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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » CDB managed a good EPS last quarter, but they cash in hand ...

CDB managed a good EPS last quarter, but they cash in hand ...

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ccsentha


Vice President - Equity Analytics
Vice President - Equity Analytics
cdb managed a good eps last quarter, but cash flow statement shows net cash out flow, they have had cash out flow in previous quarters as well......is this the reason why it's trading with a low P/E? will this be another twod?? as they don't seem to have cash ne....

Fresher


Moderator
Moderator
true. but good if you read every item and understand why. For me, I don't see any 'issue'

Also remember it's a bank

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

Good answer.

npp wrote:true. but good if you read every item and understand why. For me, I don't see any 'issue'

Also remember it's a bank

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
If a bank keep its money with them that is bad.
If they advance them to the customers as much as possible that will generate income. In fact, that is their business.

I also cannot see any problem in the reports.

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
What you are observing is typical of a finance company that has grown its loan book by 50% for about two years in a row. The cash problem will most likely be solved with a debenture not a rights issue.

What CDB needs to ensure is that the loans disbursed don't start to tank and that expenses are kept low. If this happens .... well that's another story

What you should observe:
1. CDB has parked 800M/= in commercial banks. Up from 90M/=. Why? Because of CAR requirements for CB.
2. Net fund advance to customers has increased by 500M/= in 9 months. Is this high or low for you?
3. Bank overdraft has increased by 400M/=. Why?

It is always good to have a cash positive statement.

The time to buy CDB is when the risk profile decreases. This occurs when the lending portfolio becomes self financing. That is you can close the portfolio and still pay customers, staff, overheads etc. Any new deposits and new loans become a luxury and hence add more value. This is what PLC has become.



hettdas

hettdas
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
npp wrote:true. but good if you read every item and understand why. For me, I don't see any 'issue'

Also remember it's a bank

Who says it is a "Bank"

It is " Citizens Development Business Finance PLC" . It is a Finance Company Very Happy

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@hettdas wrote:
npp wrote:true. but good if you read every item and understand why. For me, I don't see any 'issue'

Also remember it's a bank

Who says it is a "Bank"

It is " Citizens Development Business Finance PLC" . It is a Finance Company Very Happy

Its funny you said that. During pre ipo discussion in the last minute we were told by a director that it didn't have banking licence - a lot of us thought it was a bank. We were told it's name is now Citizen's Development Bank. Why not CDBF.
The room went silent for about 5 minutes. Shocked

After wards we realised that it was not Ceylinco Savings Bank - taken by MBSL. In hindsight the IPO price would have been more.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Rainmaker,
As you seems a lot knowleadble with CDB let me ask something?

Do you think CDB will go down or be a further growth company?


Even well managed entities can have financial short comings at some
point. What we need to worry is whether the management is trustworty and
reputable andwhat they do to resolve the issues.


@rainmaker wrote:

The time to buy CDB is when the risk profile
decreases. This occurs when the lending portfolio becomes self
financing. That is you can close the portfolio and still pay customers,
staff, overheads etc. Any new deposits and new loans become a luxury and
hence add more value. This is what PLC has become.





When that time comes,do you think CDB price will be same or much lesser? Will there be big possibility that it can be more?

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I can't comment on CDB's share price as a buy/sell recommendation. The share price performed better than expected on the first day (if you remember). Institutional investors rarely buy into finance companies and hence retailers will carry the stock.
Apart form short term fluctuation, CDB should get enough support to be ok.

I generally don't recommend finance company shares - note how foreign investors stay away. What I do recommend is good stock picking in firms that totally dominate the market.




Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
I think you should re-read what I asked . It it not really about
buying/ selling and share price. If we wait till everything to fall in
place ( like what you expected for CDB) it might take years. By that time the train might have run. Shares prices run ahead with expectation. Important thing is do you trust the management and are they strong enough to re structure in a crisis and come out stronger.


You many not be fan of fianance ( I see it too) . It is okay. But as you have talked a lot about CDB , I would like you to comment on other companies in the sector too so redears can do a comparison. At some point even LFIN had serious issues. We remember what LFIN was under vanik influence. Now? It was turned around with good management. Even few years ago their gearing was high to worrysome level . (even if one does not analyse too deep) But the present cash balance situation is turning vey healthy and their ratings are improving. LFIN is gradually giving a run for CFIN for future leader position ( might take a lot of years more) in the sector as far as private companeis are concerned.

What do you see in companies such as COCR and VFIN then.

As immediately troubled companies I see TFC , CIFL in the front. TFC is taking far too long to recover, I rememebr in 1 quarter they looked like they are about to turn around, then again in a hole. CDB is not troubled as of now and i see no big issues.



Now about picking market dominant shares, Yes it is good and need to have them in our basket. But we should have short , medium and long term shares and also include large, medium and small caps. Share market tend to run in step in recovery. We saw what happened during 4700-600o run. It was not market dominant shares that had to biggest recoveries always.

So in the future if you can also give your insight into penny sotcks, small caps , mid caps etc it would be good.

Anyway thanks for your inputs so far.











@rainmaker wrote:I can't comment on CDB's share price as a buy/sell recommendation. The share price performed better than expected on the first day (if you remember). Institutional investors rarely buy into finance companies and hence retailers will carry the stock.
Apart form short term fluctuation, CDB should get enough support to be ok.

I generally don't recommend finance company shares - note how foreign investors stay away. What I do recommend is good stock picking in firms that totally dominate the market.




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