Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
BB, I remember Integrax was one of Tan Teng Boo's favorite counters too. High margin business, reasonable PER, low price-to-asset. However asset turnover is very poor resulting in low ROA, ROE and mediocre ROIC; no potential growth in revenue etc. Is there an interesting story behind it which makes it a good investment?
Study this table. The data of 2008 includes a one off impairment charge. What do you think of Integrax?
Revenue has been flat. Earnings likewise.
Then look at its total debts. It has been declining. Its interest too has been declining.
Then look at its free cash flow. It is very strong and sustainable. P/FCF is around 3.5. Its latest cash and equivalent is $122 million.
It is a safe investment. The upside potential/downside risk ratio is favourable.
The port concession is a monopoly. It is generating good cash flow.
The only problem is the management has not been able to grow its other business outside this Lumut port significantly. Its investment into the nickel mine was exciting in the initial stage, however, it turned out to be disappointing to date. Its foray into other port facilities in the region have been slow to date.
If the iron ore project in Perak by a foreign company materialised, Integrax will benefit. However, it will need to plough in more capital expenditure to modify the port before the earnings flow in.
In the news recently, there was a report that the 2 brothers who are major shareholders do not see eye to eye, and there is a possibility that one of them may buy out the other. That is about the only excitement at present.
Those holding onto this stock awaiting for PE expansion can be comforted with a DY of around 2%. Last year, the company did not give any dividend. However, the latest dividend is higher than the previous.
BB, thanks for the very useful information on Integrax, especially on the non-financial aspects of which one only knows if he has gone into detail study of the company. By the way, could you enlighten us how do you get the free cash flow. For 2008, you seem to add the operating cash flow (55.9m) and the investment cash flow(4.1m) to obtain 60 m FCF in your spreadsheet. Shouldn't FCF be the operating cash flow less capex?
I often use CFO - CFI as an approximation. It is more difficult to get the CAPEX figure from quarterly announcements. It is OK to be approximately right, rather than to be exactly wrong.
Moreover, you will find that valuing a company is based on many assumptions. You can virtually come up with any value figure depending on the assumptions you use.
Of course, as a prudent investor, one likes to have a sense of the overall picture and trends (a bird's eyeview), and always valuing the company based on conservative assumptions.
BB, I remember Integrax was one of Tan Teng Boo's favorite counters too. High margin business, reasonable PER, low price-to-asset. However asset turnover is very poor resulting in low ROA, ROE and mediocre ROIC; no potential growth in revenue etc. Is there an interesting story behind it which makes it a good investment?
ReplyDeletehttp://spreadsheets.google.com/ccc?key=0AuRRzs61sKqRclllX1NCY1poWDZmVUNVX1pMV2Nfenc&hl=en#gid=0
ReplyDeleteStudy this table. The data of 2008 includes a one off impairment charge. What do you think of Integrax?
Revenue has been flat. Earnings likewise.
Then look at its total debts. It has been declining. Its interest too has been declining.
Then look at its free cash flow. It is very strong and sustainable. P/FCF is around 3.5. Its latest cash and equivalent is $122 million.
It is a safe investment. The upside potential/downside risk ratio is favourable.
The port concession is a monopoly. It is generating good cash flow.
The only problem is the management has not been able to grow its other business outside this Lumut port significantly. Its investment into the nickel mine was exciting in the initial stage, however, it turned out to be disappointing to date. Its foray into other port facilities in the region have been slow to date.
If the iron ore project in Perak by a foreign company materialised, Integrax will benefit. However, it will need to plough in more capital expenditure to modify the port before the earnings flow in.
In the news recently, there was a report that the 2 brothers who are major shareholders do not see eye to eye, and there is a possibility that one of them may buy out the other. That is about the only excitement at present.
Those holding onto this stock awaiting for PE expansion can be comforted with a DY of around 2%. Last year, the company did not give any dividend. However, the latest dividend is higher than the previous.
BB, thanks for the very useful information on Integrax, especially on the non-financial aspects of which one only knows if he has gone into detail study of the company. By the way, could you enlighten us how do you get the free cash flow. For 2008, you seem to add the operating cash flow (55.9m) and the investment cash flow(4.1m) to obtain 60 m FCF in your spreadsheet. Shouldn't FCF be the operating cash flow less capex?
ReplyDeleteFCF = CFO - CAPEX
ReplyDeleteI often use CFO - CFI as an approximation. It is more difficult to get the CAPEX figure from quarterly announcements. It is OK to be approximately right, rather than to be exactly wrong.
Moreover, you will find that valuing a company is based on many assumptions. You can virtually come up with any value figure depending on the assumptions you use.
Of course, as a prudent investor, one likes to have a sense of the overall picture and trends (a bird's eyeview), and always valuing the company based on conservative assumptions.