2015 eps=45.93 sen,pe=12 ,share price=rm5.51 ,very undervalue.
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Dude, what about Canone now?
Author: cephasyu | Publish date: Mon, 14 Mar 2016, 01:29 PM
I want to start this article by saying I was wrong. In my last article
as linked below, I gave a recommendation for Canone, with a TP of RM5.72
on the basis that the milk business is growing in profitability and
Canone’s stake in Kian Joo Can Factory Berhad (“KJ”) is a healthy and
profitable one.
http://klse.i3investor.com/blogs/rarecharms/91402.jsp
However the 2015 Q4 results came out and it was below expectations. The stock price tanked from RM4.50 to as low as RM3.5. People lost money and so did I. I was surprisingly glad that despite my high TP, nobody blamed me (yet) for losing money based on my recommendation. Perhaps nobody trusted me enough to buy on my recommendation anyway. Haha… aww shucks :(
I personally had no idea why Canone’s milk division and KJ reported lower profitability. I was looking at foreign exposure, commodity prices, USD/RM strength and I couldn’t find out why. KJ had a forex loss of RM8m (what.. why?) and Canone had marginal forex gains when both the USD and VND were stable against the RM in Q4 2015.
I hypothesize that it could be due to customer pressure for lower prices (I do not have data to prove this), while raw materials although have decreased in price are still priced in USD, muting cost savings.
The other recent development is an article in the Star newspaper that most of you should be familiar with.
http://www.thestar.com.my/business/business-news/2016/03/12/canone-mulls-sale-of-condensed-milk-ops/
In this article, it says that sources (this is hella dodge) claim that KWAP is interested in buying up to 80% of Canone’s milk division and Canone is seeking a valuation of 20X PE. In any case, I decided that as a follow-up to my previous article, I needed to re-run the numbers to find out the new valuation. First of all, a revision of KJ’s offer price from Aspire and TTC.
KJ’s NTA has increased significantly from 2013, but PAT disappointed, only increasing 2% since 2013.
Next, I revised the two base case and optimal case valuation based on the latest result.
As you can tell, the TP for both has dropped notably. However, in light of recent events, I need to readjust some valuation multiples. I call this new valuation the revised case (how original).
I need to explain a few things here. First of all, I understand people are arguably concerned about the RM542mil of debt on Canone’s books. Out of this, approximately RM200mil is used for currency trade loans, bills receivable financing and BA. These are mostly trade financing loans which aren’t like term loans. They are short term loans to finance raw material purchases. To understand more, please refer to the appendix of Icon8888’s interesting article on EG.
http://klse.i3investor.com/blogs/icon8888/90015.jsp
Besides that, another RM218mil was used to finance the KJ acquisition which is paying for its own financing cost. Therefore, I don’t think there’s too much to worry about for the remaining RM100mil term loans.
On top of that, in my valuation, I assigned the general cans business a PE of 8 and a value of RM64mil. This business has assets worth RM302m and I’m assigning a fifth of its asset value. I would say that’s prudent enough.
From the Star article, for the dairy division, it states that “The plan is for the asset to be listed a valuation higher than 20 times earnings, so this is the potential upside for the buyer now.” I am going to discount this to a PE of 15, following my optimal case. Finally, to take a more prudent stance, I will use the original Aspire offer price of RM3.30 instead of the revised ones. With all these revision, we arrive at Canone’s value of RM5.55 (dude, you can’t fudge numbers like these).
Conclusion
I understand that we all need some margin of safety. Discount it even further, personally on your own. If you want a margin of safety of 50%, then your TP is RM2.27, please pass on this. If you think you need 20% margin of safety, then your TP is RM4.44. I am only here to give you a reference model with a price.
For me personally, I’ll take the Rm5.55 bet which I’ve already embedded a whole bunch of discounts into it. Nevertheless, the choice is yours. I could be wrong (again) and if I am, please let me know gently :)
Happy trading/ investing ya’ll
Cephas
2）
Hi all,
I find above title really reflecting what is going on in Canone now.
Reason is obvious, 1 bad quarter of result, mainly due to lesser contribution from KianJoo, which in turn due to foreign exchange loss of approximately RM 9 million. Of course, eventhough adding back that item, it still doing poorer then previous quarters.
WHAT ABOUT THE DEAL OF SELLING OFF 32.2% stake?
Will one quarter of bad result contribute to significant VALUE DROP of the 32.2% stake?
http://klse.i3investor.com/blogs/canone/84307.jsp
http://klse.i3investor.com/blogs/canone/89515.jsp
I DOUBT IT.
ANYWAY, this is interpretation of my own, please do your own study and make your own investment decision.
YiStock
Additional Note:
All my articles are for reading pleasure only and should not be treated as buy/ sell call on any particular company mentioned in the articles.
I can never be 100% sure on the data i sourced and correctly predict the performance of the company I mentioned in the articles.
My investment strategy is very simple, If the business fundamental is improving, i will buy in whatever amount i can. On the other hand, once i start noticing sign of deterioration, i will immediately cut the profit / losses. I only take care of downside, the upside will take care of itself
If i missed any investment opportunity, i will acknowledge i missed it. If i make a mistake on judging the source of info or material i read on certain company i invest in, i will only blame myself and vow to do better in future.
My strategy is FA come first, and forever FA.
I only have 2 sifu, one is KCChong, One is OTB. Take courses from these 2 sifu, and do my own practice. I believe in: the master leads you to the door, the rest is up to you.
I have 2 idol, Mr ColdEye and Bursa Dummy.
I have an enemy: FEAR
3）
冠旺乳品业务8亿求售 传KWAP有兴趣
2016-03-13 11:34
http://klse.i3investor.com/blogs/rarecharms/91402.jsp
However the 2015 Q4 results came out and it was below expectations. The stock price tanked from RM4.50 to as low as RM3.5. People lost money and so did I. I was surprisingly glad that despite my high TP, nobody blamed me (yet) for losing money based on my recommendation. Perhaps nobody trusted me enough to buy on my recommendation anyway. Haha… aww shucks :(
I personally had no idea why Canone’s milk division and KJ reported lower profitability. I was looking at foreign exposure, commodity prices, USD/RM strength and I couldn’t find out why. KJ had a forex loss of RM8m (what.. why?) and Canone had marginal forex gains when both the USD and VND were stable against the RM in Q4 2015.
I hypothesize that it could be due to customer pressure for lower prices (I do not have data to prove this), while raw materials although have decreased in price are still priced in USD, muting cost savings.
The other recent development is an article in the Star newspaper that most of you should be familiar with.
http://www.thestar.com.my/business/business-news/2016/03/12/canone-mulls-sale-of-condensed-milk-ops/
In this article, it says that sources (this is hella dodge) claim that KWAP is interested in buying up to 80% of Canone’s milk division and Canone is seeking a valuation of 20X PE. In any case, I decided that as a follow-up to my previous article, I needed to re-run the numbers to find out the new valuation. First of all, a revision of KJ’s offer price from Aspire and TTC.
KJ’s NTA has increased significantly from 2013, but PAT disappointed, only increasing 2% since 2013.
Next, I revised the two base case and optimal case valuation based on the latest result.
As you can tell, the TP for both has dropped notably. However, in light of recent events, I need to readjust some valuation multiples. I call this new valuation the revised case (how original).
I need to explain a few things here. First of all, I understand people are arguably concerned about the RM542mil of debt on Canone’s books. Out of this, approximately RM200mil is used for currency trade loans, bills receivable financing and BA. These are mostly trade financing loans which aren’t like term loans. They are short term loans to finance raw material purchases. To understand more, please refer to the appendix of Icon8888’s interesting article on EG.
http://klse.i3investor.com/blogs/icon8888/90015.jsp
Besides that, another RM218mil was used to finance the KJ acquisition which is paying for its own financing cost. Therefore, I don’t think there’s too much to worry about for the remaining RM100mil term loans.
On top of that, in my valuation, I assigned the general cans business a PE of 8 and a value of RM64mil. This business has assets worth RM302m and I’m assigning a fifth of its asset value. I would say that’s prudent enough.
From the Star article, for the dairy division, it states that “The plan is for the asset to be listed a valuation higher than 20 times earnings, so this is the potential upside for the buyer now.” I am going to discount this to a PE of 15, following my optimal case. Finally, to take a more prudent stance, I will use the original Aspire offer price of RM3.30 instead of the revised ones. With all these revision, we arrive at Canone’s value of RM5.55 (dude, you can’t fudge numbers like these).
Conclusion
I understand that we all need some margin of safety. Discount it even further, personally on your own. If you want a margin of safety of 50%, then your TP is RM2.27, please pass on this. If you think you need 20% margin of safety, then your TP is RM4.44. I am only here to give you a reference model with a price.
For me personally, I’ll take the Rm5.55 bet which I’ve already embedded a whole bunch of discounts into it. Nevertheless, the choice is yours. I could be wrong (again) and if I am, please let me know gently :)
Happy trading/ investing ya’ll
Cephas
2）
CANONE - 恐慌裡，大家都忘了價值? - YiStock
Author: YiStock | Publish date: Tue, 1 Mar 2016, 11:42 PMHi all,
I find above title really reflecting what is going on in Canone now.
Reason is obvious, 1 bad quarter of result, mainly due to lesser contribution from KianJoo, which in turn due to foreign exchange loss of approximately RM 9 million. Of course, eventhough adding back that item, it still doing poorer then previous quarters.
WHAT ABOUT THE DEAL OF SELLING OFF 32.2% stake?
Will one quarter of bad result contribute to significant VALUE DROP of the 32.2% stake?
http://klse.i3investor.com/blogs/canone/84307.jsp
http://klse.i3investor.com/blogs/canone/89515.jsp
I DOUBT IT.
ANYWAY, this is interpretation of my own, please do your own study and make your own investment decision.
YiStock
Additional Note:
All my articles are for reading pleasure only and should not be treated as buy/ sell call on any particular company mentioned in the articles.
I can never be 100% sure on the data i sourced and correctly predict the performance of the company I mentioned in the articles.
My investment strategy is very simple, If the business fundamental is improving, i will buy in whatever amount i can. On the other hand, once i start noticing sign of deterioration, i will immediately cut the profit / losses. I only take care of downside, the upside will take care of itself
If i missed any investment opportunity, i will acknowledge i missed it. If i make a mistake on judging the source of info or material i read on certain company i invest in, i will only blame myself and vow to do better in future.
My strategy is FA come first, and forever FA.
I only have 2 sifu, one is KCChong, One is OTB. Take courses from these 2 sifu, and do my own practice. I believe in: the master leads you to the door, the rest is up to you.
I have 2 idol, Mr ColdEye and Bursa Dummy.
I have an enemy: FEAR
3）
冠旺乳品业务8亿求售 传KWAP有兴趣
2016-03-13 11:34
（吉隆坡12日讯）传冠旺（CANONE，5105，主板工业产品股）有意脱售乳制品生产业务的80%股权，要价8亿令吉价格，吸引了公务员退休基金（KWAP）的感兴趣。
《星报》引述消息报道，冠旺的乳制品生产业务，目前隶属于独资子公司F&B Nutrition私人有限公司（FNSB）旗下，业务活动包括生产甜味炼乳、浓缩炼乳和各种口味的牛奶。
“根据FNSB在2015财年净赚的4200万令吉，冠旺把该公司的估值设在20倍的盈利水平，由此，该业务的估值将高达8.4亿令吉，高于冠旺目前的6.956亿令吉市值。”
据悉，公司有意脱售高达80%的股权，从而取得高达6.72令吉的收入，但熟悉这宗交易的银行业者指出，实际脱售股权规模，可能会低于80%。
消息指，这宗交易是为了帮助FNSB未来数年的上市计划铺路，届时，该公司将以高于盈利20倍的水平挂牌，因此，目前是买家趁低收购的良好时机。
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