disposing its investments each year and booking some capital gains. Also the investment value in the BS continue to increase which suggests that CABO has been reinvesting the proceeds from disposal of its investments.

Also the property acquired by the company recently which is located at No. 35, 35 1/1 & 37 at Janadhipathi Mawatha, Colombo 1 is going to be developed as a car park as per the 2009/2010 annual report which will eventually increase the revenue generated by the company’s core business. However, this will be a nominal figure compared to company's non-operating income.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@duke wrote:W.A.D. Ramanayake Mawatha = Alston Place
Janadhipathi Mawatha = Queens Street

Thanks duke.

RockStock


Manager - Equity Analytics
Manager - Equity Analytics
@duke wrote:This discussion gives out an important point about the CSE. The companies under discussion are valued by the portfolios and assets they hold which consists of the already over valued shares of the same CSE. We consider what if these companies sell off all their assets like JKH, BRWN, DFCC, SAMP etc. were doing over the last quarters to keep up their profits? But these companies are holding those companies again. This is just like a credit crisis (just like each other buying on credit expecting others will buy and expecting everything will go up.) All the CSE companies are depending on each other for their worth. One companies worth is not because of they're doing business well but because they own shares of other similar companies and expect them to perform well so that they can get a higher value by owning those other companies. I hope you get my point.
If you look at the core business the performance would be flat. Some of these companies has increased the profit by over 10 times in a single one off quarter compared to other quarters just by revaluations or sell offs.
That means there's no growth in companies in the CSE. Because of this I don't think we can consider CSE as an 'emerging market' it's only a 'speculative market'. May be we have already paid the price sufficient for another 5 years of the so called fundamental stocks which are now all jsut a bunch of speculative shares.

I can't agree with you 100% on above statements.To do such massive investments, They must have done their core businesses well, otherwise how do they find such amount of cash to Buy millions of shares in DFCC,NDB,JKH etc.

On the other hand companies with such investments don't have to beg from the shareholders with Rights/Warrrents for thier future development projects.

Although current trend is downward at CSE; Has the growth forecast of SL downgraded or corporate earnings declined? .I think best era of the CSE is yet to come,( not even the 2009-2010).I think CBSL and IMF further upgraded growth forecast in SL from 8% to 8.5%.

Majority of Companies with good businesses are yet to capitalize from their full potential, I thinks even giants like JKH,COMB,NDB,DFCC are still in early stages of their development.So I believe good days are yet to come.

I agree that the behavior of some stocks and investors are not healthy to the market and may even retard the progress we are expecting.

In any society there are people ranging from priests,monks, virtues to Smugglers,thieves,murderers etc and majority in between, in CSE also we should expect such a behavior from investors,traders as well, because investment community is essentially a subset of the Universal community.

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@RockStock wrote:ALLI is another stock which have such a large stock portfolio, with only around 1 million shares in issue.

Out of CABO,RENU,COLO,ALLI, If we consider their Core businesses as well , what would be the best out of them,
My order of preference,

1.COLO-Because of strong demand for KIA SUV and other ranges of vehicles, They have a significant income from spare parts business,Now Sri Lanka is flooded with all sorts of vehicles and all may need spare parts from next few years.Union place land have a huge value, even some property companies don't have such an asset.

2.ALLI-Being a Finance stock, Strong credit demand and demand for leasing and higher purchases along with continous economic development.

3-RENU-Income from their CITY hotels Slowly gearing up,but not as rapid as above two

4.CABO- Income generated from the properties are still at very low levels compare to other businesses, though their ASSET value is high.They may take some years to generate good income along with economic development

What are your views

Thanks RockStock for those valuable comments. Yes ALLI also maintains a healthy portfolio but I have not analyzed it in any detail. I did one trade recently with ALLI where I bought around 800 levels and sold after the recent report with a good capital gain.

Regarding the order of preference among these four shares, I prefer RENU above ALLI, RENU recently refurbished the hotel and it started full operation only in the first quarter of this year. RENU is therefore poised to gain from the recent refurbishments and well as recovering tourism industry.

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@SW: You have compiled an excellent analysis on CABO, very comprehensive and fact-based... Keep it up!

I believe that the CABO price will shoot up once the ongoing selling spree is over. No investor with adequate funds would voluntarily sell at these levels. Good to collect...

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