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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Tea is it the next Hidden Gem?

Tea is it the next Hidden Gem?

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1Tea is it the next Hidden Gem? Empty Tea is it the next Hidden Gem? Tue Feb 05, 2013 2:33 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
3rd quarter results are being released by some companies. Some counters are are trading at a pe of around 2.

Bogawantalawa: BOPL

quarterly earnings: RS 1.75
quarterly results annualized: RS 7
forward pe ratio: 1.87
Net assets per share: 10.98
Market Price: 12.80

metropoliton resource holding: MPRH

holding company of BOPL(67.35%)
removing the minority shareholding profit of BOPL trading at a forward pe 0f below 1.2
Net assets per share: 35
Market Price: 21

Watawala plantation: WATA

quarterly earnings: 1.21
quarterly results annualized: 4.84
forward pe ratio: 2.6
net assets per share : 14.28
Market Price : 12.80

Horana Plantation : HORA

quarterly earnings: 4.03
quarterly results annualized: 16.12
forward pe ratio : 1.61
Net assets per share : 46.94
Market price : 26

other tea based undervalued plantations yet to announce quarterly results


Talawakele plantation :TPL normally divend paid in february
Elpitiya plantation :ELPL
Kahawatte plantation : KAHA

2Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 5:28 pm

raptor


Manager - Equity Analytics
Manager - Equity Analytics
You cannot multiply one quarterly performance by 4 to get a yearly EPS forecast. You need to look at the Last Twevle Months or LTM performance which will provide a far more accurate picture of how a company has performed. The issue with your method is that if a company has 1 good quarter and 3 bad and you based your calculations on the 1 good quarter you have grossly over valued the said company. So always look at the LTM performance, in this case I assume you need to add the last quarter of the pervious financial (3M ended 31st March 2012) year to the 9M performance upto the quarter ended 31st December 2012. Then you have a far more accurate view as to how a company did over time. It also avoids instances where a company might have 1 quarter where it makes the most of its revenues from over stating performance, for e.g if a company makes a lot of sales in christmas and you use the quarter ended 31st December you will grossly over value it.

On to tea, I hear there is another wage bargaining agreement that will be negotiated in June this year, its meant to happen every 2 years so its very hard to say what will happen. Tea suffered a lot in the year 2011/2012 given the wage risers and are doing well this year and the wages haven't gone up. I think wages will go up pushing costs up and performance will be like the year 2011/2012.

If you want plantations, palm and rubber is a better bet. Margins are much higher. For example HOPL makes 75% profits from rubber but only around 25% of revenue comes from rubber.

3Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 6:30 pm

Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
A crippling tax increase was imposed on bulk tea exports, by a gazette notification on January 23rd. According to the Tea Exporters Association, the Ministry of Plantation Industries and the Sri Lanka Tea Board knew nothing of the tax-hike until informed by horrified tea-exporters

A wage hike is in the offing as well

Cheers!

4Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 7:03 pm

nimantha80


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Whatever the hidden jems don't buy anything now.Wait till march end and then think twice and if you feel ok then buy. Because you'll be able to buy lot lower.

5Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Tue Feb 05, 2013 9:43 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Plantations must always trade below their NAV value given the risky nature of the business.. Or correctly put, a certain discount to the sector PE as these are valued based on PE ratio rather than PBV.

This sector invovled risks however, For example, rubber tapping will be an issue in rainy season so plantations tend to follow seasonal effects. Imo, the last Nov-Dec season might've not been in favour for rubber plantations. Also we must understand that few seasons of high revenues can follow with less revenues in next couple of seasons..

Also its better to follow rubber + Palm in plantation sector to reduce your risk..
KGAL is the leading rubber plantation while NAMU is for Palm.. HOPL & KOTA also has a significant exposure to rubber.
Last time the wage hike issue has hit their bottom lines and KGAL cut the overheads in one go lessening their that qtr revenue. Others followed but draggin their payments for the latter part of the year as well.

Considering the NAV values posted (if true) many plantations look attractive but we gotta be selective. After all one's disadvantage is another one's advantage. When we talk about rains, power sector may have certain benefits in rainy seasons. Therefore, it could be a good idea to keep few counters in portfolios too..

But u can never say.. Even potatoes or onion will have its day Wink

6Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Wed Feb 06, 2013 4:07 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Agree with you.

@smallville wrote:

But u can never say.. Even potatoes or onion will have its day Wink

7Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Wed Feb 06, 2013 11:18 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
http://forum.srilankaequity.com/t25809-sri-lanka-s-bogawantalawa-tea-estate-profits-surge#152073

Feb 06, 2013 (LBO) - Profits at Sri Lanka's Bogawantalawa Tea Estates Plc, surged to 146 million rupees from a loss of 28 million rupees a year earlier, helped by stronger tea prices, interim accounts show.

The firm reported earnings of 1.75 rupees per share during the quarter. In the nine months to December it reported earnings of 3.28 rupees per share on profits of 274 million rupees, recovering from a loss of 199 million rupees a year earlier.
The stock closed at 12.90 rupees, up 30 cents Monday.

The nine months profits included a 37 million rupee 'fair value' gain on tree growth, according to unaudited accounts filed with the Colombo Stock Exchange.

In the nine months tea brought 2.6 billion rupees of revenues (up from 2.4 billion rupees a year earlier) and 335 million rupees of gross profits. Rubber brought just 4.9 million rupees in revenues and 462,000 rupees in losses.

The company is 67 percent owned by listed Metropolitan Resource Holdings Plc.
In the December 2012 quarter revenues rose 39 percent to 1.03 billion rupees, cost of sales rose at a slower 12 percent to 861 million rupees and gross profits increased over five times to 170 million rupees.
http://lbo.lk/fullstory.php?nid=1267249505


NOT potatoes or onions. tea will rally soon like the chikens did once.

8Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 7:59 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Tea rally is not the case here, it a plantation rally if so..

Anyways, just becuz Tea has shown some good results shares rarely run these days in CSE. its the involvement of big boys and demand can take the shares to the next level.

9Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 11:08 am

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
@smallville wrote:Tea rally is not the case here, it a plantation rally if so..

Anyways, just becuz Tea has shown some good results shares rarely run these days in CSE. its the involvement of big boys and demand can take the shares to the next level.

In my opinion it is not plantations in general it is tea based plantations not rubber.

Given the fact that US & European stocks are advancing, if rubber price too move up we may see a plantation rally in general.

10Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 11:42 am

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
If you really noted our great analyst MW said 1 year ago that tea will be the next hidden Gem.

respect you Mr. Lakshan.........

11Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 1:39 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
@Arena wrote:If you really noted our great analyst MW said 1 year ago that tea will be the next hidden Gem.

respect you Mr. Lakshan.........

Year ago wasn't the time to Enter!! Twisted Evil

12Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 2:12 pm

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
ha ha u would have bought BOPL at 7 range ELPL at 10, Madu at 9.

Now already more than 100% gone.......

13Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 2:58 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
@Arena wrote:ha ha u would have bought BOPL at 7 range ELPL at 10, Madu at 9.

Now already more than 100% gone.......

you mean 6 months ago!! Exclamation

14Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 3:16 pm

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Hayiyoooooooooooooo...........Crazy

Get the point. The analysis or the base for his prediction was the valuable thing here. See the moon. not the finger. Lol..........

tc

15Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 6:41 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
Timing Matters

16Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 7:53 pm

DKS


Stock Analytic
Stock Analytic
@Arena wrote:If you really noted our great analyst MW said 1 year ago that tea will be the next hidden Gem.

respect you Mr. Lakshan.........


See the top share holders list of MADU, MASK, BOPL.

17Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:02 pm

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Wow just now saw Mask and Madu..................He has done it remarkably. Sri lanka need these kind of value investors. All the best again............Looks MASK is the best counter to enter if wants.

18Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:47 pm

Kinm hunter

Kinm hunter
Manager - Equity Analytics
Manager - Equity Analytics
It is better to by December Co. Shares at this stage, as they declare dividend within this month. like TPL, KVAL,
would be able to enjoy healthy yield..

19Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Thu Feb 07, 2013 9:56 pm

DKS


Stock Analytic
Stock Analytic
Though earning of plantations companies are strong due to better tea prices market is not strong enough to push their share prices to the next level. But we can see strong base formation for some plantations companies (WATA,BOPL,KGAL...etc.).

Time will show us the drama. Let's wait and see......

TC

20Tea is it the next Hidden Gem? Empty Re: Tea is it the next Hidden Gem? Fri Feb 08, 2013 6:35 pm

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
Twisted Evil Twisted Evil Twisted Evil Twisted Evil Twisted Evil Twisted Evil

http://www.cse.lk/cmt/upload_report_file/723_1360316800362.pdf

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