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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Renuka Holdings

Renuka Holdings

+7
The Alchemist
CSE.SAS
Antonym
Kumar
Jana1
knockknobbler
awije
11 posters

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1Renuka Holdings Empty Renuka Holdings Thu Mar 28, 2013 11:11 am

awije


Stock Analytic
Stock Analytic

Hi, could I know if this is a good share to buy. Seems undervalued and also both voting and non voting seem to have bottomed out.

Thanks for any advise.

2Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 12:16 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics

no idea to tell, whether it is good share to buy or not.
surely, you must be having some good reasons ,to see these are undervalued.
If you mention those, probably others (including myself) may be able to comment on the basis of judgement.

3Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 12:27 pm

Jana1


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

knockknobbler wrote:no idea to tell, whether it is good share to buy or not.
surely, you must be having some good reasons ,to see these are undervalued.
If you mention those, probably others (including myself) may be able to comment on the basis of judgement.

To identify undervalue counter, you only need to see FS and its sector. Not need other people comments over which others evaluate ..

@awije
For me this is a one of best counters at CSE. I mean fundamentally, as per its sector valuation and future prospect. Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

4Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 2:34 pm

Kumar

Kumar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

Jana1 wrote:
knockknobbler wrote:no idea to tell, whether it is good share to buy or not.
surely, you must be having some good reasons ,to see these are undervalued.
If you mention those, probably others (including myself) may be able to comment on the basis of judgement.

To identify undervalue counter, you only need to see FS and its sector. Not need other people comments over which others evaluate ..

@awije
For me this is a one of best counters at CSE. I mean fundamentally, as per its sector valuation and future prospect. Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

Good point.

5Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 3:03 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics

[quote="Kumar"]
Jana1 wrote:
knockknobbler wrote:

@awije
For me this is a one of best counters at CSE. I mean fundamentally, as per its sector valuation and future prospect. Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

Good point.

Unable to understand the "Good Point " here.
How come , changing the sector classification by SEC ,will result in .. "Then only people will chase..."
I can understand some temporary bump. But will there be permanent upward price revision , just because change of categorization, without any change within the company ?
Do SEC investors that immature ?

6Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 3:20 pm

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics

knockknobbler wrote:
Do SEC investors that immature ?
Some persons who trade on the CSE are merely chasing rainbows, hoping to make a quick buck. Their investment horizon is typically short term. To answer your question: Yes, some of them are immature and fickle-minded.

7Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 3:26 pm

Jana1


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

[quote="knockknobbler"]
Kumar wrote:
Jana1 wrote:
knockknobbler wrote:

@awije
For me this is a one of best counters at CSE. I mean fundamentally, as per its sector valuation and future prospect. Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

Good point.

Unable to understand the "Good Point " here.
How come , changing the sector classification by SEC ,will result in .. "Then only people will chase..."
I can understand some temporary bump. But will there be permanent upward price revision , just because change of categorization, without any change within the company ?
Do SEC investors that immature ?

Have you ever read RHL Income statement? Do you know its NAVP of RHL? Have you noticed there Turnover increment due to acquisition of subsidiaries? Then come to the point.. Do any Diversified holdings trade at 60% of its NAVP share in Mainboard? Most of them are atleast 1.5 times of its NVAPs. You got to think about this. And also remember RHL platation exposure is almost null and very good export generator. So few Diri savi board diversified holdings which trade at low price cannot be a proxy for RHL.

Definitely there should be a Jump when it becomes foreigners' kid. People always forget past within 2-3 months then they entirely forget where it comes from.
I never heard SEC investors.. Can you buy shares from SEC? According to investopedia 99% of investors are followers and badly affected by emotions. Smarts are just few.

8Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 3:28 pm

CSE.SAS

CSE.SAS
Global Moderator

Antonym wrote:
knockknobbler wrote:
Do SEC investors that immature ?
Some persons who trade on the CSE are merely chasing rainbows, hoping to make a quick buck. Their investment horizon is typically short term. To answer your question: Yes, some of them are immature and fickle-minded.

Well said Antonym Smile

9Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 4:50 pm

awije


Stock Analytic
Stock Analytic

Jana1 wrote:
To identify undervalue counter, you only need to see FS and its sector. Not need other people comments over which others evaluate ..

@awije
For me this is a one of best counters at CSE. I mean fundamentally, as per its sector valuation and future prospect. Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

Thank you Jana1, I am not an expert and takes me a lot of time to understand the FS but looking at RHL to me it seems to be trading at a discount when compare with the sector pe, nav, pbv also last quarter earnings are good. I wanted to see the reaction of others before buying. Thanks again.

10Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 5:12 pm

Jana1


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

awije wrote:
Jana1 wrote:
To identify undervalue counter, you only need to see FS and its sector. Not need other people comments over which others evaluate ..

@awije
For me this is a one of best counters at CSE. I mean fundamentally, as per its sector valuation and future prospect. Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

Thank you Jana1, I am not an expert and takes me a lot of time to understand the FS but looking at RHL to me it seems to be trading at a discount when compare with the sector pe, nav, pbv also last quarter earnings are good. I wanted to see the reaction of others before buying. Thanks again.

I think you got to be caution with last year EPS-5. That came from property revaluation and it is one off. It will not generate again. Only one quarter of the year they do revaluation. Annual EPS of 6-7 is more appropriate to RHL at present condition. Once mkt is up they will probably give rights to take money to invest in mkt thereafter their profit would be over 10. That is my understanding about RHL.

11Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 6:24 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics

[quote="Jana1"]

Have you ever read RHL Income statement? Do you know its NAVP of RHL? Have you noticed there Turnover increment due to acquisition of subsidiaries? Then come to the point.. Do any Diversified holdings trade at 60% of its NAVP share in Mainboard? Most of them are atleast 1.5 times of its NVAPs. You got to think about this. And also remember RHL platation exposure is almost null and very good export generator. So few Diri savi board diversified holdings which trade at low price cannot be a proxy for RHL.


If you say RHL price will improve because of company's performance ,strength ..I agree with you. But earlier you mentioned,
Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

@ Kumar worte ...it is a good point ...And that's the point I commented.
Do you still believe that .........there be permanent upward price revision , just because change of categorization, without any change within the company ?

12Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 7:23 pm

Jana1


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

[quote="knockknobbler"]
Jana1 wrote:

Have you ever read RHL Income statement? Do you know its NAVP of RHL? Have you noticed there Turnover increment due to acquisition of subsidiaries? Then come to the point.. Do any Diversified holdings trade at 60% of its NAVP share in Mainboard? Most of them are atleast 1.5 times of its NVAPs. You got to think about this. And also remember RHL platation exposure is almost null and very good export generator. So few Diri savi board diversified holdings which trade at low price cannot be a proxy for RHL.


If you say RHL price will improve because of company's performance ,strength ..I agree with you. But earlier you mentioned,
Still this is investment holding but sooner it will be changed as diversified holdings. Then only people will chase...

@ Kumar worte ...it is a good point ...And that's the point I commented.
Do you still believe that .........there be permanent upward price revision , just because change of categorization, without any change within the company ?

Yes. RHL price will improve because of company's performance. They just bought many companies through subsidiaries ( Coco, RAL)- what will happen in 1-2 years time when those companies' profit accumulate? It will become cash rich company and there is no exposure to finance, plantation and motor sector which perhaps get hammered within next two years. Higher the depreciation of rupee, higher RHL profit is- Because mainly export of food items which always consistently do well through out the year. Nowdays their selling and distribution cost is almost 15 times increased that is a good sign there aggressively marketing their products. In addition to their sound bottom line, Rajiah family is very good stock investors. During 2011 they generated around Rs-7 per share from stock investing. For that year their income was more than 13 along with property revaluation. Thing about in two years time if they again make same profit with bottom line boost it could be around 20. Are u afraid of buying this share if it comes 25 now which probably their one year income. Think about other fact which I already disclosed as becoming diversified holding. And another positive factor now they are making about 6 bn T/O ( came from 2.5 bn 18 months befr), in two years time it could be around 15 bn then it will become foreigners interest. Still I am collecting but I disclosed all possible factors to you. Hope you are not a big fish...Not need to rush to buy it will come bit down if this mkt continues. There is another big quantity from MBSL for selling probably they may need to come less than 28 to dispose but they r seeking around 32.

13Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 8:14 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics

@ Jana 1
You have taken lot of time and effort. Thanks very much.
As you have hoped , I am not a "big fish". However this type of company ( family held and managed, mostly trading, in stock investing) will not fit into my line of thinking. Any way the information disclosed, and your way of thinking would be helpful to anyone to look at this company, closely.

Actually my concern in this discussion,was on a different matter. As you have implied there is a possibility that the company would be transferred to "Diversified Holding " sector. It' like a big upgrading.
To what extent , that factor will affect the company share price ?
I am wondering ..... whether people will chase the share after that happens , and whether that's a rational decision.

14Renuka Holdings Empty Re: Renuka Holdings Thu Mar 28, 2013 9:17 pm

Jana1


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

knockknobbler wrote:@ Jana 1
You have taken lot of time and effort. Thanks very much.
As you have hoped , I am not a "big fish". However this type of company ( family held and managed, mostly trading, in stock investing) will not fit into my line of thinking. Any way the information disclosed, and your way of thinking would be helpful to anyone to look at this company, closely.

Actually my concern in this discussion,was on a different matter. As you have implied there is a possibility that the company would be transferred to "Diversified Holding " sector. It' like a big upgrading.
To what extent , that factor will affect the company share price ?
I am wondering ..... whether people will chase the share after that happens , and whether that's a rational decision.

I am not sure why you keep away from family owned business. Few examples in cse Pestonjee family- Abans, Carson & buki-Selvanathan family, etc. are well manged companies.Only few worst from family owned but you can easily tag then from past records say Tess agro and East. Then why do u keep away from family owned? Just keep eye on good companies.

My concern about diversified is different. RHL is trading at low as that fall in investment trust. In cse investment trust means they invested their significant portion in cse and remaining as minority shareholders. whenever mkt is down its NAV price will slash. But for RHL case is different. They have controlling stake so they can report its subsidiaries' TO and portion of assets to their IS. The effect of mkt fluctuation is minimal. Still investors value this share as investment trust, so they value less but its instrict value is higher. When its sector changes from investment to diversified every1 will realise... Hope this will help uu...

15Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 12:10 am

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Jana1 wrote:
knockknobbler wrote:@ Jana 1
You have taken lot of time and effort. Thanks very much.
As you have hoped , I am not a "big fish". However this type of company ( family held and managed, mostly trading, in stock investing) will not fit into my line of thinking. Any way the information disclosed, and your way of thinking would be helpful to anyone to look at this company, closely.

Actually my concern in this discussion,was on a different matter. As you have implied there is a possibility that the company would be transferred to "Diversified Holding " sector. It' like a big upgrading.
To what extent , that factor will affect the company share price ?
I am wondering ..... whether people will chase the share after that happens , and whether that's a rational decision.



I am not sure why you keep away from family owned business. Few examples in cse Pestonjee family- Abans, Carson & buki-Selvanathan family, etc. are well manged companies.Only few worst from family owned but you can easily tag then from past records say Tess agro and East. Then why do u keep away from family owned? Just keep eye on good companies.

My concern about diversified is different. RHL is trading at low as that fall in investment trust. In cse investment trust means they invested their significant portion in cse and remaining as minority shareholders. whenever mkt is down its NAV price will slash. But for RHL case is different. They have controlling stake so they can report its subsidiaries' TO and portion of assets to their IS. The effect of mkt fluctuation is minimal. Still investors value this share as investment trust, so they value less but its instrict value is higher. When its sector changes from investment to diversified every1 will realise... Hope this will help uu...

Actually, Jana1 has bought up a very interesting point !

Firstly i cannot understand how Vone, FLCH & BIL are considered Diversified Holding Companies when RHL is considered an Investment Trust ?

Secondly, how come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (p/e).

Thirdly, due to Accounting convention - over 20 % holding (termed associate company - can equity account), - over 50 % holding (termed subsidiary - can consolidate ), earnings "appear" larger than Investment Trusts who cannot do so if they have less than 20 % stake in an investee company.
Now, if we consider "look through" earnings concept that Buffet always talks about (especially for Berkshire Hathaway investments less than 20 %), some of the Investment Trusts earnings will surprise you and p/e's will look attractive too (not only discounted assets).
btw, "Look Through Earnings" means that for eg - say you own 5 % of Company A. you get to account for 5 % of Company A Earnings and Net Assets.

I find it ironic that CIT (an Investment Trust) NAV over 240 is trading at 100, and owns approx 18 % of CFLB (which is an Diversified Holding) and cannot equity account for CFLB earnings. but it would be ok for CFLB to trade at a premium to its asset value since its a Diversified Holding. Same with GUAR (NAV around 250, trading at 160) with 80 % of portfolio consisting of BUKI, JKH & COMM bank, and BUKI & JKH which are Diversified Holdings trading over their book values !

16Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 12:20 am

chandikahw


Stock Trader

Another small point: RHL was awarded one of the best (Under 1 billion or some thing...) companies by.. (I cannot remember)... Pls verify this, and comment on its significance.

17Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 2:07 am

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics

The Alchemist wrote:
...How come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (P/E)...

I find it ironic that CIT (an Investment Trust) NAV over 240 is trading at 100, and owns approx 18 % of CFLB (which is a Diversified Holding) and cannot equity account for CFLB earnings. But it would be ok for CFLB to trade at a premium to its asset value since its a Diversified Holding. Same with GUAR (NAV around 250, trading at 160) with 80% of portfolio consisting of BUKI, JKH & COMM bank, and BUKI & JKH which are Diversified Holdings trading over their book values!
Opportunities come disguised as ironies/anomalies sometimes.
I believe that, over time, the valuation gap between Diversified Holdings and Investment Trusts will narrow.
To profit from such opportunities, one necessarily needs to have a long term perspective.

Another anomaly, another opportunity?
In one country that is growing at 3%, the market is hitting new highs and trading at a P/E of 15.5.
In another country that is growing at 6.25%, the market trades at a P/E of 11.4.

18Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 9:11 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics

The Alchemist wrote:
Jana1 wrote:
knockknobbler wrote:@ Jana 1

..

Actually, Jana1 has bought up a very interesting point !

Firstly i cannot understand how Vone, FLCH & BIL are considered Diversified Holding Companies when RHL is considered an Investment Trust ?
............
Secondly, how come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (p/e).
..........
.......................

@Alchemist
Good , that you also have intervened here.
Wish to make few comments on issues you have raised.

Firstly i cannot understand how Vone, FLCH & BIL are considered Diversified Holding Companies when RHL is considered an Investment Trust ?
No idea about the basis of CSE sector classification. I also find this classification is absurd, because it is observed that companies within a particular Sector is vastly different in their scope, nature of business, size, market penetration etc. Forget about BFI or Diversified Sectors (where this mismatch is clearly visible), even seemingly uniform Manufacturing sector, companies producing cables, cement, tiles, tyres etc, are dumped together. These different industries have different cost structures, margins, capital investment , ROI, etc. Main reason for CSE , may be there are one or two companies in this different industries. But the question arises when someone compare a company performance /indicators with the sector performance /indicators. I find this, utterly misleading .
Even in this thread, there is an opinion to judge a company (undervalued /overvalued ) comparing to Sector indicators. In most Broker Research Reports this comparison of Company vs Sector, is the primary basis for buy/sell recommendation. Even reputed Research firms make comments on this comparison, probably going by their experience in Markets in developed countries, forgetting about the fundamental differences in companies within a particular sector of CSE.

Secondly, how come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (p/e).
As I understand , this indicates the limitations of mathematical computations/ forecasting techniques like, Intrinsic value, NAV, P/E multiplies in judging market prices. There is no THEORY to say these are the ultimate indicators to determine / forecast market prices and there are STRONG opinions to contrary.

Sorry, not knowledgeable in Accounting aspects or familiar with company financials , to comment on third and fourth issues.

19Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 9:38 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

There is a very good reason why investment trusts trade at discounts. It is not uncommon and also occurs in the UK. Just google investment trust trading at discounts and see the number of hits that come up.

The primary reason is that a lot of the investment trusts are not managed to optimise shareholder returns. Closed investment trusts have to capitalise their gains and return it via dividends and buybacks.

What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride.

-------------------------------------------

Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units.

20Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 10:17 am

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics

An investment trust is like a box containing shares; the trust manager can buy or sell these shares, with the long term objective of maximizing profit. To my simple mind, the value of the box is equal to the value of the shares.

A holding company is like a box containing business units. The Board of Directors can invest in or divest these business units, with the long term objective of maximizing profit. Same difference: The value of this box is equal to the value of the business units.

PS:
1. Business units (and their shares) are valued based on their future prospects; DCF is my favorite valuation tool.
2. I could never fully appreciate the concept of controlling premiums.
3. Historically most investment trusts have traded at a discount. But I don't understand why you would pay less for the box than you would for its contents.

21Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 11:21 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Antonym wrote:An investment trust is like a box containing shares; the trust manager can buy or sell these shares, with the long term objective of maximizing profit. To my simple mind, the value of the box is equal to the value of the shares.

A holding company is like a box containing business units. The Board of Directors can invest in or divest these business units, with the long term objective of maximizing profit. Same difference: The value of this box is equal to the value of the business units.

PS:
1. Business units (and their shares) are valued based on their future prospects; DCF is my favorite valuation tool.
2. I could never fully appreciate the concept of controlling premiums.
3. Historically most investment trusts have traded at a discount. But I don't understand why you would pay less for the box than you would for its contents.

Yes this is what I said. But the trusts are not as well managed as the business units. If they were they would be capitalising gains and returning it to the shareholders. They will go for a rights if they need capital for another great opportunity. This is how it should work!

If this does not happen then the dividends from investments will be used up by management fees and the capital gains may never be realised in a down trend.



Controlling premiums are a fact of life. Companies are governed according to the Articles of Association and as long as those provisions do not break the Companies Act and the Takeover Act then the Articles can be held up by any court.

A controlling stake gives you the ability to alter the Articles and control the Board of Directors i.e. have provisions where shareholders of more than 10% can appoint directors. Apart from that the 10% holder can also give notice for an EGM and sack the board if more than 50% in the room are willing to accept it. Normal turnout is around 60% of the shareholders and hence that is why 30% is the mandatory offer level.

22Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 12:18 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

[quote="rainmaker"]There is a very good reason why investment trusts trade at discounts. It is not uncommon and also occurs in the UK. Just google investment trust trading at discounts and see the number of hits that come up.

The primary reason is that a lot of the investment trusts are not managed to optimise shareholder returns. Closed investment trusts have to capitalise their gains and return it via dividends and buybacks.

What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride.

-------------------------------------------
Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units.
[quote="rainmaker"]


@Rainmaker - According to you, there is a very good reason why investment trusts trade at a discount and the primary one is that they are not managed to optimize shareholder returns.
Why are they not managed to optimize shareholder returns ? The mantra for all companies is to maximise shareholder returns. Thats the whole point. For eg companies like CINV & GUAR are 10 baggers todate even in this slump from 4 years ago. They have created shareholder value through
capital gains, splits, bonuses, discounted rights and share repurchases.
At this point, worth clarrifying that their are 2 types of Investment Trusts i.e. Open ended and closed ended. The type we are referring to are open ended i.e. CIT, CFI, CINV, GUAR, NAMAL etc.
The close ended ones are Unit Trusts / Mutual Funds etc. I think you are confusing the term "trust" again. In our local context, all our Investment Trusts are Investment holding companies and have the ability to purchase or dispose business units or minority holding stakes. Weather it is a Investment Trust or Investment Holding company (the same), we are comparing this to a Diversified Holding Company (JKH, HEMAS, CARSONS, CFLB etc and are trying to figure out weather the premiums / discounts currently seen, are warranted, especially for minority shareholder i.e. you and me (and not controlling Interests).

" What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride."
The future prospect of an Investment Trust (or Holding company) depends on what underlying securities it holds in its portfolio. there are 4 sources of Income, Dividends, Interest Income, Capital gains and Share of associate company profit (if it owns over 20 % stake). If the underlying securities in the portfolio does well, then dividends and capital gains accrue (same as to the holder of a minority stake in a diversified holding company). In fact, the distinct advantage is that a Investment holding company or trust is more "diversifed" than even the diversified holding companies business units and we all know the diversification benefits in stock / company holdings.

" Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units."

All 3 statements are incorrect. Investment Trust = Investment Holding Company is different to Diversified Holding Company. All have to ability to buy / sell minority or controlling stakes if its their strategy or plan. controlling stakes have controlling premiums for controlling interests (and not you and me - minority interests). The holding company's debt level is the sum of the parts of the individual business units. it cannot be any other way !

@Knocknobbler - Very good points. very relevant and worth reading again.

@ Antonym - As usual, you hit the nail right on the head !










23Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 1:50 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

[quote="The Alchemist"][quote="rainmaker"]There is a very good reason why investment trusts trade at discounts. It is not uncommon and also occurs in the UK. Just google investment trust trading at discounts and see the number of hits that come up.

The primary reason is that a lot of the investment trusts are not managed to optimise shareholder returns. Closed investment trusts have to capitalise their gains and return it via dividends and buybacks.

What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride.

-------------------------------------------
Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units.
rainmaker wrote:

@Rainmaker - According to you, there is a very good reason why investment trusts trade at a discount and the primary one is that they are not managed to optimize shareholder returns.
Why are they not managed to optimize shareholder returns ? The mantra for all companies is to maximise shareholder returns. Thats the whole point. For eg companies like CINV & GUAR are 10 baggers todate even in this slump from 4 years ago. They have created shareholder value through
capital gains, splits, bonuses, discounted rights and share repurchases.
At this point, worth clarrifying that their are 2 types of Investment Trusts i.e. Open ended and closed ended. The type we are referring to are open ended i.e. CIT, CFI, CINV, GUAR, NAMAL etc.
The close ended ones are Unit Trusts / Mutual Funds etc. I think you are confusing the term "trust" again. In our local context, all our Investment Trusts are Investment holding companies and have the ability to purchase or dispose business units or minority holding stakes. Weather it is a Investment Trust or Investment Holding company (the same), we are comparing this to a Diversified Holding Company (JKH, HEMAS, CARSONS, CFLB etc and are trying to figure out weather the premiums / discounts currently seen, are warranted, especially for minority shareholder i.e. you and me (and not controlling Interests).

" What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride."
The future prospect of an Investment Trust (or Holding company) depends on what underlying securities it holds in its portfolio. there are 4 sources of Income, Dividends, Interest Income, Capital gains and Share of associate company profit (if it owns over 20 % stake). If the underlying securities in the portfolio does well, then dividends and capital gains accrue (same as to the holder of a minority stake in a diversified holding company). In fact, the distinct advantage is that a Investment holding company or trust is more "diversifed" than even the diversified holding companies business units and we all know the diversification benefits in stock / company holdings.

" Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units."

All 3 statements are incorrect. Investment Trust = Investment Holding Company is different to Diversified Holding Company. All have to ability to buy / sell minority or controlling stakes if its their strategy or plan. controlling stakes have controlling premiums for controlling interests (and not you and me - minority interests). The holding company's debt level is the sum of the parts of the individual business units. it cannot be any other way !

@Knocknobbler - Very good points. very relevant and worth reading again.

@ Antonym - As usual, you hit the nail right on the head !




I'm not confused about trusts and investment holding firms and I'm not talking about unit trusts. My answers are general and not with regards to any particular firm listed on the CSE

Specific to SL, there is a difference between GUAR and VONE. One invests across the board with some concentration to Carsons firms. A firm like this does not own very large stakes (usually just 4% of the portfolio). A firm like VONE is different as it holds very large controlling stakes (30% +) and hence it can experience unexpected capital gain when it disposes it.

Yes both GUAR and VONE are investment holdings but the type and level of investment holding is difference. You cannot compare the two - its like comparing a private equity firm (massive stakes in selective stocks) and a hedge fund (smaller stakes in a wide array of stocks).

As for debt levels, GUAR or VONE will not be accountable for Carsons, Goodhope, SAMP, LB Finance or any of its subsidairy/investment's debt even though they may be consolidated in the accounts --> ASPIC corporation will never be liable for CIFL's obligations even though they would consolidate the accounts

24Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 1:53 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

Some constructive discussion is going on here . Well done boys this is how you present opposing views. cheers

25Renuka Holdings Empty Re: Renuka Holdings Fri Mar 29, 2013 2:18 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Before the comments come rolling in may I add that in order for the holding company to be involved with its investments debt a court case has to filed. Proof has to be provided that funds have been funnelled.

This is a bitter lesson that golden key depositors realised. Ceylinco limited assets were only seized after proof can be provided. Obviously it takes a lot of time to press for court injunctions.

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