Sunday, September 15, 2019
Jardine Matheson Holdings
Conglomerate with exposure to greater China and Southeast Asia. Basically it’s an ETF that holds dairy farm, Jardine c&c, Hong Kong land, mandarin oriental, astra and other non listed business. It is widely diversified and take part in Everyday business which a typical economy will need such as retail property automobile finance construction hotel etc. Pays a decent dividend out of its cash flow. Current yield is 3 percent and historical trend points to a growing dividend policy. Price is corrected from recent high. Trading at below book value. 40B market cap. Not easy to fail since it is prudently managed. There is some debt but not so high. If want to buy a Jardine company, this should be the one to go.
Wednesday, September 11, 2019
OKP Review
https://www.drwealth.com/okp-holdings-is-undervalued/
Good analysis from Dr Wealth. Go through the annual report for more in depth understanding before taking action. Paying 5 percent yield now. Trading at less than asset value.
Classic graham style stocks. However experience with such stocks are not good as they take a long time to recover to its fair value before your patience run out. Also, when the market is correcting and tanking, its price action tends to be more volatile. Best time to buy is during depressed conditions.
Current market is not depressed enough.
Like its balance sheet strength but business nature is cyclical and project base even though they have classified road works as maintenance type which is recurring, it is still considered as project based.
We shall keep this in watchlist for future actions.
Good analysis from Dr Wealth. Go through the annual report for more in depth understanding before taking action. Paying 5 percent yield now. Trading at less than asset value.
Classic graham style stocks. However experience with such stocks are not good as they take a long time to recover to its fair value before your patience run out. Also, when the market is correcting and tanking, its price action tends to be more volatile. Best time to buy is during depressed conditions.
Current market is not depressed enough.
Like its balance sheet strength but business nature is cyclical and project base even though they have classified road works as maintenance type which is recurring, it is still considered as project based.
We shall keep this in watchlist for future actions.
Sunday, September 1, 2019
Carnival PLC CUK_CCL Review
Largest Cruise operator. Listed both in NYSE and LSE. 2 counters listed in NYSE which is CUK (ADR) and CCL. We will be looking at CUK since it is offering a higher yield and potentially without withholding tax since it is a UK listed company.
Good valuation numbers and overall score. Not yet reach 30% discount. Currently at 25%.
Entry point at $40. Need to look at its annual report for more clarity.
Currently indicating a low debt financed business with good cash flow sustaining a 4% dividend yield. Strong Moat in terms of brand recognition and huge barrier of entry (not everyone can go and buy a cruise ship easily and start competing with Carnival). Their business have various brands that cater to different market segment.
Not sure of IMO impact, potentially higher fuel cost if ship need to burn LSFO.
If general economy weaken, lesser tourist will go on cruise which is not cheap. There is sign of general economy weakening. Potentially will impact their business performance in future.
Dividend maybe cut if the FCF is not enough.
Capital intensive business though their ROE and net profit margin is respectable at teens level indicating that it is not in a low margin business.
Brexit may not have an impact to this UK listed company in view of its global operation.
In terms of historical valuation, it is trading near historical low at 26% vs 10 year median level of 22%. The lowest point is 50% in 2008/09 during GFC but thereafter rebound strongly. During that time, price drops to 20s indicating a 50% drawdown from current price. This is the worst case scenario volatility that we can expect. Even during that period, company did not make loss and still pays a dividend.
1.2B in cash, short term debt of 2B vs long term debt of 9B and shareholder equity of 24B.
Interest coverage is ~7-8x on net profit basis. Revenue increase but Onboard and fuel cost increase much more leading to lower profitability. Operating margin is ~10% while net profit margin is 7-8%.
Interest expense is 200MM versus net income of ~1.6B and dividends of 1.4B.
Operating cash flow is ~5.5B vs CAPEX of 3.5B. dividends can be financed from FCF.
Going forward, forecast CAPEX requirement is 6.7 , 5,7, 5.9, 5.3 every year from 2019 to 2022 leading to annual capacity increase of 4.5-7.3% with new ship growth.
The operating cash flow need to cover the above CAPEX requirement else more debts are required.
Current long term debt are evenly spread out from 2021 to 2030. Near term big maturity is at 2022 with 2B of debt maturity and 1.2B at 2023.
Total new ship growth capital expected is 19B from 2019 to 2023 for 5 years versus operating cash generation of ~5-6 B per year. The cash generation capability will largely finance the new ships without huge amount of debt. Dividends payout and share buybacks need to be measured/controlled to avoid taking on more debts.
New ships are larger and more efficient and replace the older fleets. Their fleet size does not increase much and stay near to 100 for the past 5 years while growing the overall passenger capacity and passenger carried which is a good sign.
Good valuation numbers and overall score. Not yet reach 30% discount. Currently at 25%.
Entry point at $40. Need to look at its annual report for more clarity.
Currently indicating a low debt financed business with good cash flow sustaining a 4% dividend yield. Strong Moat in terms of brand recognition and huge barrier of entry (not everyone can go and buy a cruise ship easily and start competing with Carnival). Their business have various brands that cater to different market segment.
Not sure of IMO impact, potentially higher fuel cost if ship need to burn LSFO.
If general economy weaken, lesser tourist will go on cruise which is not cheap. There is sign of general economy weakening. Potentially will impact their business performance in future.
Dividend maybe cut if the FCF is not enough.
Capital intensive business though their ROE and net profit margin is respectable at teens level indicating that it is not in a low margin business.
Brexit may not have an impact to this UK listed company in view of its global operation.
In terms of historical valuation, it is trading near historical low at 26% vs 10 year median level of 22%. The lowest point is 50% in 2008/09 during GFC but thereafter rebound strongly. During that time, price drops to 20s indicating a 50% drawdown from current price. This is the worst case scenario volatility that we can expect. Even during that period, company did not make loss and still pays a dividend.
1.2B in cash, short term debt of 2B vs long term debt of 9B and shareholder equity of 24B.
Interest coverage is ~7-8x on net profit basis. Revenue increase but Onboard and fuel cost increase much more leading to lower profitability. Operating margin is ~10% while net profit margin is 7-8%.
Interest expense is 200MM versus net income of ~1.6B and dividends of 1.4B.
Operating cash flow is ~5.5B vs CAPEX of 3.5B. dividends can be financed from FCF.
Going forward, forecast CAPEX requirement is 6.7 , 5,7, 5.9, 5.3 every year from 2019 to 2022 leading to annual capacity increase of 4.5-7.3% with new ship growth.
The operating cash flow need to cover the above CAPEX requirement else more debts are required.
Current long term debt are evenly spread out from 2021 to 2030. Near term big maturity is at 2022 with 2B of debt maturity and 1.2B at 2023.
Total new ship growth capital expected is 19B from 2019 to 2023 for 5 years versus operating cash generation of ~5-6 B per year. The cash generation capability will largely finance the new ships without huge amount of debt. Dividends payout and share buybacks need to be measured/controlled to avoid taking on more debts.
New ships are larger and more efficient and replace the older fleets. Their fleet size does not increase much and stay near to 100 for the past 5 years while growing the overall passenger capacity and passenger carried which is a good sign.
Sold WDC and CPB
Sold WDC (25% gain) and CPB (12% gain). Selling winners to hold more cash in portfolio for risk mitigation against potential market pro-long correction.
Bought SNP which is beaten down and offer good dividend yields.
Actively building dividend yielding portfolio predominantly with foreign stocks with low withholding tax rates. Although this strategy appears to be weak compared to the US stock market rising while overseas market got beaten.
This is mainly due to FOREX exchange and other countries' being weaker. However, in terms of valuation, foreign markets appears to be more attractive compared to USA.
Stick to good value proposition and trust your system. Over long term, we should get meaningful returns. Don't panic in front of roller coaster ride.
Bought SNP which is beaten down and offer good dividend yields.
Actively building dividend yielding portfolio predominantly with foreign stocks with low withholding tax rates. Although this strategy appears to be weak compared to the US stock market rising while overseas market got beaten.
This is mainly due to FOREX exchange and other countries' being weaker. However, in terms of valuation, foreign markets appears to be more attractive compared to USA.
Stick to good value proposition and trust your system. Over long term, we should get meaningful returns. Don't panic in front of roller coaster ride.
Monday, August 26, 2019
Sinopec (SNP) Review
Appears to be low valuation with low debt ratio. Net cash position (167MM RMB cash vs 120 debt) compared to general oil and gas company. High interest coverage ratio > 10x, (20x for Ebita/expense) No indebtness and liquidity issue.
Good cash flow generation. OPS cash is 2x of net profit. CAPEX is ~0.5x of OP cash indicating good free cash flow generation. Dividend payment is sustainable as it is close to or lower than FCF.
Payout ratio based on net profit is > 50% and dividend payout is consistently growing.
A good trend is company's debt level has been gradually decreasing with company consistently pay down debt resulting in lower finance expense and free up more cash for returning to shareholders.
Yield is ~7% based on listing in HKEX.
Business covers the whole supply chain from upstream exploration to refining to pet-chem, sales and distribution.
Oil and gas exploration is losing money while other segments are making money
1Q 2019, E&P swing to positive. Other sectors remain positive growth while refining business register negative growth with lower refining margin as experienced globally. One good thing is they also manage the cost well with lower operating cost. Overall still making money.
They register negative operating cash flow and increase debt to finance CAPEX. Balance sheet is still sound. However, if this continues, it will be a red flag.
New accounting standards applied also. Appears to be one-time for some of the costs.
In short, company appears to be defensive still.
State-own company with >70% shares
Dividend pay out history:
Assuming $5 payout per year, the yield will be close to 8-9% which is attractive.
The numbers are quite good indicating low valuation based on historical P/E, dividend, P/B, P/cash ratios as well as DCM and earning power valuation models.
Main reason for price correction is due to trade war concerns with USA. Things may get nasty.
Worst case scenario, chinese companies maybe sanctioned and listing in USA maybe affected. vs potential price rerating when the situation improves.
The assumption that company will continue to pay does not depend on company performance only. Need to consider political factors as well.
Share price may test 2014 low point at $40 indicating a ~30% drawdown. Be prepare to endure the volatility should we enter a position soon.
https://www.dividend.com/dividend-stocks/basic-materials/independent-oil-and-gas/snp-china-petroleum-and-chemical-corp/
Good cash flow generation. OPS cash is 2x of net profit. CAPEX is ~0.5x of OP cash indicating good free cash flow generation. Dividend payment is sustainable as it is close to or lower than FCF.
Payout ratio based on net profit is > 50% and dividend payout is consistently growing.
A good trend is company's debt level has been gradually decreasing with company consistently pay down debt resulting in lower finance expense and free up more cash for returning to shareholders.
Yield is ~7% based on listing in HKEX.
Business covers the whole supply chain from upstream exploration to refining to pet-chem, sales and distribution.
Oil and gas exploration is losing money while other segments are making money
1Q 2019, E&P swing to positive. Other sectors remain positive growth while refining business register negative growth with lower refining margin as experienced globally. One good thing is they also manage the cost well with lower operating cost. Overall still making money.
They register negative operating cash flow and increase debt to finance CAPEX. Balance sheet is still sound. However, if this continues, it will be a red flag.
New accounting standards applied also. Appears to be one-time for some of the costs.
In short, company appears to be defensive still.
State-own company with >70% shares
Dividend pay out history:
Assuming $5 payout per year, the yield will be close to 8-9% which is attractive.
The numbers are quite good indicating low valuation based on historical P/E, dividend, P/B, P/cash ratios as well as DCM and earning power valuation models.
Main reason for price correction is due to trade war concerns with USA. Things may get nasty.
Worst case scenario, chinese companies maybe sanctioned and listing in USA maybe affected. vs potential price rerating when the situation improves.
The assumption that company will continue to pay does not depend on company performance only. Need to consider political factors as well.
Share price may test 2014 low point at $40 indicating a ~30% drawdown. Be prepare to endure the volatility should we enter a position soon.
| 2019-05-31 | $3.4697 | |
| 2018-09-05 | $2.0821 | |
| 2018-05-24 | $5.6345 | |
| 2017-09-18 | $1.3313 | |
| 2017-07-14 | $2.2222 |
https://www.dividend.com/dividend-stocks/basic-materials/independent-oil-and-gas/snp-china-petroleum-and-chemical-corp/
Thursday, August 22, 2019
Jardine C&C (C07.SI) Review
Historical good dividend growth. Dividend almost doubled for the past decade. However, dividend growth slowed in recent years.
Total debt of 4.5 + 2.8 (long term) vs equity of 13B. Non financial debt is 2.7+1.1 (long term).
OP Cash flow is 2B vs dividend of 0.3MM while investment is also 2B. To finance increasing dividends, they need to generate more cash or cut investment. They are holding more investment to support future growth.
Its historical fair value margin is ~20%. Based on this margin, the entry price is ~$28.5 which is another 10% discount from current price. If price drop to this level, it may be an interesting entry point. However, current PE is 30x and dividend yield of <3%. Abit on the rich side. If the growth rate does not support the large PE, there will be price correction.
Exposure to ASEAN emerging markets, predominantly in Indonesia with strategic investment in Siam Cement and 10% holding in Vinamilk (F&N is 20%). Vinamilk is high growth company which pay dividends to C&C.
Poor valuation despite recent correction in price. The valuation model appears to be quite accurate in the sense that the fair value is around $35 which the stock price approaches for the past 1 year with peak at $37. Recent low is at $28 at 2015. The stock last seen $25 at 2009/2010 with its bottom at around $9. Unless we are expecting another 2009 GFC type of event, the price should not drop drastically.
reasonable debt/equity ratio excluding its financial subsidiaries. Interest coverage is > 10x with net financing charges of 161MM vs profit of 2B.
reasonable debt/equity ratio excluding its financial subsidiaries. Interest coverage is > 10x with net financing charges of 161MM vs profit of 2B.
Total debt of 4.5 + 2.8 (long term) vs equity of 13B. Non financial debt is 2.7+1.1 (long term).
OP Cash flow is 2B vs dividend of 0.3MM while investment is also 2B. To finance increasing dividends, they need to generate more cash or cut investment. They are holding more investment to support future growth.
Its historical fair value margin is ~20%. Based on this margin, the entry price is ~$28.5 which is another 10% discount from current price. If price drop to this level, it may be an interesting entry point. However, current PE is 30x and dividend yield of <3%. Abit on the rich side. If the growth rate does not support the large PE, there will be price correction.
Tuesday, August 20, 2019
Smart Beta ETF in Singapore
Philip Sing Income ETF
Recently come across this Smart beta etf which selects its stocks based on dividend yield, balance sheet strength and business moat. Refer to below analysis by fifth person which is good:
https://fifthperson.com/phillip-sing-income-etf/
Another write up from dollar and sense:
https://dollarsandsense.sg/an-alternative-to-the-sti-etf-introducing-the-phillip-sing-income-etf/
Refer to Philips website for the ETF factsheet
https://www.poems.com.sg/wp-content/uploads/2018/09/Sing-Inc-Fund-Brochure.pdf
http://www.phillipfunds.com/home/sing-income-etfs
The stocks held by the etf appears to be the kind that I will buy. Good investment tool if no time to study individual stock
Philip Lion global REIT ETF
Understand Philips managed to get tax exemption from iras for reit dividends. The yield will be higher without the 20 percent tax. It’s interesting now. More details at fsm link:
https://secure.fundsupermart.com/fsm/stocks/etf-factsheet/SGX/CLR
But this year Reit rise a lot. Wait for price correction before buying the reit etf
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