Fake AI news

 Fake AI-generated news can have significant negative impacts on individuals and society. Some potential consequences include:

1. Misinformation: Fake AI news can spread false information, leading people to believe in events or statements that never occurred, causing confusion and misunderstandings.

2. Manipulation: Malicious actors can use fake AI news to manipulate public opinion, advance personal agendas, or influence political outcomes.

3. Trust Issues: The prevalence of AI-generated fake news erodes trust in media sources, making it harder for people to discern between genuine and false information.

4. Social Division: False stories created by AI can exacerbate societal divisions, promoting hatred, and intolerance among different groups.

5. Economic Impact: Misleading AI-generated news can affect stock markets, investment decisions, and business strategies, leading to financial losses.

6. Security Threats: Fake AI news may be used as a tool to spread disinformation about security threats, leading to panic and potential security risks.

Addressing this issue requires a combination of technological advancements to detect and prevent AI-generated fake news, media literacy education for the public, and responsible AI usage by developers and organizations to ensure the ethical deployment of AI technology.

KSS Review

https://kohls.gcs-web.com/static-files/69bb5ef4-94be-4108-9565-ea19aa1e76d8

Low valuation due to retail doom. Company is still making money and forecast EPS is $4.5 for 2019.
Debt is not excessive with interest coverage of ~4x based o operating profit and 6x on op cash.
Debt is eventually spaced out with next debt maturity of 530MM in 2023, 650MM in 2025 and the next big one is 427MM at 2045. In between is small amount maturity which can be handled by its cash holdings. total long term debt is 1.8B vs cash of 0.5B and equity of 5.3B. 9M operating cash flow is already 1B indicating its strong cash generation ability. Company is also actively paying down debt and engaging in the digital transformation which will pay fruits in future. The revenue drop is stablised but profit is lowered due to these investment.

Current valuation is not compelling and is a good entry point. Property and fix assets is 7B indicating a good source for unlocking value should management decide to sell off their assets.
Dividend payout is ~60% on net profit with yield of ~5% which is attractive.

DTEGY DEUTSCHE Telecom Review

https://www.telekom.com/en/investor-relations/publications/financial-results-2019#559390

Net debt: EUR 78.8 B which increase 42% a year ago mainly due to accounting principle change not because of company taking in new debt.
9M Operating Profit = 7.6B vs interest net expense of 1.8B
Interest coverage = 4x vs 5x in 2018 --> worsening financing ability
9M Operating Cash flow = 17.5B and FCF = 7.5B
Dividends Payout = 3.5B --> Coverage ratio is good. Not overpaying S/H. Dividend safety is high.
Interest coverage in terms of FCF and Operating Cash flow is much higher.

Overall no financing issues. Ability to pay banks and S/H is there.
Total Cash on Balancesheet = 6.4B vs ST Debt = 14B and LT Debt = 55B and LT Lease = 16B
20B debt expire within 5 years while 35B will expire beyond 5 years. No near term liquidity crunch as company's cash generation ability is there.

Overseas Education Limited OEL Review

https://links.sgx.com/FileOpen/OEL%20Financial%20Results%20Q3%202019.ashx?App=Announcement&FileID=585222

3Q19 financial statement.
>100 MM loan. total 2 mil of interest + capital repayment requirement every quarter while company is making ~2 MM of net profit. coverage ratio is on low side and without much margin.

The debt is for financing their new campus which is largely completed and they have shifted to new campus. Dividend payout is large with 8% yield. If business turn sour, they will have to cut dividend.
Need to look at cash flow to ascertain the safety

PHI (PLDT) Review

http://www.pldt.com/docs/default-source/presentations/2019/9m2019-presentation_final.pdf?sfvrsn=0

Share price keep tanking despite profitability. Market cap of ~4.5 B vs net debt of 2.9B. Debt is equally space out yearly with ~10% matured every year. Cash balance is 0.5B vs gross debt of 3.5B.
Interest payment is ~170MM annually based on 4.8% average interest rate. Net debt/ EBITDA is 2x indicating EBIDTA is 1.45B and interest coverage of 8.5x which is healthy.
The debt covenant of Net debt/Ebidta is 3x which will be raised to 4x after company seek for waiver for future debt raised for CAPEX spending. Currently, there is a big margin to hit the limit.
Debt/Equity is high and > 1.  Company bonds is currently investment grade.

Dividend yield is 6.9% based on morningstar quote indicating 300MM of dividend payment with market cap of 4.5B.

2019 CAPEX is 78B peso which is 1.6B USD which is higher than is EBIDTA. Based on 2011-2019, total CAPEX spent is 369B peso which is 7.4B and roughly 0.9B per year.

Assuming the same level of CAPEX spending going forward and an annual EBIDTA of 1.45B, Free cash flow is 0.55B and minus off interest expense, there is ~400MM available for dividend payout.
If the CAPEX investment leads to higher EBIDTA generation (high margin of ~50%), we can expect the dividend to be sustained or increased in future. current yield looks attractive based on the growth rate and PE ratio of 12x and Market cap/EBIDTA of 3-4x is not compelling.

Annual debt maturity is ~400MM. Company need to maintain the debt level or payoff with increase EBIDTA from its CAPEX.

Capitaland C31.SI Review

https://links.sgx.com/FileOpen/CL%20Investor%20Day%202019.ashx?App=Announcement&FileID=587892

Link to Capitaland 2019 investor day. Shows company long term planning and fact book of its business. No longer a property development but mainly as a fund manager managing private funds or REITS. Generate recurring income which is the main income contributor. Top 10 real estate manager globally with Blackstone at the TOP.

With the merger with Ascendas, Capitaland has grown in scale and harder to fail if properly managed. Currently integrating both business together to achieve the forecast synergy. This explains the merger between Ascott REIT and Ascendas hospitality trust to become a large hospitality trust which will be included in a REIT index and potential for trading at higher multiples.

With its REITs vehicle, its a good avenue for divesting its properties for gains. Debt/equity is ~0.7 which is acceptable.

https://investor.capitaland.com/newsroom/20191105_070643_C31_GDOVJM12R2G5FJSU.2.pdf

3rdQ 2019 financial results

Profit from operation = 941M vs finance cost of 234M. Coverage is 4x. Net profit is 527MM. Coverage is 2.2x.

Coverage ratio is typical for a REIT though the dividend yield is much lower but has much diversified holdings in different sectors and geographical area.
Cash in hand is 5.6B vs short term debt of 5.5B and long term debt of 27B.
Investment properties is 48B and investment/JV is 13B while development properties for sale is 7.7B
Equity is 39B. Company is not leveraged compared to Fraser properties.

Exposure to China is large at around 30-40%. Singapore is another 30%. REmaining is Europe and other developing countries. Good entry point if its stock price tank to ~$3 which is its long term average.

TRIP Review

Online travel review company. Derive revenue from hotel bookings and advertisment placed on the websites.

Good balance sheet and cash generation capability with high ebitda margin. Not paying dividend yet.
Profitability is good though low net profit margin due to high investment and depreciation cost. Most of the cost is on marketing and general administration cost.

Marginal cost is low as it is website based business.

High P/E ratio but low P/Cash flow ratios indicating its cash generation capability.
Fair value is estimated to be ~$45 indicating low valuation based on current price.

Good entry point although no dividend paid for holding the stock.

Macy's M Review

Hammered by the market.

https://www.barrons.com/articles/macys-stock-plunged-after-the-department-store-chain-reported-a-huge-earnings-miss-51565790916

https://www.fool.com/investing/2019/08/26/macys-stock-could-triple-over-the-next-few-years.aspx


https://content-az.equisolve.net/_036737fe772bd81ce2af3dfcdcbbe121/macysinc/db/490/5730/file/Q3+2019+Balance+Sheets.pdf
https://www.macysinc.com/investors/financial-information/financial-results

Debt and coverage ratio still in tact, no signs of liquidity crunch. Company still making money with low valuation. P/E less than 8x which is attractive. Various initiatives in place for future growth.
Actively paring down debt also. Future has higher chance of being brighter than gloomier. Buy a stake at current weakness.

ALB Review

Free cash flow by 2021. Current debt/equity is ~50%. Interest coverage is ~10x which is good.
CAPEX for Lithium mines for future demand in battery. Post 2021 when the mines are up and running, the cash will flow in.
Consistent dividend payout for the last 25 years. Balance sheet is slightly leverage but not excessive and appears to be typical. Debt maturity is not very stretch out. Total debt is ~1.7B with  1B maturing within next 3 years.

As long as future electrification of global economy is on the way, demand of lithium will continue and pin company's growth which is no1 in the market. There are other business in catalyst and bromine market which they are No2. Those business has lower EBITA margin than lithum but is still good at >20% while lithium is close to 30%.

For a commodity company, the overall margin of >10% appears to be good.

2019 2Q report
https://investors.albemarle.com/static-files/85bbe6f3-47e7-4df4-9825-8396d65305a0

TS Review

Good balance sheet, net cash position with current ratio despite being a commodity type of company which supply steel pipes to the energy industry. Despite making a loss in 2016-2017, they still maintain dividends payout. Payout ratio is around ~50% at 4% yield. Due to net cash position, company has enough buffer to pay dividends every year even if free cash flow for the year is inadequate.

Global diversified business with 50% of revenue from USA. 20% in Latin america. 10% in europe, 20% in middle east and africa. <5% in Asia Pac.

VIAB and CBS Review

VIAB and CBS will be merged with CBS buying VIAB in all stock issue with VIAB S/H receiving 0.59625 CBS per VIAB share.
https://www.cnbc.com/2019/08/13/cbs-and-viacom-reach-merger-deal.html

The deal is expected to be closed by end 2019 subjected to approval by the free market commission in USA. This deal also ends the several years battle within the controlling shareholder. It will be run by Shari redstone and CEO will be Bob Bashi who has a good digital strategy to transform viacomCBS. For example, they have purchased pluto.tv which is >20 MM subscribers as of now.
With its slew of content, they will be able to compete with big companies like Warner, Disney, Comcast and Netflix etc. An article by forbes reported the details of this saga.

https://www.forbes.com/sites/dawnchmielewski/2019/10/02/exclusive-for-the-first-time-shari-redstone-tells-her-side-of-the-battle-to-merge-viacom-and-cbs/#7aef3b86423c

One interesting chart shows the comparison between CBSviacom and the various competitors in terms of market valve and sales. Only CBSviacom is trading near its sales value compared to the rest which is trading a high multiples.

AT&T is at 1.6x, Net Margin = 10-12% / ROE = 10-12%
Disney at 4x   NM = 20% / ROE = 20%
Comcast at 2x NM =  10-12% / ROE =  16-18%
Netflix at 10x  NM = 6-8% / ROE = 20-25%
CBSViacom at 1x NM = 10-12% / ROE = 25-30%

Based on the above comparison, it appears CBSvia is trading at lower multiples despite being profitable with good cash flow generation and comparable net profit margin and ROE.
If market rerate it with similar multiples, it will be easily a 100-200% return from current price and with its small size, it also becomes a good take over target to be acquired by the bigger companies such as disney or AT&T.

CBS current operating interest coverage is ~6-7x , long term debt of 9B, no short term debt and cash of 216MM. average debt interest is 4.4%. Debt is spread out till 2045 with the next 5 years debt maturity of 2B to be fully funded by cash flow of $1-2B per year. Liquidity not an issue.

VIAB current operating interest coverage is ~6x, long term debt of 8.6B, current debt of 320MM and cash of 722MM. Operating cash flow is ~2B per year while dividend payout is 400M. Debt is evenly space out until 2057 with yearly maturity of 300-500MM with every 5-10 year interval of 1B repayment. The yearly cash flow generation is able to pay down the debt. Average interest rate is 5% No issue with liquidity.

Both companies balance sheet is not stretched by any nature and the cash flow generation is adequate to finance the interest expense. With the merger, there will be synergy and cost savings which will further improve the finance.

Valuation is also not compelling. VIAB P/E ratio is less than 10 indicating future potential rerating in price. with CBS merging with VIAB, it is buying a undervalued company which in turns will boost its future share price when market rerate the combined balancesheet and earning power.

CBS is of higher valuation compared to VIAB.

Estimate VIAB intrinsic value is 32-52 versus current price of 23 which indicates high level of margin of safety. good chance to buy now for future upside.

Estimate CBS intrinsic value is 40-70 versus current price of 38.5. Either way, both company appears to be undervalued.

Buy VIAB as it is over lower valuation. Post merger, combined entity will have potential price catalyst

ABB Review

No longer Oil and Gas dominated. Review from O&G + Chemicals now makes up 14% of company's revenue. Company is positioning itself for the Electrified world with main markets in Electification, Automation, Robotics, and motion which are the future trends.

Company's customers are diversified across various industries and various geography.
Its equally split between asia, europe and americas.
In essence, it will become a proxy for global economy performance.

Operating EBITA margin around 11%
Finance expense is 200MM per year vs net income of 1200MM. Interest coverage of 6x which appears to be OK.

Cash on hand is 2.5B vs short term debt of 2.4B and long term debt of 7.9B and equity of 13B.
Negative cash flow for 1H 19 vs dividend paid out of 1.6B. Dividend sustainability is questionable.
Need to look at full year performance before further actions.

KIV.

HSBC Review

120 B Market Cap bank with quarterly profit of around 4B. Annual profit of 16B. P/E ratio less than 10. Cheap for a bank.
14% Tier 1 ratio. Similar to BCS. Positive JAWS indicating growing income vs declining costs. which is a good trend.

Payout ratio = 50%. Current price is $UK 6 vs NTB of $US 7. Trading close to book valve indicating market confidence in the bank vs BCS and other european banks which trade often at a big discount to book valve.

Aviva Review AVVIY

UK Insurer. Business in Life and General segment with main contributor from Life Insurance.
Good solvency ratio at 194% above target range of 160-180%. Stable balance sheet; upgraded to AA- by S&P. Liquidity measured by centre cash is good which support deleveraging plan.
Cost cutting in progress to reduce operating expenses and full review of group and business strategy in progress. Sold Asian operation which will yield some net returns and further boost the balance sheet strength. Net debt is current 300M vs centre cash of 2.3 B
Consistent dividend payment for last 3 years and is progressing increasing. Current yield is ~7% which is attractive.
Interest coverage is 8x based on operating profit which is healthy and show signs of increasing compared to FY18. Current price is close  and slightly lower than NAV of $4.3 pound.

Low risk asset portfolio and well diversified into mainly bond and debt assets. decreasing leverage from 37% in 2016 to 29% currently, reducing interest expenses, driving higher future profit with stable and good ratings from the agency.

Debt maturity is well spaced out with average of 500-800M yearly from 2020 to 2038 onwards. Year 2021 will have 900M maturity and 1.3B maturity in 2022. Total debt on hand is ~7B vs shareholder assets of 92B. Does not appear to be overstretch in terms of leverage.

Majority of business still comes from UK. Probably affected by Brexit.

ABEV review

http://www.mzweb.com.br/ambev2012/web/default_en.asp?idioma=1&conta=44

One of the largest brewer in the world exposed to latin america economy growth.
Demand underpinned by growing wealth in Latin america.
balancesheet is good and not overstretch. Consistent cash flow generation.
Net cash position. 5B Reals debt vs 14B Reals cash. Current debt - 2.5B and long term debt of 2.3B.
Interest coverage is 6x on operating profit basis. Adequate. Expense can be covered by cash balance if there is shortfall. Based on cash flow statement, interest payment is 200M vs interest recieved of 250M for 1H 2019 which means company has net finance cash inflow.
Interest expense includes interest paid to banks and gains/losses on derivative/non derivative instrument which is non cash.

Debt is growing slightly from previous year though still in net cash position
Pay dividends twice a year but for 2019, there is no interim dividend. Not sure if they change to once per year instead of twice per year. This is one unknown to be confirmed.

http://www.mzweb.com.br/ambev2012/web/conteudo_en.asp?idioma=1&conta=44&tipo=43241#3

Based on their dividend policy, it is mandatory to pay out min. 40% of income as dividends.
high margin business with 38% EBITA margin ans 20% profit margin.

Anheuser-Busch InBev ons 62% of shares while market owns 28% of shares. There are some liqudity. Free Float in NYSE is 85 vs in Brazil.

Stable business exposed to growth markets. Stable dividend policy. Share price depressed for various geopolitical reasons but underlying business is still OK. Balance sheet  is sound and not stretch.

Buy when price drop further.

LYG Review

To study annual report. Appears to be undervalued based on historical statistical valuation

Tier1 ratio of 14%, similar to BCS. TNAV of 53 pence is close to current market price. Hence no significant discount from book value.

https://www.lloydsbankinggroup.com/globalassets/documents/investors/2019/2019_lbg_hy_results_presentation.pdf

Mainly a UK domestic bank. Fate tied to UK economy. Comprises of traditional banking, wealth and insurance group. The wealth group is growing fast and much faster than the market.
Decreasing Cost/Income ratio a good sign of cost controlling
Underlying loan is stable and is mainly mortgages. If UK market tank, there will be default and there will be delinquent loans.
Net interest margin around 2.9%  which is relatively stable for last 2 years.
Progressive dividend policy. To commence quarterly payout from 2020 onwards.
Dividend payout ratio is low.


Q&A from 1H2019 report
https://www.lloydsbankinggroup.com/globalassets/documents/investors/2019/2019_lbg_hy_results_faqs.pdf

Company has contingency plans for BREXIT and expect direct impact to be modest since majority of their business is within UK.
Invested in digital experience for future. Expect customer to benefits and stay on with this system.
Stress test indicate robust capital and liquidity levels.

This is a UK economy play. Best is buy after BREXIT where uncertainty is mostly gone. Or a bet towards pound recovery. Bank performance over the last few years is stable despite BREXIT foes overhanging which illustrate their current robust business strategy and model.

BCS Review

To review BCS Annual report. Appears to be undervalued based on statistical valuation history
Diversified income with 50% from UK and remaining from international. Well prepared for Brexit with Barclays Ireland up and running and can take over anytime. diversified funding sources with 60% from deposit and 7% from shareholder equity, 10% from government, remaining from debt. Income sources comes from a variety of business such as tradtional banking, credit cards, bank fees. Investment incomes make up ~10% only. So its business is tied closely to general economy and not trading. The capital structure is sound and tier 1 ratio is much higher than the minimum regulatory requirement and the stress test limit. Dividend payment is not excessive and well cover by its profit. At current price level the dividend yield is ~4.5% which is not too shabby. Company has progressive dividend policy based on profit level. Current price is depressed for a bank that is pretty sound and has move on from the 2008 GFC. Price depressed due to 2 reasons:

1) BREXIT uncertainty
2) Pounds dropping.

Item 1) and 2) are related. Once the Brexit is over, uncertainty will be gone whether UK is in EU or not. With uncertainty gone, pound will increase in value. Share price will rerate and dividend payout in terms of USD will improve also. Good entry price now.

Tier-1 ratio is inline with US peers of 13% and better than european peers of 12%
Leverage ratio is 5% versus regulatory requirement of 3.9% and stress test limit of 3.6%.
Prudently managed and trading at half of book value.

New Toyo Review

Looks interesting with recent price correction. Check it out.

Recent 2 quarters making losses. Unable to cover interest expenses with the losses. short term debt of 30M + long term debt of 40M with cash of 30M. Total equity is 200M. debt/equity around 40%. Balance sheet looking stretch. Avoid until the debt has been paid off.

Altria Review

Cigaratte company, owns Marlboro as a main brand and other non-combustible type of cigarrates such as E-Vap, IQOU, JUUL patch. Also own companies such as AB INBEV (largest beer company)/ 10% share and  cannibodiol company to take advantage of the growing legalization of marijuana in USA and various countries.

Falls under the FACTOR categories of >10 year dividends and value.

Business is sticky in nature since people are addicted to tobacco. Major risk is government policy in view of potential health risk of tobacco and marijuana.

Trend of smoking is not good as company is registering steady decline of 3-5% every year. However, the revenue still manage to stay relatively flat. If new products are able to counter the traditional products decline, company business will be better.

High margin and cash flow generation business hence supporting its consistent dividend payout which is currently near 80% of EPS.
Latest quarter interest coverage of ~8x on operating income and 6x on net profit.
Gross margin is high at 50% with net profit margin of 30%.
Management forecast 2019 EPS to be $4 which translates to a PE ratio of 10x appearing to be attractive under current rich valuation of general market. Yield is ~6-7% which is attractive.

Long term debt is 27B vs short term debt of 2B and cash holding of 1.8B. Long term assets mainly backed by investments in equity securities of 32B and goodwill/intangible assets of 17B which is easy target for impairment. Total debt/ebita is 2.8x.

Doesn't look stretch in terms of ability to pay off interest with cash generation.
Debts are pretty well stretch out with every year's payoff of 4-5B with fixed interest rate.
Operating cash flow per year is 3-6B. There is ample ability to pay off the interest requirements.

They just spent 12B to purchase JUUL which is a huge bet in future vaping industry. With recent news of people dying of vaping, it may hit on their business. JUUL is likely overvalued since it is a startup. Future impairment of goodwill is possible if JUUL does not live up to standard. This deal appears to be largely finance by debt.

Altria is a falling knive. Be careful!
https://seekingalpha.com/article/4291598-altria-falling-knife

Better think twice. Observe more first. Dont bet against secular trend. Unless the price drop is drastic enough to make it valuable. Poor steward of capital with JUUL purchase which is vastly overpaid.
Potential merger with Philip Morris may further increase their debt and weaken their balance sheet.

BTTGY Review

British Telecom stock price beaten badly. Corrected almost 50% for the past 3 years. Mainly due to potential of cutting dividend for investment in 5G network which CAPEX has been lax,.
Based on valuation model on a 75% cut in dividend, still indicate pretty attractive valuation at current price and discount to fair value is much larger than historical median of 22% indicating market is unduly punishing the stock. If Mean Reversion is true, we will expect the fair value gap to be closed. Need to look more on the annual report before committing fresh funds