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කොළඔ කොටස් වෙළඳපොළේ වංශකථාව
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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » TOUCHWOOD capitalization of reserves

TOUCHWOOD capitalization of reserves

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81TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 8:33 am

TortoizePlus


Manager - Equity Analytics
Manager - Equity Analytics
@Chinwi wrote:I think you have missed the important point in this announcement.

This capitalization is done using revaluation of lands only. They have not used the revaluation of living assets for this, which is under question in the law case. In that sense its good.

Mean time there is no real cash is involved in this capitalization. No cash in their reserves you can not expect a dividend from this company. If they give a such, it is like Sakvithi paying B from A. ( I think last year they paid 10 cents)

They show over billion in y/y revenue and only 20% of that figure is real cash.
Even that is obtained by selling plantation agreements to the investors and not from selling any real timber. 80% of the shown revenue is just revaluation of trees including 2-3 year old baby sandalwood plants.

Very important thing is that their cash outflow by admin & selling expenses is higher than their real cash inflow. That may be the reason for the accumulating losses in their income statements although they show positive EPS & profit at bottom line.

You can see this in 5 year summary. Page 7 of Annual report, Retained losses accumulated from 11 million in 2008 to 364 mil in 2012.
http://www.cse.lk/cmt/upload_report_file/631_1346902757838.pdf


Again, If you just glance the revenue line you may see their revenue has grown from 593 million in 2008 to a healthy fig of 1.19 billion in 2012.
That is actually the growth of trees and not transactions in cash as in other businesses.

We know any new plantation company has to face this phenomenon. For tea, palm oil or coconut maturing time is shorter and withing 4-5 years we can get in to a healthy position. When you deal with timber it is different.

I just pointed out some observations (repeated) and do not wanted to come into any argument here.
Somehow I hope they will maintain this journey until they get real cash by felling actual trees. ( after how many years?)
The time period between that and this is critical.

Thanks chinwi, for the great insight of accounting.

I bought TWOD only for trading purposes. I don’t think it is a good counter for buy and hold like VONE and REEF.W19.

Btw, I can remember you had a TWOD lot bought at 35. Did you sell that? One time, it was a risk free investment to you and mono (long time no see friend).

82TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 8:36 am

TortoizePlus


Manager - Equity Analytics
Manager - Equity Analytics
@aj wrote:So Touchwood reevaluated the land, say 1 million land was given 2 million label add that to books, do nothing else, no business, no revenue, no real cash, nothing, then make more new casino chips out of that and doled them out for the players to play. Smile

Your point is valid for other businesses but not for the business that TWOD do.

83TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 8:38 am

aj


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I thought trees (and may be the piece of land) of touchwood business are owned by the customers who buy the tree lots as investment like the depositors who put money in the bank. I thought touchwood was just the "gardener" not the owner of the trees.

84TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 9:03 am

Chinwi


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@ccsentha wrote:
When reserves are capitalized, NAVPS will remain same isn't it or come down little? bcoz certain amount of the reserves is going to be transferred into capital hence increasing the Net assets a little, anyway NAVPS will come a bit down as bonus is valued at 8.75, isn't it??

මේ කිසිවක් වෙන්නේ නැත.
මේ ක හරියට උඩ සාක්කුවේ තුබුන සල්ලි වලින් කොටසක් යට සාක්කුවේ තුබුන සල්ලි වලට එකතු කරනවා වගේ වැඩක්. එකතුව, වටිනාකම සමානයි.
එකම වෙනස උඩ සාක්කුවේ සල්ලි අපිට ඕන වෙලාවක ණය ගෙවන්න එහෙම පිටට දෙන්න පුළුවන්. යට එකෙන් ගන්න එක ලේසි නැහැ. බංකොලොත් උනොත් පුළුවන්. ඊට අමතරව capital reduction වගේ කරනවා.
8.75 කියන ගාන කොටස් මිල හෝ NAVPS සඳහා අදාල වෙන්නේ නැහැ.
එය ඩිරෙක්ටරල සංචිත වලින් ප්‍රාග්ධනයට මාරු කරන්න තීරණය කල මුළු මුදල් ප්‍රමාණය බෝනස් දෙන කොටස් ප්‍රමාණයෙන් බෙදුවම එන ගානක් විතරයි. ඒ අය එම මුදල් ප්‍රමාණයම මාරු කරලා 1 : 1 බෝනස් දෙන්න තීරණය කලා නම් එම ගාන 4.40 වෙන්න තිබුන. 1: 10 ක් දුන්න නම් සත 44 ක් වෙනවා.
මෙහෙම වෙන්නේ නව සමාගම් පනත අනුව par value එකක් (නාමික අගයක්) නැති නිසා.

( 2007-07 පනත වගන්තිය 49 (4) - සමාගමක කිසිදු කොටසකට නාමික හෝ සමක අගයක් නොතිබිය යුතුය.)

නමුත්, කලින් පනත අනුව රුපියල් 10 කොටස් වැනි සෑම කොටසකටම නාමික අගයක් තිබුණි. එවිට මෙලෙස මාරු කළ හැකි වුයේ කොටසේ නාමික අගයට සමාන මුදලකි. එනම් කොටස් ලක්ෂයක් බෝනස් දෙනවා නම් ප්‍රාග්ධනය වෙත ලක්ෂය x රු. 10 = දස ලක්ෂයක් මාරු කළ යුතුයි.

Note :
DFCC බැංකුව ( DFCC . N ) සංස්ථා ගත කර ඇත්තේ සමාගම් පනත මත නොව වෙනම පනතක් මත වන නිසා එහි තාම ක්‍රියාත්මක වන්නේ පැරණි ක්‍රමයයි. එනම් නව 2007-07 සමාගම් පනත එයට අදාල නැහැ. බෝනස් දෙන්නෙත් පැරණි ක්‍රමයට.


NOTE 2 : ඉහත සාක්කුවෙන් සල්ලි මාරු කරන ලෙස දැක්වුයේ සමස්තය. නමුත් මේ TWOD එකේ නම් සල්ලි වෙනුවට උඩසක්කුවේ තිබුන ඉදිරි දාතම සහිත චෙක් එකක් කිව්වා නම් වඩා හොඳයි.

85TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 9:15 am

Chinwi


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@TortoizePlus,

As you said TWOD was a trader friendly stuff for many years. It did well with me in the initial years. Now I have few thousands, a small qty. compared to what I had .

I do not like to criticize this share. Because it can become a super blue chip one day, IF they survive next high risk decade .

86TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 9:36 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@aj wrote:I thought trees (and may be the piece of land) of touchwood business are owned by the customers who buy the tree lots as investment like the depositors who put money in the bank. I thought touchwood was just the "gardener" not the owner of the trees.

They have secured the ownership by buy back agreements. In practical it is very difficult to go inside their plantation and do harvesting , marketing and selling few trees owned by you. Most of the investors let them to do it.

Agreed price is much less than anticipated selling price in decades to come.
Hence they (investors in shares) are to get more benefit than fund suppliers (investors in tree lots).

87TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 03, 2012 9:48 am

kalum


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Hats off to Chinwi. You have done a grate job along this topic. Thanks You! sunny

88TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Sun Oct 07, 2012 5:54 am

market bull

market bull
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Yes they have clearly mentioned it.it should be approved in the meeting.
@Chinwi wrote:I think you have missed the important point in this announcement.

This capitalization is done using revaluation of lands only. They have not used the revaluation of living assets for this, which is under question in the law case. In that sense its good.

Their total shareholdings 71M. They have nearly 200M positive cash flow.But problem is, it is mainly from funds raised from right issue.

@Chinwi wrote:
Mean time there is no real cash is involved in this capitalization. No cash in their reserves you can not expect a dividend from this company. If they give a such, it is like Sakvithi paying B from A. ( I think last year they paid 10 cents)


They have transferred some unrealized gains arising from the fair value of biological assets from retained earnings to capital gain reserve. I believe it is a good thing rather than keeping it under retained earnings.They use it for distribution of profit once it is realized in cash.

Their total capital reserve 2233.9M. But they have only 364.3M retained earning losses.They can easily sett off once it is realized.

Yes their admin & selling exp nearly 200M.I think they use the right issue money for these expenses.but they can get get some real cash money from vanila in very near future.

@Chinwi wrote:
Very important thing is that their cash outflow by admin & selling expenses is higher than their real cash inflow. That may be the reason for the accumulating losses in their income statements although they show positive EPS & profit at bottom line.


It should be because every year they are transferring retained earning profit to mainly capital reserve a/c.may be due to court case.

Transferred amount from
Retained earning to capital reserve & other resrve 2011=361.3M
2012=283.2M
no wonder why we can see 364M retained earning losses in a/cs.

@Chinwi wrote:
You can see this in 5 year summary. Page 7 of Annual report, Retained losses accumulated from 11 million in 2008 to 364 mil in 2012.
http://www.cse.lk/cmt/upload_report_file/631_1346902757838.pdf


but I think they can get at least 10% real cash from revenue by selling vanila. As per valuer Time period to obtain harvest is 4th year from date of planting.A mature vanilla vine would give a total harvest of 15Kg during its maturity.1kg=1280

Planted vines 2008= 2992
2009= 3337
2010=19197(Value more than 350M)

@Chinwi wrote:
They show over billion in y/y revenue and only 20% of that figure is real cash.
Even that is obtained by selling plantation agreements to the investors and not from selling any real timber. 80% of the shown revenue is just revaluation of trees including 2-3 year old baby sandalwood plants.

Again, If you just glance the revenue line you may see their revenue has grown from 593 million in 2008 to a healthy fig of 1.19 billion in 2012.
That is actually the growth of trees and not transactions in cash as in other businesses.



Really good observations.What i finally think,if they get income from vanilla as expected,they can cover their day to day expenses.no need more right issues.Gains from biological assets are covered from SLAS.If they will win the court case,they can continue this practice.
There trees are valued once in a three years time (3 Years) to ensure that the book values match the current market values.If it is not match,they have to make entries accordingly.

I believe they maintain their revenue over 1B level in coming years also because this is a circle,they can plant new tress ,get the discounted fair value in to a/c & can set off against reliable losses if it is needed.

our EPF people also doing the same thing.just imagine If no inflow for EPF,what can be the result.
@Chinwi wrote:
We know any new plantation company has to face this phenomenon. For tea, palm oil or coconut maturing time is shorter and withing 4-5 years we can get in to a healthy position. When you deal with timber it is different.

I just pointed out some observations (repeated) and do not wanted to come into any argument here.
Somehow I hope they will maintain this journey until they get real cash by felling actual trees. ( after how many years?)
The time period between that and this is critical.



89TOUCHWOOD capitalization of reserves - Page 5 Empty TWOD bonus issue Wed Oct 31, 2012 5:24 pm

vacna

vacna
Equity Analytic
Equity Analytic
Hi, hope someone could help me, I rcvd a letter from TWOD about bonus issue of 1:2 at the rate of 8:75 and about the general meeting. in case of right issues we usually get a note saying on or before I have to deposit this amount which I used to send the cheque to my broker where things get settled smoothly. but in this twod letter nothing of that sort.. can any one tel me whether we need to purchase those at 8:75 if so when and where to send the cheque. if not how to proceed.
also what could be the after bonus price in the market.
Hope some one will be generous to answer

90TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 31, 2012 5:29 pm

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I do not think(I am not sure) you need to pay for bonus issue.

91TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 31, 2012 5:43 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
vacna,

See below. You will find answers and complete info.
http://forum.srilankaequity.com/t23364p50-touchwood-capitalization-of-reserves#140093

92TOUCHWOOD capitalization of reserves - Page 5 Empty Re: TOUCHWOOD capitalization of reserves Wed Oct 31, 2012 7:58 pm

Fresher


Moderator
Moderator
in short - you don't have to do anything
on XC date, you will receive the additional shares and price will adjust accordingly so that your total value will remain same.

For more info, refer link by slstock since this has been discussed in detail.

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