Showing posts with label Holdings. Show all posts
Showing posts with label Holdings. Show all posts
Tuesday, January 12, 2010
Tuesday, January 5, 2010
First Resources
Just an update. I averaged up on First Resources @0.985, bringing my cost up to 0.97.
I believe that nothing has changed fundamentally with the company, and that First Resources is still undervalued. I am not accurate with TP, but I foresee a 12 month TP of 1.50 based on its performance over the past year and its projected TP as compared with the industry.
I believe that nothing has changed fundamentally with the company, and that First Resources is still undervalued. I am not accurate with TP, but I foresee a 12 month TP of 1.50 based on its performance over the past year and its projected TP as compared with the industry.
Sunday, January 3, 2010
China Telecom
The last major development in the Telecommunication Industry in China was in 2008, when China Unicom bought over China Netcom, with China Unicom’s CDMA unit heading over towards China Telecom. This gave China Unicom access to the Fixed Line market, as well as the broadband market, while China Telecom gained access to the mobile market. Most of China Netcom’s fixed line business is in the North of the country, while China Telecom’s fixed line business is in the South. By diversifying into the mobile sector, China Telecom is able to further increase its revenue. China Telecom’s network operates on a CDMA, while the China Mobile and China Unicom operate on a GSM network. The difference will be explained in the next section.
China Mobile also has access to the internet sector, despite it not having a market share in the fixed line sector. It gained this access via its acquisition of China Tietong in 2008.
Difference between CDMA and GSM
CDMA and GSM are essentially the same thing, with CDMA’s 3G network boasts speeds between 300kbps to 700kbps, while GSM’s 3G network speeds are between 275kbps and 380kbps. The SIM card that we have all come to learn to love is used for GSM phones, while their equivalent for CDMA phones are R-UIM cards. This however, is not available on all carriers, with some carriers linking the number to a phone, meaning that when changing phones, the old phones must be deactivated for the new one to be activated.
The weakness of CDMA is that it is not as good in rural areas, and the charge is significantly higher should they wish to contract GSM cells to provide roaming services for them.
The above information is taken from Wisegeek. Please visit their site for more information on the differences.
Narrowing Down to 2 Carriers
China Mobile’s business model is heavily dependent on their mobile income, and China has a history of breaking up large companies in order to increase competitiveness. As such, any intervention by the Chinese government would most likely be detrimental to China Mobile, considering that the fixed line and internet sector is evenly distributed as compared to the mobile sector.
Analysis
Performance wise, for year ended 2008, China Mobile’s has a profit margin of 29% and an EBITDA margin of 57%. On the other hand, the profit margin for China Unicom was 4% and EBITDA margin of 39%. China Telecom had the worst performance among the 3, with a profit margin of 1% and an EBITDA margin of 32%. EBITDA would have increased to 47% and 45% for China Unicom and China Telecom respectively if impairment cost was taken out of consideration.
There was no breakdown provided into segments for China Mobile, but for China Unicom, their GSM revenue contributed to 43% of total sales while fixed line was 55% of total sales. China Telecom had a total of 52% of sales contributed by fixed lines, 2% contributed my mobiles and 22% contributed by the internet.
For 1H2009, for China Telecom, the YOY operating profit decreased by 24%, while YOY profit for the period decreased by 29%. The decrease is attributed to higher operating expenses. Operating Revenue increased by 13 billion RMB, an approximate increase of 14%. Mobile Voice services accounted for 8.7% of operating revenue, with Wireline Voice and Internet Services accounted for 39.8% and 23.7% of total revenue respectively. There was a decrease in the revenue of Wireline services from 50,485million RMB to 41,060million RMB for 1H2009.
For 1H2009, for China Unicom, the YOY profit decreased by 41%. Although Expenses were approximately the same as 1H2008, the Operating Revenue decreased by 7%, resulting in the large decrease in YOY profit. 44.8% of operating revenue was attributed to GSM revenue, while 52.6% was attributed to fixed lines. There was an increase of 1.84billion RMB in GSM revenue, while a decrease of 5.138billion in fixed lines.
Projected P/E for 2009
China Telecom – 13.2
China Unicom – 16.1
China Mobile – 11.6
I believe that China Telecom’s ability to increase operating revenue is a key performance indicator for me. Furthermore, as a market leader in the South for fixed lines, as well as being one of the market leaders for Internet services, it will gain a steady stream of income. I believe that China Telecom’s Mobile sector will provide an increasing percentage of its operating revenue. China Unicom’s decrease in operating revenue is a cause of worry, mainly because after selling off the CDMA network to China Telecom, it has another competitor in the Mobile sector, while gaining control of the less lucrative North in fixed lines would mean that its growth would have been reduced.
*Disclaimer: I am vested
China Mobile also has access to the internet sector, despite it not having a market share in the fixed line sector. It gained this access via its acquisition of China Tietong in 2008.
Difference between CDMA and GSM
CDMA and GSM are essentially the same thing, with CDMA’s 3G network boasts speeds between 300kbps to 700kbps, while GSM’s 3G network speeds are between 275kbps and 380kbps. The SIM card that we have all come to learn to love is used for GSM phones, while their equivalent for CDMA phones are R-UIM cards. This however, is not available on all carriers, with some carriers linking the number to a phone, meaning that when changing phones, the old phones must be deactivated for the new one to be activated.
The weakness of CDMA is that it is not as good in rural areas, and the charge is significantly higher should they wish to contract GSM cells to provide roaming services for them.
The above information is taken from Wisegeek. Please visit their site for more information on the differences.
Narrowing Down to 2 Carriers
China Mobile’s business model is heavily dependent on their mobile income, and China has a history of breaking up large companies in order to increase competitiveness. As such, any intervention by the Chinese government would most likely be detrimental to China Mobile, considering that the fixed line and internet sector is evenly distributed as compared to the mobile sector.
Analysis
Performance wise, for year ended 2008, China Mobile’s has a profit margin of 29% and an EBITDA margin of 57%. On the other hand, the profit margin for China Unicom was 4% and EBITDA margin of 39%. China Telecom had the worst performance among the 3, with a profit margin of 1% and an EBITDA margin of 32%. EBITDA would have increased to 47% and 45% for China Unicom and China Telecom respectively if impairment cost was taken out of consideration.
There was no breakdown provided into segments for China Mobile, but for China Unicom, their GSM revenue contributed to 43% of total sales while fixed line was 55% of total sales. China Telecom had a total of 52% of sales contributed by fixed lines, 2% contributed my mobiles and 22% contributed by the internet.
For 1H2009, for China Telecom, the YOY operating profit decreased by 24%, while YOY profit for the period decreased by 29%. The decrease is attributed to higher operating expenses. Operating Revenue increased by 13 billion RMB, an approximate increase of 14%. Mobile Voice services accounted for 8.7% of operating revenue, with Wireline Voice and Internet Services accounted for 39.8% and 23.7% of total revenue respectively. There was a decrease in the revenue of Wireline services from 50,485million RMB to 41,060million RMB for 1H2009.
For 1H2009, for China Unicom, the YOY profit decreased by 41%. Although Expenses were approximately the same as 1H2008, the Operating Revenue decreased by 7%, resulting in the large decrease in YOY profit. 44.8% of operating revenue was attributed to GSM revenue, while 52.6% was attributed to fixed lines. There was an increase of 1.84billion RMB in GSM revenue, while a decrease of 5.138billion in fixed lines.
Projected P/E for 2009
China Telecom – 13.2
China Unicom – 16.1
China Mobile – 11.6
I believe that China Telecom’s ability to increase operating revenue is a key performance indicator for me. Furthermore, as a market leader in the South for fixed lines, as well as being one of the market leaders for Internet services, it will gain a steady stream of income. I believe that China Telecom’s Mobile sector will provide an increasing percentage of its operating revenue. China Unicom’s decrease in operating revenue is a cause of worry, mainly because after selling off the CDMA network to China Telecom, it has another competitor in the Mobile sector, while gaining control of the less lucrative North in fixed lines would mean that its growth would have been reduced.
*Disclaimer: I am vested
Thursday, December 24, 2009
My Bank of America Purchase – Investment Mistake?
I purchased Bank of America on the 8th of December, without doing any fundamental analysis, after they had announced they were repaying their TARP funds.
Mistake No. 1 – Not doing any analysis
Logically speaking, I felt that the repayment of the TARP funds was a key indicator of the prospects of BofA. Ken Lewis was stepping down (Positive Point 1), they were searching for a new CEO and as BAC was in the TARP, they could not offer astronomical salaries to the replacement CEO. With the repayment of TARP, they had this cap lifted off, and could carry on the search for the new CEO (Positive Point 2).
Mistake No. 2 – Overthinking Merrill Lynch
BofA’s merger with Merrill Lynch was a major disaster, and resulted in BofA seeking the aforementioned TARP funds. As the economy recovers, so will the risk appetite, and this means more capital for Merrill Lynch. I had put too much emphasis (again without any fundamental analysis) on the profitability of Merrill Lynch, without much regard for BofA’s other income generating sectors.
Mistake No. 3 – Calculating upside based on past performance.
Looking at BofA’s share price, I looked at the possible upside, which was at least 33%. Looking at this number clouded my judgment, and my warnings indicators became clouded. If that’s the case I should be purchasing China New Town, with at least a 100% upside. (I stated China New Town as I just finished an analysis of it)
I am still holding on to BofA, and will not sell it off just yet. The purchase has been made, and the paper losses are less than 5%. I don’t intend to sell it off anytime soon, and will wait for any new developments. Low interest rates are going to be around till at least May next year, and it will be good for the financial sector.
A reminder to all investors: Make sure you know what you are investing in, and do your analysis beforehand. Logically thinking does not necessarily work, and even if you develop a surefire investment method, chances are the market will smash it up into pieces.
On a sidenote which has nothing to do with investment, I am mystified by how Russell did not win the latest season of Survivor. I know that many people feel that Survivor is such a boring show, but if you have time, read it all on samoa.survivor.com.
*Disclaimer I am vested
Thursday, December 10, 2009
First Resources
Why Palm Oil?
Palm Oil is a renewable resource, and is important component in many industries, such as food and biofuel. Furthermore, the yield from a palm plantation is much higher than that of other organic oils, such as sunflower, rapeseed and soybean, and demand of Palm Oil has increased worldwide as compared to other natural oils.
With alternative energy the focus in recent years, and most likely years ahead, the oleochemical industry is set to provide a renewable (although not pollution free) resource, and wean the world off dependence of petrochemicals.
About First Resources
First Resources Limited is one of the leading oil palm plantation companies in Indonesia. We are an upstream operator with primary business activities in the cultivation and harvesting of oil palms, and the processing of fresh fruit bunches into crude palm oil for local and export sales. Established in 1992, we are one of the fastest-growing plantation companies in the region. Today, we manage more than 100,000 hectares of planted oil palm plantations and operate 8 palm oil mills in Indonesia. Our plantations produced approximately 1.4 million tons of fresh fruits bunches and 323,000 tons of crude palm oil in 2008.
Why First Resources
I decided to look into the following companies for comparison: Indofood Agri, Golden Agri, Kecana Agri, First Resources and the company with the biggest market cap, Wilmar. Going by market cap, First Resources ranked 4th among these 5 companies.
For the year ended 2008, the profit margin for Golden Agri came up tops with 48%, while First Resources profit margin was 41% and Wilmar was 5%. Delving into the Operating Profit Margin, Golden Agri had a margin of 67% with First Resources having 75%, Wilmar having 7%. Total Profit for the Year is as follows (based on today's exchange rate):
Indofood Agri - 1,066,727 Rp Million - 157 million SGD
Golden Agri - 1,418,645 USD '000 - 1977 million SGD
Kencana Agri - 10,324 USD '000 - 14 million SGD
First Resources - 1,151,597 RP Million - 170 million SGD
Wilmar - 1,556,431 USD '000 - 2169 million SGD
P/E Ratio for 2008 showed that GAR was trading at a P/E of 1, with First Resources at a P/E of 3. All companies were not highly leveraged, all with a gearing ratio of less than 1.
The noteworthy point however, is that in 2008, due to an increase in value of CPO and kernels, resulted in all companies posting an increased profit. This fair value gain however, is not a realised gain, and as valuations change, so will the income statement. Taking that factor out, First Resources had an operating profit margin of 61%, and a YOY of 105%. Wilmar had a YOY operating profit of 138%. Golden Agri posted a drop of 10% YOY when the factor was removed.
Looking at the most recent earnings release (3Q 09), at this point I narrowed down to First Resources, GAR and Wilmar, First Resources posted a drop of 34.7% in Gross Profit over the YTD, Wilmar with a drop of 33.1%, while Golden Agri posted a change of -55%. EPS for YTD of FR was 436Rp, Wilmar was 18.12USD cents and GAR was 1.18USD cents. Extrapolating it to a full year, FR would have an EPS of approximately 580Rp, Wilmar to be at 30USD cents and GAR with 1.6USD cents, giving the following P/E ratio:
GAR - 21
Wilmar - 15
FR - 11
Furthermore, upon looking further into the Q3 report, First Resources had an increase in 10.3% volume of CPO and 1.7% of Palm Kernel, while Wilmar had a decrease in 5.4% of Palm Oil, while seeds increased by 19.4%. Values were not available for Golden Agri.
The only 2 challenges that I foresee is the price of palm oil being a hindrance, and that First Resources has a much lower market capitalization than its competitors. For the first, as the demand for palm oil will increase and play a greater part for the next decade, the price of palm oil will increase, and as for the latter, it would depend greatly on the management.
*Disclaimer I am vested
Palm Oil is a renewable resource, and is important component in many industries, such as food and biofuel. Furthermore, the yield from a palm plantation is much higher than that of other organic oils, such as sunflower, rapeseed and soybean, and demand of Palm Oil has increased worldwide as compared to other natural oils.
With alternative energy the focus in recent years, and most likely years ahead, the oleochemical industry is set to provide a renewable (although not pollution free) resource, and wean the world off dependence of petrochemicals.
About First Resources
First Resources Limited is one of the leading oil palm plantation companies in Indonesia. We are an upstream operator with primary business activities in the cultivation and harvesting of oil palms, and the processing of fresh fruit bunches into crude palm oil for local and export sales. Established in 1992, we are one of the fastest-growing plantation companies in the region. Today, we manage more than 100,000 hectares of planted oil palm plantations and operate 8 palm oil mills in Indonesia. Our plantations produced approximately 1.4 million tons of fresh fruits bunches and 323,000 tons of crude palm oil in 2008.
Why First Resources
I decided to look into the following companies for comparison: Indofood Agri, Golden Agri, Kecana Agri, First Resources and the company with the biggest market cap, Wilmar. Going by market cap, First Resources ranked 4th among these 5 companies.
For the year ended 2008, the profit margin for Golden Agri came up tops with 48%, while First Resources profit margin was 41% and Wilmar was 5%. Delving into the Operating Profit Margin, Golden Agri had a margin of 67% with First Resources having 75%, Wilmar having 7%. Total Profit for the Year is as follows (based on today's exchange rate):
Indofood Agri - 1,066,727 Rp Million - 157 million SGD
Golden Agri - 1,418,645 USD '000 - 1977 million SGD
Kencana Agri - 10,324 USD '000 - 14 million SGD
First Resources - 1,151,597 RP Million - 170 million SGD
Wilmar - 1,556,431 USD '000 - 2169 million SGD
P/E Ratio for 2008 showed that GAR was trading at a P/E of 1, with First Resources at a P/E of 3. All companies were not highly leveraged, all with a gearing ratio of less than 1.
The noteworthy point however, is that in 2008, due to an increase in value of CPO and kernels, resulted in all companies posting an increased profit. This fair value gain however, is not a realised gain, and as valuations change, so will the income statement. Taking that factor out, First Resources had an operating profit margin of 61%, and a YOY of 105%. Wilmar had a YOY operating profit of 138%. Golden Agri posted a drop of 10% YOY when the factor was removed.
Looking at the most recent earnings release (3Q 09), at this point I narrowed down to First Resources, GAR and Wilmar, First Resources posted a drop of 34.7% in Gross Profit over the YTD, Wilmar with a drop of 33.1%, while Golden Agri posted a change of -55%. EPS for YTD of FR was 436Rp, Wilmar was 18.12USD cents and GAR was 1.18USD cents. Extrapolating it to a full year, FR would have an EPS of approximately 580Rp, Wilmar to be at 30USD cents and GAR with 1.6USD cents, giving the following P/E ratio:
GAR - 21
Wilmar - 15
FR - 11
Furthermore, upon looking further into the Q3 report, First Resources had an increase in 10.3% volume of CPO and 1.7% of Palm Kernel, while Wilmar had a decrease in 5.4% of Palm Oil, while seeds increased by 19.4%. Values were not available for Golden Agri.
The only 2 challenges that I foresee is the price of palm oil being a hindrance, and that First Resources has a much lower market capitalization than its competitors. For the first, as the demand for palm oil will increase and play a greater part for the next decade, the price of palm oil will increase, and as for the latter, it would depend greatly on the management.
*Disclaimer I am vested
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