Friday, July 30, 2010
Saturday, August 22, 2009
Review of trade this week (17 Aug to 21 Aug 2009)
I told myself I'd come back to trading breakouts only when the 200 day moving average confirmed an uptrend. So I'm back.
Wing Tai
Original idea was
Long
Entry price 1.83
30 day ATR 0.07
1.5X ATR30 0.11
Cut loss stop on 1.5ATR30 1.73
Recommended cut loss 1.49
Loss on recommended cut loss -703.54
Target price 2.3
Profit on target price 910.72
Reward/risk ratio 1.29
Flag pattern breakout.
Flag pole 1.85 - 1.38 = 0.47
But as the stock pulled back, my breakout stoplimit order never got triggered. Until 20 Aug (Thurs)
So I entered at 1.69 instead of 1.83. Happened to also be a breakout of the high of past 3 days. Recovering from oversold RSI as well. Target is now 2.14.
See how it goes.
Wing Tai
Original idea was
Long
Entry price 1.83
30 day ATR 0.07
1.5X ATR30 0.11
Cut loss stop on 1.5ATR30 1.73
Recommended cut loss 1.49
Loss on recommended cut loss -703.54
Target price 2.3
Profit on target price 910.72
Reward/risk ratio 1.29
Flag pattern breakout.
Flag pole 1.85 - 1.38 = 0.47
But as the stock pulled back, my breakout stoplimit order never got triggered. Until 20 Aug (Thurs)
So I entered at 1.69 instead of 1.83. Happened to also be a breakout of the high of past 3 days. Recovering from oversold RSI as well. Target is now 2.14.
See how it goes.
Friday, June 27, 2008
Review of trades this week (23-27 June 2008)
I came back from my overseas trip last week and went over the charts. My initial feeling was to look for stocks to short. But going through the charts I just saw the very oversold market situation going into the FOMC meeting and thought it was better to bet on a short term bounce.
My time frames for trading are getting shorter. This has to be the case if trading is to fit into my future plans.
Anyway here's a review of my trades this week.
1) COSCO
BOUGHT 2 lots 15 May 2008
Long
Entry price 3.51
30 day ATR 0.2
1.5X ATR30 0.3
Cut loss stop on 1.5ATR30 3.21
Recommended cut loss 3.23
Loss on recommended cut loss -607.7810732
Target price 3.89
Profit on target price 707.540068
Reward/risk ratio 1.164136396
Last done price = $3.22
Paper loss = -$634
This trade should have been cut out long ago during the time I was in Canada. Anyway I'm probably going to just hold this counter as it has not had any real bad news and is holding up pretty well so far. $3.10 seems to be the support. Volatility in this counter has also come down tremendously so this is not a counter on the top half of traders' radars anymore.
As a result I've decided to adopt a buy and hold strategy for this one. I'm still betting oil prices to have a sharp correction and stocks like COSCO are bound to benefit. There are many "good skeletons" not out for this stock. Eg their proposed increase in stake of the shipyard, new orders etc. When those do come out it will be positive.
We'll have to wait and see.
2) UOL
Bought 3 lots 23 June 2008 at 3.42
One of those really oversold counters that had broken support levels. RSI super low and UOL seldom stays that oversold for too long. Remember I'm talking short short term here. Not talking about trends. Trend is still down. But my tools make me feel more comfortable doing long trades at the moment.
Again looking for rubber band trades.
Anyway sold it off at 3.51 on 26 June 2008.
Sold 3 lots at 3.51
Profit = $185
3) Wing Tai
Bought 5 lots (should have bought 10!) at 1.49 on 23 June 2008
Similar picture as UOL but even more oversold and below NAV! Was always due for a bounce going into the FOMC meeting.
I also look at these indicators to look for rubber band trades.
Sold 5 lots on 26 June 2008 at 1.57
Profit = $337
3) Allco Reit
Bought 10 lots at 0.78 on 25 June 2008
Allco Reit is a counter my good friend and trading buddy has done a lot of research on and his assessment is that the stock has very very good fundamentals (he was a FA guy before he turned TA after Chinese New Year)
Anyway I've been watching this stock for a LONG time now. There was the news that the parent company Allco was in financial difficulty and the stock tanked in January. And there was the news that they might have difficulty refinancing their loans in March. And in May there was the news about their Moody's rating drop. And each time the stock just went up again. This is one of those quiet quiet stocks which are not trader's cup of tea. But I've been watching it for so long and seeing my good friend make money that I decided once and for all to just join him. In any case it's a REIT! REITS are going to be good during bear markets. I won't go into the fundamentals but briefly Allco Reits owns buildings with office rentals. And rental rates have gone up (although won't be going up so soon). But look at the Allco chart and you know how far it has dropped. At most just collect dividend. REITS will be defensive counters and Allco is one of those quiet ones that has little or no coverage. Shhh...dun tell too many people ok?
In any case I'm quite confident we'll see a bounce for Allco Reit as well. In the POEMS CFD this is a long only CFD. So not so much on shortists' radars. It is also trading below NAV liao.
Can lah.
Last closing price 0.76
paper loss = $-263
Total realised profit/loss = $3565 +$185 + $337 = $4087
Unrealised profit/loss = $-634 - $263= $-897
My time frames for trading are getting shorter. This has to be the case if trading is to fit into my future plans.
Anyway here's a review of my trades this week.
1) COSCO
BOUGHT 2 lots 15 May 2008
Long
Entry price 3.51
30 day ATR 0.2
1.5X ATR30 0.3
Cut loss stop on 1.5ATR30 3.21
Recommended cut loss 3.23
Loss on recommended cut loss -607.7810732
Target price 3.89
Profit on target price 707.540068
Reward/risk ratio 1.164136396
Last done price = $3.22
Paper loss = -$634
This trade should have been cut out long ago during the time I was in Canada. Anyway I'm probably going to just hold this counter as it has not had any real bad news and is holding up pretty well so far. $3.10 seems to be the support. Volatility in this counter has also come down tremendously so this is not a counter on the top half of traders' radars anymore.
As a result I've decided to adopt a buy and hold strategy for this one. I'm still betting oil prices to have a sharp correction and stocks like COSCO are bound to benefit. There are many "good skeletons" not out for this stock. Eg their proposed increase in stake of the shipyard, new orders etc. When those do come out it will be positive.
We'll have to wait and see.
2) UOL
Bought 3 lots 23 June 2008 at 3.42
Long | |
Entry price | 3.4 |
30 day ATR | 0.08 |
1.5X ATR30 | 0.12 |
Cut loss stop on 1.5ATR30 | 3.28 |
Recommended cut loss | 3.24 |
Loss on recommended cut loss | -550.6082328 |
Target price | 1.63 |
Profit on target price | 824.500233 |
Reward/risk ratio | 1.497435352 |
One of those really oversold counters that had broken support levels. RSI super low and UOL seldom stays that oversold for too long. Remember I'm talking short short term here. Not talking about trends. Trend is still down. But my tools make me feel more comfortable doing long trades at the moment.
Again looking for rubber band trades.
Anyway sold it off at 3.51 on 26 June 2008.
Sold 3 lots at 3.51
Profit = $185
3) Wing Tai
Bought 5 lots (should have bought 10!) at 1.49 on 23 June 2008
Long | |
Entry price | 1.5 |
30 day ATR | 0.065 |
1.5X ATR30 | 0.0975 |
Cut loss stop on 1.5ATR30 | 1.4025 |
Recommended cut loss | 1.4 |
Loss on recommended cut loss | -551.396555 |
Target price | 1.63 |
Profit on target price | 594.5271665 |
Reward/risk ratio | 1.078220676 |
Similar picture as UOL but even more oversold and below NAV! Was always due for a bounce going into the FOMC meeting.
I also look at these indicators to look for rubber band trades.
Sold 5 lots on 26 June 2008 at 1.57
Profit = $337
3) Allco Reit
Bought 10 lots at 0.78 on 25 June 2008
Long | |
Entry price | 0.78 |
30 day ATR | 0.02 |
1.5X ATR30 | 0.03 |
Cut loss stop on 1.5ATR30 | 0.75 |
Recommended cut loss | 0.75 |
Loss on recommended cut loss | -354.232227 |
Target price | 0.87 |
Profit on target price | 841.514265 |
Reward/risk ratio | 2.375600527 |
Allco Reit is a counter my good friend and trading buddy has done a lot of research on and his assessment is that the stock has very very good fundamentals (he was a FA guy before he turned TA after Chinese New Year)
Anyway I've been watching this stock for a LONG time now. There was the news that the parent company Allco was in financial difficulty and the stock tanked in January. And there was the news that they might have difficulty refinancing their loans in March. And in May there was the news about their Moody's rating drop. And each time the stock just went up again. This is one of those quiet quiet stocks which are not trader's cup of tea. But I've been watching it for so long and seeing my good friend make money that I decided once and for all to just join him. In any case it's a REIT! REITS are going to be good during bear markets. I won't go into the fundamentals but briefly Allco Reits owns buildings with office rentals. And rental rates have gone up (although won't be going up so soon). But look at the Allco chart and you know how far it has dropped. At most just collect dividend. REITS will be defensive counters and Allco is one of those quiet ones that has little or no coverage. Shhh...dun tell too many people ok?
In any case I'm quite confident we'll see a bounce for Allco Reit as well. In the POEMS CFD this is a long only CFD. So not so much on shortists' radars. It is also trading below NAV liao.
Can lah.
Last closing price 0.76
paper loss = $-263
Total realised profit/loss = $3565 +$185 + $337 = $4087
Unrealised profit/loss = $-634 - $263= $-897
Labels:
AllcoReit,
Cosco,
Trading Records and Matters,
UOL,
Wing Tai
Friday, June 20, 2008
Review of trades this week (16-20 June 2008)
I just returned from my trip to North America on 19 June 2008. I had not been monitoring the market much but have just realised that the major indices have all broken key support levels and are about to test the lows of Jan and March 2008.
I'll need to spend some time analyzing once again. Got to look at the Elliot Wave count among other things. But I decided to take some profit off the table on Singtel first.
1) Singtel (Bought on 9th May 2008)
Long
Entry price 3.66
30 day ATR 0.09
1.5X ATR30 0.135
Cut loss stop on 1.5ATR30 3.525
Recommended cut loss 3.57
Loss on recommended cut loss -231.2547714
Target price 3.89
Profit on target price 406.476691
Reward/risk ratio 1.757700775
Sold on 20 June 2008 at 3.76
Profit = $130
2) COSCO
BOUGHT 2 lots 15 May 2008
Long
Entry price 3.51
30 day ATR 0.2
1.5X ATR30 0.3
Cut loss stop on 1.5ATR30 3.21
Recommended cut loss 3.23
Loss on recommended cut loss -607.7810732
Target price 3.89
Profit on target price 707.540068
Reward/risk ratio 1.164136396
Last done price = $3.34
Paper loss = -$396
Total realised profit/loss = $3435 + $130 = $3565
Unrealised profit/loss = $-396
I'll need to spend some time analyzing once again. Got to look at the Elliot Wave count among other things. But I decided to take some profit off the table on Singtel first.
1) Singtel (Bought on 9th May 2008)
Long
Entry price 3.66
30 day ATR 0.09
1.5X ATR30 0.135
Cut loss stop on 1.5ATR30 3.525
Recommended cut loss 3.57
Loss on recommended cut loss -231.2547714
Target price 3.89
Profit on target price 406.476691
Reward/risk ratio 1.757700775
Sold on 20 June 2008 at 3.76
Profit = $130
2) COSCO
BOUGHT 2 lots 15 May 2008
Long
Entry price 3.51
30 day ATR 0.2
1.5X ATR30 0.3
Cut loss stop on 1.5ATR30 3.21
Recommended cut loss 3.23
Loss on recommended cut loss -607.7810732
Target price 3.89
Profit on target price 707.540068
Reward/risk ratio 1.164136396
Last done price = $3.34
Paper loss = -$396
Total realised profit/loss = $3435 + $130 = $3565
Unrealised profit/loss = $-396
Monday, June 2, 2008
MIDAS Valuations Projections
MIDAS is in the business of large-section aluminium alloy extrusion products and polyethylene pipes.
ROE is >15%. Profitable company.
NPM has been flat or even dropping which is not a good sign of competitiveness.
No liquidity problems.
Little or negligible long term debt.
They generated better free cash flow in 2007. However dividend payout ratio is only about 10% at best.
Not a bad set of numbers.
Let's look at valuation....
EPS growth has been >15% for past 2 years, I use a EPS growth rate of 10%.
I use a future PE of 17 to calculate the price in 5 years time. Hence price based on EPS of 6.08 and PE of 17 in 5 years would be $1.03
Dividend payout ratio is about 10%. So for total EPS for next 5 years = 25.38 cents. Dividend = 2.53 cents.
Price based on dividend payout would be $0.925(current price) + $0.0253 = $0.95
Using a desired return rate of 5% dividend yield,
Present price to pay for stock should be $0.744 if I want 5% dividend yield.
Return of Equity (ROE) | Net income/Equity | |||
Net income | Equity | ROE | ROE growth | |
2007 | 31,914 | 181,574 | 17.57630498 | 11.98320581 |
2006 | 25,567 | 162,894 | 15.69548295 | -21.29386054 |
2005 | 18,322 | 91,877 | 19.94187882 | 2.14511304 |
2004 | 15,302 | 78,379 | 19.52308654 | -82.91239343 |
2003 | 8,954 | 7,837 | 114.2529029 | |
2002 | 7,019 |
ROE is >15%. Profitable company.
Net Profit Margin (NPM) | Net income/Revenue | |||
Net income | Revenue | NPM | NPM growth | |
2007 | 31,914 | 140,399 | 22.73093113 | -6.857149094 |
2006 | 25,567 | 104,764 | 24.40437555 | -6.131996613 |
2005 | 18,322 | 70,473 | 25.9986094 | 2.295404166 |
2004 | 15,302 | 60,208 | 25.41522721 | -3.595847996 |
2003 | 8,954 | 33,964 | 26.3632081 | -10.33354224 |
2002 | 7,019 | 23,873 | 29.40141583 |
NPM has been flat or even dropping which is not a good sign of competitiveness.
Liquidity | |||
Total Current Assets | Total Current Liabilities | Current ratio | |
2007 | 111,280 | 36,198 | 3.074202995 |
2006 | 103,241 | 38,978 | 2.648699266 |
2005 | 68,396 | 22,179 | 3.083818026 |
2004 | 67,666 | 23,688 | 2.856551841 |
2003 | 28,151 | 36,228 | 0.7770509 |
No liquidity problems.
Solvency | |||
Long Term Debt | Total Shareholder Equity | LT Debt/Equity Ratio | |
2007 | 2960 | 181,574 | 1.630189344 |
2006 | 2946 | 162,894 | 1.808538068 |
2005 | 2581 | 91,877 | 2.809190548 |
2004 | 2490 | 78,379 | 3.176871356 |
2003 | 23394 | 7,837 | 298.5070818 |
Little or negligible long term debt.
Free Cash Flow | ||||
Net cash from operating activities | Capital expenditures | Free Cash Flow(FCF) | FCF/Revenue | |
2007 | 34,027 | 12723 | 21,304 | 15.17389725 |
2006 | 27,765 | 31668 | -3,903 | -3.725516399 |
2005 | 13,013 | 10029 | 2,984 | 4.23424574 |
2004 | 3,362 | 1503 | 1,859 | 3.087629551 |
2003 | 9,651 | 1830 | 7,821 | 23.02732305 |
They generated better free cash flow in 2007. However dividend payout ratio is only about 10% at best.
Not a bad set of numbers.
Let's look at valuation....
EPS Data | EPS | EPS growth |
2007 | 3.78 | 18.86792453 |
2006 | 3.18 | 33.05439331 |
2005 | 2.39 | 4.366812227 |
2004 | 2.29 | 42.23602484 |
2003 | 1.61 |
EPS growth has been >15% for past 2 years, I use a EPS growth rate of 10%.
Projected EPS at yr end | |
End year 1 | 4.158 |
End year 2 | 4.5738 |
End year 3 | 5.03118 |
End year 4 | 5.534298 |
End year 5 | 6.0877278 |
Total EPS for next 5 years | 25.3850058 |
Current price of stock | 0.96 |
Current EPS | 0.0378 |
Current PE ratio | 25.3968254 |
I use a future PE of 17 to calculate the price in 5 years time. Hence price based on EPS of 6.08 and PE of 17 in 5 years would be $1.03
Dividend payout ratio is about 10%. So for total EPS for next 5 years = 25.38 cents. Dividend = 2.53 cents.
Price based on dividend payout would be $0.925(current price) + $0.0253 = $0.95
Using a desired return rate of 5% dividend yield,
Present price to pay for stock | |
Year 5 | 0.904761905 |
Year 4 | 0.861678005 |
Year 3 | 0.820645719 |
Year 2 | 0.781567351 |
Year 1 | 0.744349858 |
Present price to pay for stock should be $0.744 if I want 5% dividend yield.
FJ Benjamin valuations projection
FJ Benjamin is a high end luxury goods retailer.
I own 20 lots of this stock at an average of 0.6175.
Here are some figures :
Not a high ROE business. They did have some impressive ROE growth between 2005 and 2006.
It is also not a high NPM business.
FJ's has good cash position though. Little long term debt at present and current ratio is healthy.
It is interesting to note though that the free cash flow for FJ is not anything to crow about. So where is the cash coming from? I have to look into this further.
However EPS growth has been good.
Assuming an EPS growth of 15% for the next 5 years,
EPS at the end of next 5 years will be 10.19 cents.
If we use a PE of 10, the price of the stock in 5 years should be $1.02
Using dividend price valuations, we first find out what the dividend payout ratio is for the past few years.
A very impressive dividend payout ratio! However this is including the special dividends paid out. But it is worthwhile to note that they frequently pay out special dividends. In fact I did not include the 13 cents capital distribution they gave out last year.
Total EPS for next 5 years based on EPS growth of 15% is 39.31 cents. Assuming a modest 20% dividend payout ratio, the total dividend paid out over next 5 years is 7.86 cents.
Current price is $0.425. So price in 5 years based on dividends is $0.50
Hence discounted over the 5 years, if I buy the stock at 0.41 today, I will get a dividend yield of 4% over the next 5 years.
FJ Benjamin looks more like a dividend play. They have a strong cash position but their business does not seem to be very profitable. Strange combination.......
I own 20 lots of this stock at an average of 0.6175.
Here are some figures :
Return of Equity (ROE) | Net income/Equity | |||
Net income | Equity | ROE | ROE growth | |
2007 | 21,468 | 198,614 | 10.80 | 1.85 |
2006 | 10,171 | 95,840 | 10.61 | 92.3 |
2005 | 4,262 | 77,249 | 5.51 | 108.7 |
2004 | 2021 | 76,466 | 2.64 | 34.32 |
2003 | 1517 | 77,098 | 1.96 | -63.3 |
2002 | 3100 | 57,819 | 5.36 |
Not a high ROE business. They did have some impressive ROE growth between 2005 and 2006.
Net Profit Margin (NPM) | Net income/Revenue | |||
Net income | Revenue | NPM | NPM growth | |
2007 | 21,468 | 257,618 | 8.33 | 53.40 |
2006 | 10,171 | 187,235 | 5.43 | 85.65 |
2005 | 4,262 | 145,658 | 2.92 | 68.77 |
2004 | 2021 | 116,573 | 1.73 | 20.64 |
2003 | 1517 | 105,569 | 1.43 | -47.55 |
2002 | 3100 | 113,147 | 2.73 |
It is also not a high NPM business.
Liquidity | |||
Total Current Assets | Total Current Liabilities | Current ratio | |
2007 | 251,050 | 102,003 | 2.46 |
2006 | 107,251 | 74,727 | 1.43 |
2005 | 73,557 | 57,538 | 1.27 |
2004 | 58,112 | 40,969 | 1.41 |
2003 | 56,490 | 40,287 | 1.40 |
2002 | 61,924 | 55,494 | 1.11 |
Solvency | |||
Long Term Debt | Total Shareholder Equity | LT Debt/Equity Ratio | |
2007 | 3104 | 198,614 | 1.56 |
2006 | 21210 | 95,840 | 22.13 |
2005 | 21634 | 77,249 | 28.0 |
2004 | 20242 | 76,466 | 26.47 |
2003 | 20984 | 77,098 | 27.21 |
2002 | 31702 | 57,819 | 54.82 |
FJ's has good cash position though. Little long term debt at present and current ratio is healthy.
Free Cash Flow | ||||
Net cash from operating activities | Capital expenditures | Free Cash Flow(FCF) | FCF/Revenue | |
2007 | -31,148 | 11945 | -43,093 | -16.72 |
2006 | 7,694 | 4107 | 3,587 | 1.91 |
2005 | 5,529 | 3396 | 2,133 | 1.46 |
2004 | 2,444 | 3128 | -684 | -0.58 |
2003 | 5,803 | 2147 | 3,656 | 3.46 |
2002 | 13,630 | 3235 | 10,395 | 9.18 |
It is interesting to note though that the free cash flow for FJ is not anything to crow about. So where is the cash coming from? I have to look into this further.
However EPS growth has been good.
EPS Data | EPS | EPS growth |
Year 1 | 1.22 | |
Year 2 | 0.53 | -56.55 |
Year 3 | 0.71 | 33.96 |
Year 4 | 1.5 | 111.26 |
Year 5 | 3.53 | 135.33 |
Year 6 | 5.07 | 43.62 |
Assuming an EPS growth of 15% for the next 5 years,
Projected EPS at yr end | |
End year 1 | 5.83 |
End year 2 | 6.70 |
End year 3 | 7.710 |
End year 4 | 8.86 |
End year 5 | 10.19 |
If we use a PE of 10, the price of the stock in 5 years should be $1.02
Using dividend price valuations, we first find out what the dividend payout ratio is for the past few years.
Dividend | EPS | Dividend payout ratio | |
2002 | 0.1 | 1.22 | 8.19 |
2003 | 0.25 | 0.53 | 47.16 |
2004 | 0.75 | 0.71 | 105.63 |
2005 | 1.1 | 1.5 | 73.33 |
2006 | 2.4 | 3.53 | 67.98 |
2007 | 3.5 | 5.07 | 69.03 |
A very impressive dividend payout ratio! However this is including the special dividends paid out. But it is worthwhile to note that they frequently pay out special dividends. In fact I did not include the 13 cents capital distribution they gave out last year.
Total EPS for next 5 years based on EPS growth of 15% is 39.31 cents. Assuming a modest 20% dividend payout ratio, the total dividend paid out over next 5 years is 7.86 cents.
Current price is $0.425. So price in 5 years based on dividends is $0.50
|
Hence discounted over the 5 years, if I buy the stock at 0.41 today, I will get a dividend yield of 4% over the next 5 years.
Current price of stock | 0.425 |
Current EPS | 0.0507 |
Current PE ratio | 8.382642998 |
FJ Benjamin looks more like a dividend play. They have a strong cash position but their business does not seem to be very profitable. Strange combination.......
Friday, May 30, 2008
China Milk price valuations projections
Due to my upcoming holiday trip (flying off Wednesday 4 June) I had been taking a back seat in terms of trading. Hence I took the opportunity to read up on value investing. In future I will look to combine both value calculations and TA in my stock picks and decision making.
I've done some calculations for China Milk which I feel is a good company with a good business.
Return of Equity (ROE) = Net Income/Equity
China Milk was listed on 13 March 2006. Hence the equity figures had increased after that resulting in a drop in ROE. However ROE rose to 16.6% from 2007. It is hard to look at the ROE at this stage due to the lack of a track record for the company after listing.
Net Profit Margin (NPM) Net income/Revenue
Net profit margin however is unaffected by listing. It is an extremely high NPM business!
Liquidity
China Milk is extremely solvent. No liquidity problems definitely.
Solvency
On 5 January 2007, the Company issued a zero coupon convertible bonds due 2012 with an aggregate principal amount of uS$150,000,000. the convertible bonds were issued with a conversion price of S$2 per share and will mature on 5 January 2012. The yield for the bonds was 5.25%. How the management uses this money is important. The interest yield does not seem very high and if the money is invested well, this is good for the company despite the debt to equity ratio being relatively high.
Free Cash Flow
China Milk's FCF is good. FCF as revenue shows how much of the revenue is generated as cash and China Milk excels in this area. 2008's FCF was lower because management used the cash to invest in the milk processing plant for future growth.
Price valuation projection
Looking at the EPS growth, I would assume a 10% EPS growth over the next 5 years using current EPS of 0.58 RMB
Currently 1SGD=5.1RMB
Hence projected EPS at end of next 5 years = SGD$0.18
Current price of stock is SGD$0.725
Latest EPS = SGD$0.11
P/E ratio = 6.6
Using a projected P/E ratio of 10, we would expect China Milk to be trading at $1.80 in 5 years time.
Price calculation based on dividend payout
Total EPS projected over next 5 years = SGD$0.76
Dividend payout ratio over past 4 years is about 9%
Hence dividend expected to be paid out over next 5 years = SGD$0.07
Future price in 5 years time based on dividend payout = $0.795
Assume dividend payout to keep up with inflation, use 5% desired return.
Desired price to buy China Milk would be SGD$0.622
At the current price of SGD$0.725 we would get a return of about 2% on projected dividend over the next 5 years
Overall the analysis from the figures show that China Milk is a profitable company with good ROE and excellent NPM.
I will read into the business itself in more detail but this is just a breakdown of the numbers which look quite good.
I've done some calculations for China Milk which I feel is a good company with a good business.
Return of Equity (ROE) = Net Income/Equity
ROE | ROE growth | |
2008 | 26.42 | -5.53 |
2007 | 27.973 | 1.00 |
2006 | 27.69 |
China Milk was listed on 13 March 2006. Hence the equity figures had increased after that resulting in a drop in ROE. However ROE rose to 16.6% from 2007. It is hard to look at the ROE at this stage due to the lack of a track record for the company after listing.
Net Profit Margin (NPM) Net income/Revenue
NPM | NPM growth | |
2008 | 87.89 | 2.85 |
2007 | 85.46 | -5.64 |
2006 | 90.57 | 2.23 |
2005 | 88.59 |
Net profit margin however is unaffected by listing. It is an extremely high NPM business!
Liquidity
Current ratio | |
2008 | 14.9 |
2007 | 9.78 |
2006 | 24.8 |
2005 | 6.75 |
China Milk is extremely solvent. No liquidity problems definitely.
Solvency
LT Debt/Equity Ratio | |
2008 | 52.4168215 |
2007 | 70.9722985 |
2006 |
On 5 January 2007, the Company issued a zero coupon convertible bonds due 2012 with an aggregate principal amount of uS$150,000,000. the convertible bonds were issued with a conversion price of S$2 per share and will mature on 5 January 2012. The yield for the bonds was 5.25%. How the management uses this money is important. The interest yield does not seem very high and if the money is invested well, this is good for the company despite the debt to equity ratio being relatively high.
Free Cash Flow
Free Cash Flow(FCF) | FCF/Revenue | |
2008 | 94,228 | 17.2 |
2007 | 150,552 | 33.99 |
2006 | 160,004 | 53.15 |
2005 | 141,969 | 58.26 |
China Milk's FCF is good. FCF as revenue shows how much of the revenue is generated as cash and China Milk excels in this area. 2008's FCF was lower because management used the cash to invest in the milk processing plant for future growth.
Price valuation projection
EPS Data | EPS | EPS growth |
2005 | 0.33 | |
2006 | 0.41 | 24.24 |
2007 | 0.51 | 24.39 |
2008 | 0.58 | 13.72 |
Projected EPS at yr end | |
End year 1 | 0.63 |
End year 2 | 0.70 |
End year 3 | 0.77 |
End year 4 | 0.84 |
End year 5 | 0.93 |
Currently 1SGD=5.1RMB
Hence projected EPS at end of next 5 years = SGD$0.18
Current price of stock is SGD$0.725
Latest EPS = SGD$0.11
P/E ratio = 6.6
Using a projected P/E ratio of 10, we would expect China Milk to be trading at $1.80 in 5 years time.
Price calculation based on dividend payout
Total EPS projected over next 5 years = SGD$0.76
Dividend payout ratio over past 4 years is about 9%
Hence dividend expected to be paid out over next 5 years = SGD$0.07
Future price in 5 years time based on dividend payout = $0.795
Assume dividend payout to keep up with inflation, use 5% desired return.
Present price to pay for stock | |
Year 5 | 0.757 |
Year 4 | 0.721 |
Year 3 | 0.686 |
Year 2 | 0.654 |
Year 1 | 0.622 |
Desired price to buy China Milk would be SGD$0.622
At the current price of SGD$0.725 we would get a return of about 2% on projected dividend over the next 5 years
Present price to pay for stock | |
Year 5 | 0.779 |
Year 4 | 0.764 |
Year 3 | 0.749 |
Year 2 | 0.734 |
Year 1 | 0.720 |
Overall the analysis from the figures show that China Milk is a profitable company with good ROE and excellent NPM.
I will read into the business itself in more detail but this is just a breakdown of the numbers which look quite good.
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