Monday, April 13, 2099

Valuation of all stocks listed in Holland AEX All Share AAX: Benjamin Graham Defensive Investor method

Warren Buffett: "Well, start with the A’s." Click on the companies below for Graham Evaluation:

Aalberts Industries AEX:AALB, NL0000852564
ABN AMRO AEX:ABN48 NL0011540547
Accell Group AEX:ACCEL NL0009767532
Ahold Koninklijke AEX:AH, NL0010672325
Accsys Technologies AEX:AXS, GB00BQQFX454: Too small, making a loss, but growing sales.
Aegon AEX:AGN, NL0000303709
AFC AJAX AEX:AJAX NL0000018034
Air France-KLM PSE:AF, FR0000031122
Akzo Nobel AEX:AKZA NL0000009132
Altice AEX:ATC, NL0011333752
AMG Advanced Metallurgical Group NV AMG:AEX NL0000888691
Amsterdam Commodities AEX:ACOMO NL0000313286
AND International Publishers
Apollo Alternative Assets AEX:AAA1, GB00B15Y0C52
Aperam AEX:APAM LU0569974404
Arcadis AEX:ARCAD, NL0006237562
ArcelorMittal AEX:MT, LU0323134006
ASM International AEX:ASM NL0000334118 BUY under €35
ASML Holding NV
ASR Nederland a buy under 30 Euros?
Batenburg Techniek
BAM Koninklijke Groep 
Basic Fit ?! don't buy above 7,50
BE Semiconductor Industries AEX:BESI, NL0000339760
Beter Bed Holding AEX:BBED, NL0000339703
Bever Holding: Small real estate fund, neg. cash flow, selling at 3,8 under 5,5 Euro book value. Plans to make money in near future. Buy?
BinckBank buy under 3 Euros
Boskalis Westminster Koninklijke AEX:BOKA, NL0000852580
Boussard & Gavaudan Holding Ltd. An expensive hedge fund.
Brill, Koninklijke kopen onder 20 Euro
Brunel International AEX: BRNL, NL0010776944
Coca-Cola European Partners
Corbion AEX:CRBN, NL0010583399
Core Laboratories AEX:CLB, NL0000200384
Ctac buy under €3,20
Curetis loss making biotech company = too difficult pile. Price fell from 7,14 to 5 June 2016-June 2017
Docdata: Now a  holding for the https://www.ease2.com/ Internet of Cars app, under construction.
Delta Lloyd now part of NN Group.
DPA Groep N.V. buy at €1,4
DSM Koninklijke don't buy over 40 Euros
Esperite: Stem Cell Bank losing money hand over fist. Price fell from 3 to 0,70 June 2016-17
Eurocastle NPL Non Performing Loans in Italy 10% dividend FFO Funds From Operations pretty good, selling at 8,55 which is 7% under Net Asset Value
Eurocommercial Properties: Buy under 40?
Euronext buy at €30
Fagron impairments
ForFarmers a Graham Defensive Pick up to €6,50
Flow Traders outside my circle of competence, seems like a buy under €30
Fugro's Graham Value has decreased, buy at €10?
Gemalto buy under €35
Galapagos is a clinical-stage biotechnology company, not profitable (yet?).
GrandVision : Don't buy over €20
Groothandelsgebouwen N.V. buy under €50
HAL Trust
Headfirst Source part of Value8 holding. Figures? Earnings 2017 before Amortization 0,30?
Heijmans losing money check August 17 2017
Heineken, buy under 60?
Holland Colours buy under €70
Hunter Douglas, good balance sheet, buy if under €70
Hydratec buy at 55 sell at 65
ICT Group NV buy under 9 Euros
IEX Group Sales 2m, losses 600k, not for the defensive investor
IMCD buy under 35 Euros
ING Bank buy under 15 Euros
Intertrust too little history: Earnings per share 2016 Euro 1,3 x 15 = 19,5 Euros: Price = 19,86 Euros
Inverko used to be Newconomy, is for sale, garbage (disposal) Price = 0,60 Euros
Kardan made a loss 5 out of the last 5 years including 2016 and first Q 2017. Almost bankrupt?
KAS BANK cheap now under 10 Euros ?
Kendrion buy at 25 Euros
Kiadis Pharma bleeder, not for Defensive Investor, no sales
Klepierre French Retail Real Estate 5% dividend
KPN not for the Graham Defensive Investor CHECK AFTER JULY 26th 2017
Porceleyne Fles Koninklijke Check under 5 Euros.
K. VOPAK buy under 30
K. Wessanen 
Lavide not  a going concern (yet?) 
Lucas Bols buy under €15
Nedsense lege beurshuls
New Sources Energy penny stock
Neways electronic manufacturing services (EMS)
NN Group NV buy now under €40?
Novisource verliesgevend interim management 
NSI Nieuwe Steen Investments per February 14th
Value8 AEX:VALUE NL0010661864
Nedap NV Nederlandsche Apparatenfabriek
OCI NV buy under 16 Euros
Oranjewoud not a Defensive stock...
Pharming back of the envelope math
Philips Electronics buy around 20?
Philips Lighting
PostNL
Probiodrug loss making biotech, not a stock for the Defensive Investor
Randstad
Refresco Group  buy around 12 Euros?
RELX Group (formerly Reed Elsevier)
RoodMicrotec shareholder financed
Royal Dutch Shell
SBM Offshore 
Sif Holding
Sligro 
SnowWorld
Stern Groep buy under 25 Euros?
Takeaway.com making a loss, not for the Defensive Investor. Prijs 10x verkoop.
Tetragon investment fund including CLO (Collateralized Loan Obligations) NAV $20, price $12,44
Thunderbird Resorts: Negative book value and losing money.
TIE Kinetix Shares Outstanding: 2013:933 2014:1127 2015:1227 2016:1830
TKH Group
TomTom
Unibail Rodamco a buy?
Unilever after Kraft Heinz bid
Value8 not much information
Van Lanschot
Vastned Retail check after share buybacks May 15th
VNC = too difficult pile: Geert Schaaij + Selwyn Duijvestijn 
Volta Finance fund including CLO (Collateralized Loan Obligations)
Wereldhave, buy?
Wolters Kluwer
Yatra Capital Indian Real Estate, losing money, stopping? Book 7,5 E, Price 5,75 E.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Tuesday, August 08, 2017

Elon Musk's Paypal (X.com) master plan: A financial services flywheel of growth aka snowball or productivity loop

In his Ashlee Vance biography, Elon Musk talks about what he sees as a huge missed opportunity for Paypal. Here is how he explained it in Appendix 2, below that similar thinking by the Brenninkmeijer family, Sam Walton and Jeff Bezos is presented.

"While Musk has reflected publicly about his time at Paypal and the coup (he was removed as CEO), he went into far greater detail than ever before during one of our interviews... Musk had been able to meditate more on what went right, what went wrong, and what might have been... and ended with an explanation of how the finance industry still hasn't solved the problems X.com wanted to tackle. 

"... At the time it was this weird almost hybrid brand with X.com and PayPal. I think X was the right long-term brand for something that wants to be the central place where all transactions happen.  That's the X. It's like the X is the transaction. PayPal doesn't make sense in that context, when we're talking about something more than a personal payment system. I think X was the more sensible approach but timing-wise it didn't need to happen then. That should have probably waited longer ... In retrospect, I should have delayed the brand transition (from X.com to PayPal).... I've thought about trying to get PayPal back. I've just been too strung out with other things. Almost no one understands how PayPal actually worked or why it took off when other payment systems before and after it didn't. Most of the people at PayPal don't understand this. The reason it worked was because the cost of transactions in PayPal was lower than any other system. And the reason the cost of transactions was lower is because we were able to do an increasing percentage of our transactions as ACH, or automated clearing house, electronic transactions, and most importantly, internal transactions. Internal transactions were essentially fraud-free and cost us nothing. An ACH transaction costs, I don't know, like twenty cents or something and was slow, so that was the bad thing. It's dependent on the bank's batch processing time. And then credit card transaction was fast, but expensive in terms of the credit card processing fees and very prone to fraud. That's the problem Square is having now. 
Square is doing the wrong version of PayPal. The critical thing is to achieve internal transactions. This is vital because they are instant, fraud-free, and fee-free. If you're a seller and have various options, and PayPal has the lowest fees and is most secure, it's obviously the right thing to use.
When you look at any given business, like say a business is making 10 percent profitability. They're making 10 percent profit when they may net out all of their costs. You know, revenue minus expenses in a year, they're 10 percent. 
If using PayPal means you pay 2 percent for your transactions and using some other systems means you pay 4 percent, that means using PayPal gives you a 20 percent increase in your profitability. You'd have to be brain dead not to do that. Right? 
So because about half of PayPal's transactions in the summer of 2001 were internal or ACH transactions, then our fundamental costs of transactions were half because we'd have half credit cards, we'd have half that and then the other half would be (partly) free. (Recall the zero cent cost of internal transactions within PayPal itself.) The question then is how do you give people a reason to keep money in the system. 
That's why we created a PayPal debit card. It's a little counterintuitive, but the easier you make it for people to get money out of PayPal, the less they'll want to do it. But if the only way for them to spend money ro access it in any way is to move it to a traditional bank, that's what they'll do instantly. The other thing was the PayPal money market fund. We did that because if you consider the reasons that people might move money out, well, they'll move it to either conduct transactions in the physical world or because they are getting a higher interest rate. So I instituted the highest-return money market fund in the country. Basically, the money market fund was at cost. We didn't intend to make any money on it, in order to encourage people to keep their money in the system. And then we also had also had like the ability to pay regular bills like your electricity bill and that kind of thing on PayPal.
There were a bunch of things that should have been done like checks. Because even though people don't use a lot of checks, they still use some checks. So if you force people to say, 'Okay, we're not going to let you use checks ever,' they're like, 'Okay, I guess I have to have a bank account.' Just give them a few checks, for God's sake.
I mean it's so ridiculous that PayPal today is worse than PayPal circa end of 2001. That's insane.
None of these start-ups understand the objectove. The objective should be - what delivers fundamental value. I think it's important to look at things from a standpoint of what is actually the best thing for the economy. If people can conduct their transactions quickly and securely that'better for them. If it's simpler to conduct their financial life it's better for them. So, if all your financial affairs are seamlessly integrated integrated one place it's very easy to do transactions and the fees associated with transactions are low. These are all good things. Why aren't they doing this? it's mad."

Note:  In 2007 PayPal transactions were ridicously expensive, 4% fee.. Someone paid me $146 via PayPal of which PayPal took $6 and I received $140.  ) http://sinaas.blogspot.nl/2007/08/paypal-meer-dan-4-over-146-euro.html

In this interview Musk explains the same sentiment, he wanted X.com to dominate world finance in one database:  

Retail underseller C&A called it the "snowball system" in 1906: "Terrain can be won by offering large amounts of useful clothing at prices that can be paid by the masses. Due to the higher sales expected, the gross margins (BCP%) per piece sold can be kept low, and a snowball system can be developed which leads to ever-increasing conversions. "
C&A snowball system, net profit increases as gross margin decreases
Original Dutch “Terrein kan worden gewonnen door grote hoeveelheden bruikbare confectie aan te bieden tegen prijzen, die door de massa kunnen worden betaald. Door de te verwachten hogere omzet kan de calculatie per stuk laag gehouden worden, en zo kan zich een sneeuwbal-systeem ontwikkelen, dat tot steeds hogere omzetten leidt.”

The same concept as used at Walmart and adapted by Jeff Bezos for Amazon.
Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Saturday, July 15, 2017

Koninklijke BAM Groep intrinsic value using Graham Number BAMNB


SECTOR: [PASS]  BAM is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. BAM's sales of €6 976 million, based on 2016 sales, pass this test.

CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. BAM's current ratio €3 366m/€3 176m of 1.1 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for BAM is €510 million, while the net
current assets are €190 million. BAM fails this test.

LONG-TERM EPS GROWTH: [FAIL]  Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. BAM's earnings have declined and were negative in 2012 and thus fails the EPS growth test.

Earnings Yield: [FAIL] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. BAM's E/P of 2% using last years earnings fails this test.

Graham Number value: [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. BAM has a Graham number of (22,5 x €0,12 EPS x €3,09 Book Value) = €2,9

DIVIDEND = 0,09 / 4,95 = 2% 

Conclusion BAM is only marginally profitable at the moment. There is no margin of safety if you buy now. Not a stock for the Defensive Investor.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Thursday, July 13, 2017

Kendrion share Price and intrinsic Value


SECTOR: [FAIL]  Kendrion is in the Technology sector, which is one sector that this methodology avoids. Technology and financial stocks are considered too risky to invest in. Several of Graham's criteria, like the Current Ratio and Debt to Current Assets, do not apply to financial companies. As a result, the company will not be able to pass this methodology, although we will include the remainder of the analysis for informational purposes.

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Kendrion's sales of €443 million, based on 2016 sales, pass this test.

CURRENT RATIO:  [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Kendrion current ratio €121m/€73m of 1,7 passes this test...almost ;)
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] Long-term debt must not exceed net current assets. Companies that meet this criterion display one of the attributes of a financially secure organisation. 
Kendrion has Net Current Assets of €48 million and long-term debt of €95 million. 

LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for 
Kendrion's earnings haven't increased 30% in the last 10 years, therefore the company fails this criterion. 

EARNINGS YIELD: 
[FAIL] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. Kendrion's E/P of 3,5% using earning per share of the past 3 years fails this test.


Graham Number value: [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Kendrion has a Graham number of (15 x €1,34 EPS x 1,5 x €14 Book Value) = €20,1

Dividend:  €0,78 / €35 = 2%

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Tuesday, July 11, 2017

Softbank Singularity and 2000 bubble


The green line is the share price of Softbank and the blue line is a realistic price based on the company's actual profits. Look at the discrepancy around 2000 the Dot.com bubble... Softbank's CEO apparently understands the Technological Singularity.



Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Pharming back of the envelope math

Pharming is not a stock for the Defensive Investor. A Benjamin Graham Defensive Investor owns parts of companies who give money to the owners the form of dividends (or possibly share buybacks).

Note: I have no clue about the Pharming, am not an expert and all the numbers below might be incorrect.

Pharming is a company which takes money from its owners by selling more and more stocks. Share outstanding:  72m...213m...408m

This year Pharming might make money because it bought the rights to Ruconest from Valeant (by in essence selling more shares). In total Pharming might have not 400 million but soon 700 million shares outstanding. More shares act as a diluent, if there are more shares, each owns a smaller part of the company.

Back of the envelope math:

In the first quarter, Pharming had an Operating Profit of €4 million.

Assume optimistically this was a Net Profit and that per year Net Profits are 4 x €4,- = €16 million.

Earnings per Share would then be €16m / 700m shares = €0,03

Assume a Price / Earnings (PE) multiple of 15 and you get a reasonable share price of €0,03 x 15 = €0,45 which is today's share price. (Up from a 52 week low of €0,19)

The FDA might also approve Ruconest for other uses so the value might be higher. On the other hand, management doesn't seem to have any plans for returning cash to shareholders in the near future.

Comments, questions or E-mails welcome: ajbrenninkmeijer@
gmail.com

Sunday, July 09, 2017

KAS BANK seems cheap and pays a good dividend.




SECTOR: [FAIL]  KAS Bank is in the Financial sector, which is one sector that this methodology avoids. Technology and financial stocks are considered too risky to invest in. Several of Graham's criteria, like the Current Ratio and Debt to Current Assets, do not apply to financial companies. As a result, the company will not be able to pass this methodology, although we will include the remainder of the analysis for informational purposes.

SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. KAS Bank's sales of €106 million, based on 2016 sales, fails this test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] Long-term debt must not exceed net current assets. Companies that meet this criterion display one of the attributes of a financially secure organisation. 
KAS Bank is a financial stock so this variable is not applicable and this criterion cannot be evaluated.

LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for 
KAS Bank haven't increased in the last 5 years including the first 3 quarters of 2016, therefore, the company fails this criterion. 

EARNINGS YIELD: 
[PASS]  The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. KAS Bank's E/P of 11% using earning per share of the past 3 years passes this test.

Graham Number value: [PASS]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. KAS Bank has a Graham number of (15 x €1,1 EPS x 1,5 x €15,2 Book Value) = €19,5

Dividend:  €0,64 / €9,60 = 7%

Conclusion 2017: KAS Bank is having a tough year. The stock price seems low, so it might be worthwhile to do some research to see whether a return to earnings over 1 Euro per share and a high dividend are in the cards for the coming years. Not a stock for the Defensive Investor.

Conclusion July 9th 2017: KAS BANK seems cheap no at €9,6 based on the high dividend and good results in Q1 2017.

Voor een gratis ebook over Graham z'n meest succesvolle pupil zie: http://www.warrenbuffett.nl/  


Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Thursday, July 06, 2017

Opportunity based retail booklet

IKEA's founder, Ingvar Kamprad, spent more than a decade arguing back and forth with his own planning department about the following question. Kamprad explains: "My staff are always concerned with what they call the gross profit %.... Our planners constantly go on that we must keep our "total gross margin" to a certain percentage. I say to these retail "experts" 'What the hell is 'percentage' anyhow?' A high gross margin % target is a stumbling block that leads to pricing ourselves out of the market." 

What Kamprad described is one of the pitfalls of conventional retail planning. Theoretically, the only alternative is to allocate operating expenses to different assortment options in order to determine which is profitable. Systems for doing this include Activity Based Costing (ABC) or DPP and ECR.

ALDI's Dieter Brandes called ECR ridiculously complicated bordering on moronic. His conclusion: "Many a company has calculated itself out of the market with incorrect equations and inappropriate cost accounting." On the other hand, when asked about simple gross margin % targets he wrote: "One can easily understand how stupid such percentage targets are." This confused me, so I decided to turn to one of my uncles.

He was C&A's CEO during a period of strong growth between 1960 and 1988. According to him, C&A's real breakthrough had been a decision in 1906 to cut the gross margin % target in half.

When I asked him: " If you don't use gross margin %, how do you allocate operating expenses to determine which assortment options are most profitable?"

His response was simply: "You don't."

Me: "You don't ?"

"No, the key is Opportunity Costs. The extra gross margin dollars you get by choosing one option over another is much more important than the relatively small differences in selling expenses."


Breakthrough: C&A's Secret Formula Rediscovered is a booklet describing how Opportunity based customer $ driven retail worked in practice and how to implement it today. Copies are free for family and colleagues at C&A and other parts of Cofra Holding. Just send me your address. (€20 for others). I have a few dozen leftover from the last print run.

Presently Dr. Bianca Groen, drs. Björn Kijl, Ruud Verschuur and I are working on improving retail theory. We've edited Wikipedia and are writing a paper, but my main focus at the moment is helping set up a public equity investment fund.
 

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Tuesday, July 04, 2017

ING stock intrinsic value Benjamin Graham valuation

The Intelligent Investor by Benjamin Graham, was first published in 1949. The Graham Defensive Stock Screen used here, was described in Chapter 14 of that book. It is fascinating for me to see how many stock prices follow the simple geometric average calculation of 1,5x Book Value and 15x Earnings per Share of the Graham Number. See https://en.wikipedia.org/wiki/Graham_number


ING 's book value and profit have increased since my last evaluation in October 2016: http://sinaas.blogspot.nl/2016/10/ing-stock-intrinsic-value-benjamin.html

SECTOR: [FAIL] 


ING is in the Financial sector, which is one sector that this methodology avoids. Technology and financial stocks are considered too risky to invest in. Several of Graham's criteria, like the Current Ratio and Debt to Current Assets, do not apply to financial companies. As a result, the company will not be able to pass this methodology, although we will include the remainder of the analysis for informational purposes.


SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. ING's sales of €17,491 million, based on 2016 sales, pass this test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] Long-term debt must not exceed net current assets. Companies that meet this criterion display one of the attributes of a financially secure organisation. ING is a financial stock so this variable is not applicable and this criterion cannot be evaluated.


LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for ING haven't increased in the last 10 years the company fails this criterion. 


EARNINGS YIELD:  [PASS]  The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. ING's E/P of 7% using earning per share estimate of €1,20.


Graham Number value: [PASS]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. ING has a Graham number of (15 x €1,13 EPS x 1,5 x €12,84 Book Value) = €18

Voor een gratis ebook over Graham z'n meest succesvolle pupil zie: http://www.warrenbuffett.nl/  

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Friday, June 30, 2017

Has the Value of IMCD increased by more than 400% in the past 7 years? The Price has!

Internatio-Müller Chemical Distribution (IMCD) is the sister company of IMtech (which went bankrupt). Bain Capital bought IMCD for €610m in 2010 and the market cap now, after coming back to the stock exchange again, is € 2 500m. 

SECTOR: [PASS]  IMCD is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. IMCD's sales of €1 718 million, based on 2016 sales, pass this test.

CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. IMCD's current ratio €525m/€291m of 1.8 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for IMCD is €468 million, while the net current assets are €234 million. IMCD fails this test.

LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. IMCD's EPS were negative in 2012 and 2013 so the company fails this test.

Earnings Yield: [FAIL] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. IMCD's E/P of 3% (using the average over 3 years) fails this test.

Graham Number value: [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. IMCD has a Graham number of (15 x €1,44 EPS x 1,5 x €15 Book Value) = €22 and fails this test.

Dividend: 0,55 E / 47 E = 1% and increasing.

Conclusion: Bain probably wouldn't buy the company now for 4x the price it paid in 2010.


For analysis of more great companies, see www.beterinbeleggen.nl 

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Wednesday, June 28, 2017

ICT Group "short" term and long term: intrinsic Value vs. Price

How long should your investing time frame be? Last year I considered ICT Group over a 4-5 year time frame.

This year I consider a longer period, 18 years, in which 5 years seems relatively short and you see that things don't always go up ;) 

You can see that the points when the stock price was lowest and under intrinsic Value, were great times to buy: 2003, 2009, 2014. 

SECTOR: [PASS]  ICT Group is in process management. Technology and financial stocks were considered too risky to invest in when this methodology was published. 

SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. 
ICT Group sales of €90 million, based on 2016 sales, fails this test.

CURRENT RATIO:  [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. 
ICT Group current ratio €38m/€22m of 1,7 passes this test...almost ;)

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for 
ICT Group is €14 million, while the net current assets are €16 million. ICT Group passes this test.

LONG-TERM EPS GROWTH: 
[FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. ICT Group's earnings were negative in 2012 and 2013, so the company fails this test.

Earnings Yield:  
[FAIL] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. ICT Group's E/P of 5% (using last years Earnings) fails this test.

Graham Number value: 
[FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. ICT Group has a Graham number of (15 x €0,6 EPS x 1,5 x €5 Book Value) = €8,1 

Dividend: €0.33/€12= 3% 

Conclusion: 
ICT Group has a strong balance sheet and the Value per share is increasing, but at the moment the Price (quoted value) seems too high for the Defensive Investor at €12.2 in June 2017. People who bought after 2009 are right to be satisfied with the company's as well as the share's recent performance.  People who at 5 Euros in 2003 have earned well on decent dividends.      

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com