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stockraider1
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Posting #1: Sun Sep 30th, 2007 17:25 |
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Hexza,
Annualised EPS of rm 0.12
NTA per share Rm 1.26
Cash & equivalent per share Rm 0.45
Dividend per share Rm 0.03.
Share price at Rm 0.775 trading at a bargain PE 6.5, Dividend yield close to 4% p.a.
Latest turnover and earnings shows both growth exceeding 20%.
Conservative Management.
Should be a good long term investment bcos of its strong cash equivalent holdings of Rm 0.45 as effectively investor are buying only Rm 0.775 -Rm 0.45= Rm 0.325 per share.This give actually a PE of less than 3 times for the business !
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Moolah
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Posting #2: Mon Oct 1st, 2007 02:19 |
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Many thanks for your attempts to make a review. However, it would be very much appreciated that you follow the guidelines posted in this section of the forum. ( Guidelines And Rules )
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Guidelines for Member's Stock Review and Recommendation
All postings must include the following 3 issues. (1) Earnings Review & Outlook (2) Pros & Cons (3) Recommendation.
1. Earnings Review & Outlook
Do give some comments on the company's past earnings and also your personal outlook for the stock.
2. Pros & Cons
Every stock will have its good and bad points. Listing out the pro and cons will help everyone understand more about the potential of the stock and more importantly the risk involved in the stock
3. Recommendation
So what's your recommendation for the stock? Is it a buy or sell
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Reason for insisting this guideline is because we cannot have everybody making simplified reviews. Else this forum will be flooded with examplis like ABC stock, eps 10 sen. Pe 3. Good management. Recommended a buy.
Anyway.. we shall leave your posting as it is for this time.
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Annualised EPS of rm 0.12
NTA per share Rm 1.26
Cash & equivalent per share Rm 0.45
Dividend per share Rm 0.03.
Share price at Rm 0.775 trading at a bargain PE 6.5, Dividend yield close to 4% p.a.
Latest turnover and earnings shows both growth exceeding 20%.
Conservative Management.
Should be a good long term investment bcos of its strong cash equivalent holdings of Rm 0.45 as effectively investor are buying only Rm 0.775 -Rm 0.45= Rm 0.325 per share.This give actually a PE of less than 3 times for the business !
Questions.
1. How did you arrive your annualised EPS?
2. Growth stock of turnover and earnings growth exceeding 20%. Any data to back up your claim? And most of all, the growth is based on how many years earnings?
3. Share price trading at a bargain PE. Any historical data to back up what you are saying? Reason is some stocks had a long histroy of trading at a low pe range.
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stockraider1
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Posting #3: Mon Oct 1st, 2007 03:24 |
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1)The latest a/c shows EPS is about Rm 0.18 per share but this is based on 17 mths after adjustment annualised EPS Rm 0.12.
2)Since it is 17 mths annualised turnover on profit after tax is Rm 160m and Rm 15.6m against Rm 130m and Rm 10.4m the previous year a growth rate of 23% and 50% for the current year.
3)As for analysing whether the company is bargain agst historical data my approach advising agst it bcos it is more accurate to value as it is basis based on current earnings, balance sheet, cashflow and cash holdings and compare to the share price to determine undervaluation.Based on the current data using a conservative PE of 10 Hexza should be valued at Rm 1.20 (This not take into a/c the potential growth factors).I agreed with u that some stocks has been trading at low PE the key to my contentian are as follows;
a)The low PE is it warrant based on the intrinsic value of the underlying business value ? Mr Market can be wrong for a long time and we can take advantage of him
b)Sometime there may be Catalyst to trigger rerating such as Revenue Growth and build up in cash position and higher dividend payout.The issue in Hexza case with the current development does it warrant a rerating ?
4)Historical data is useful for us to get a feel of the growth factors;
2007-EPS Rm 0.12 and Turnover Rm 160m
2006-EPS Rm 0.08 and Turnover Rm 130m
2005-EPS Rm 0.06 and turnover Rm 128m
2004-EPS Rm 0.04 and turnover Rm 124m
Based on the above data the turnover takeoff appear in 2007 but earnings been growing in double digit level since 2004.
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Moolah
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Posting #4: Mon Oct 1st, 2007 03:49 |
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Ah... many thanks for your more detailed explaination.
I would leave it for other readers to interpret your reasonings.
Regarding usage of EPS as earnings. I would always prefer to use only net earnings in Ringgit against the usage of EPS.
Why? Because the slices of the cake, is always a dynamic figure which a company can always change anytime and whenever it pleases. For exapmle, everything mentioned by you now is all based on eps, which is based on current number of shares. However, if ever there was a change in the composition of the shares, most of ur data has to be re-computed again. Which would be a hassle.
Anyway back to the growth.
Yes.. from 2004 onwards, Hexza growth will be impressive.
However.. if u look at the bigger picture, ie since fy 2002, this impressive might be deemed as slightly above average only.
old notes which showed Hexza performance since 2002 to 2006.
sales earnings
2002 109.027 8.282
2003 98.433 4.199
2004 117.487 4.811
2005 128.454 8.221
2006 130.097 10.402 |
anyway... i would say that 2007 has been a good year for Hexza.
And perhaps you should state that the company dabbles quite substantially in the share market. ( let's make this fact a known fact - interpretation of whether such corporate exercise is acceptable or not, is up to individual readers own opinion)
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Moolah
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Posting #5: Mon Oct 1st, 2007 03:56 |
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Regarding Hexza track record.
sales earnings
2002 109.027 8.282
2003 98.433 4.199
2004 117.487 4.811
2005 128.454 8.221
2006 130.097 10.402 |
Forgot to explain why I said that following:
- However.. if u look at the bigger picture, ie since fy 2002, this impressive might be deemed as slightly above average
This is because fy 2003 and fy 2004 was deemed as rather poor year for Hexa. So coming from a poor year and also from lower set of numbers, its fy 2005 certainly look good if compared to fy 2003 and fy 2004. However if one compares fy 2005 to fy 2002, its performance is certainly about average only.
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stockraider1
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Posting #6: Mon Oct 1st, 2007 06:05 |
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I agree with u that the earnings dip from 2003 but u analyse 2003 backwards the earnings (PAT) are actually as follows;
1)2003-4.1m
2)2002-8.1m
3)2001-5.6m
4)2000-9.8m
5)1999-7.7m
Although earnings flutuate at a reasonable high level but if u examine the quality of earnings from 2002 it is not as good as period from 2003 onwards.The earlier period earnings is driven by stocks and receivable with only nomimal increase in cash position.
But from 2003 onwards the earnings quality has improved dramatically as every Rm profit is back up by corresponding cash build up.During this period the company also clean up their books.
As regards of measuring growth using EPS, i find this approach is the most accurate measurement for Minority shareholder bcos it reflect his true position, but this approach is slightly complex bcos investor must bear in mind any bonus or rights issue and adjust accordingly,where there is no such corporate exercise this measurement is perfect.
Absolute PAT measurement may shows growth but if the company keep splitting the shares even there is growth but the impact is diluted.
Anyway measuring Growth using absolute figure or EPS most of the time will come up to the same conclusion.
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Moolah
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Posting #7: Mon Oct 1st, 2007 06:47 |
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- I agree with u that the earnings dip from 2003 but u analyse 2003 backwards the earnings (PAT) are actually as follows;
1)2003-4.1m
2)2002-8.1m
3)2001-5.6m
4)2000-9.8m
5)1999-7.7m
Although earnings flutuate at a reasonable high level but if u examine the quality of earnings from 2002 it is not as good as period from 2003 onwards.The earlier period earnings is driven by stocks and receivable with only nomimal increase in cash position.
But from 2003 onwards the earnings quality has improved dramatically as every Rm profit is back up by corresponding cash build up.During this period the company also clean up their books.
I was talking based soley on the issue of growth. So let's leave out the cash issue for now.
Since you had said that Hexza had achieved growth stock status, one then has to back it up with what one is saying.
And it's nice to see that you have the data from 1999 onwards. So a re-compiled track record for Hexza would look something like this.
earnings
1999 7.7
2000 9.8
2001 5.6
2002 8.282
2003 4.199
2004 4.811
2005 8.221
2006 10.402 |
I have said many times b4 the complexity of counting growth. (see http://whereiszemoola.blogspot.com/2007/09/review-of-uchi-again.html )
quote:
- However, I would not get too overly engrossed with numbers. Numbers can be represented in many different ways. Take the simple CAGR issue. If the initial comparison point used was 2003, the CAGR would have been different.
And if u work out the CAGR calcutions for Hexza, using 1999 and 2002 and 2003 as the initial starting comparison point, the growth annual compounded rate would have yielded very contrasting numbers.
And since Hexza has done extremely well for its past 2 fiscal years, I strongly agree with you in that respect that Hexza could be deemed as achieving growth stock status.
However, if I use a bigger time frame comparison, I think I will reserve my judgement on it.
Some indulgence in numbers.
Anyway, as it is, 17 months net profits for Hexza was reported as 22.138m. Or a net profit of 15.6 million for 12 months.
Hence the earnings track record for Hexza would be as follows.
earnings
1999 7.7
2000 9.8
2001 5.6
2002 8.282
2003 4.199
2004 4.811
2005 8.221
2006 10.402
2007 15.627 |
CAGR since 1999 to now (8 years) = 9.23%.
CAGR since 2002 to now (5 years) = 13.7%
CAGR since 2003 to now (4 years ) = 38.8%
- As regards of measuring growth using EPS, i find this approach is the most accurate measurement for Minority shareholder bcos it reflect his true position, but this approach is slightly complex bcos investor must bear in mind any bonus or rights issue and adjust accordingly,where there is no such corporate exercise this measurement is perfect.
LOL! This is an issue of preference. If you like to use EPS as a reference, i see nothing wrong in it as it is your preference.
Leave you with a thought on what you had written.
- ..where there is no such corporate exercise this measurement is perfect.
A corporate world without bonus issue, splits, placement, ESOS etc etc would indeed be a rarity. Oh yes, a perfect world.
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stockraider1
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Posting #8: Mon Oct 1st, 2007 06:58 |
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Basing on the lower end of your growth rate model of 9% and using Benjamin Graham simplify method methods of valuation growth stock comprises of EPS x (8.5%(given by Graham formula) + 9% (growth rate))
Rm 0.12 x 27.5= Rm 3.30.
Thus if Hexza is actually growth stock it can be rerate to Rm 3.30 based on Graham model
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Moolah
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Posting #9: Mon Oct 1st, 2007 07:02 |
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LOL!!
Things do get extremly perfect when one compounds way into the future.
x percent + y amount of years = super duper stock!
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stockraider1
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Posting #10: Mon Oct 1st, 2007 09:07 |
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Correction an error in calculation it should be ;
Rm 0.12 x 17.5 = Rm 2.10 still a sizeable return based on growth model.
A potential 2 bagger return.
At this level the stock is trading at a prospective PE of 17.5 times and price to book value of 1.7 times not really an extreme valuation.
CCM trading at PE of 24 times based on Price of RM 3.00 and price to book value of 1.6 times
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