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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Interim Financial Statements 31-03-2013 - Colombo Investment Trust

Interim Financial Statements 31-03-2013 - Colombo Investment Trust

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Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
http://www.cse.lk/cmt/upload_report_file/610_1369912026709.pdf

Bond


Manager - Equity Analytics
Manager - Equity Analytics
They sold securities at a loss instead of collecting during the bear period Razz

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz

Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.

Monster

Monster
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
They have not sold any thing, 59 million loss was due to "Gain/(loss) on fair-value-through-proft or
loss financial assets"

In the mean time they have collected Rs 80 million from right issue and spent Rs 80.5 million for "Acquisition of Investments"

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
If ever at some point in the next few year CFLB will hit previous high again ( value adjusted after split) , CIT/CFI will be multi baggers.

We should now await RENU/CABO NAV update .




@Antonym wrote:
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.

Monster

Monster
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Antonym wrote:
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.
@Antonym, my estimate is around Rs 255/- to 260/- (considering only market value of CFI, not the real value). But still we have to wait till annual report to get the exact the value.

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Antonym wrote:
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.

@Antonym - Yes , if you go strictly by their Portfolio valuation, taking the CIT & CFI portfolios seperately, the current NAV of CIT is approx Rs 260. But their is a small problem with that approach. CIT owns approx 40 % of CFI shares, and since this is below the 51 % consolidation threshold, it does not consolidate them so it takes the CFI shares at market value, which as at 31st March could have been around Rs 100.
Now, Current NAV of CFI maybe Rs 240, so CIT'S CFI stake is potentially undervalued by further Rs 50-60 Per share, just due to this accounting treatment. Thus, I consider NAV of CIT to be between Rs 300-320.
This would have been the case had CIT owned 51 % instead of current 40 % of CFI (or if CFI Market Price = NAV)

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@The Alchemist wrote:
@Antonym wrote:
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.

@Antonym - Yes , if you go strictly by their Portfolio valuation, taking the CIT & CFI portfolios seperately, the current NAV of CIT is approx Rs 260. But their is a small problem with that approach. CIT owns approx 40 % of CFI shares, and since this is below the 51 % consolidation threshold, it does not consolidate them so it takes the CFI shares at market value, which as at 31st March could have been around Rs 100.
Now, Current NAV of CFI maybe Rs 240, so CIT'S CFI stake is potentially undervalued by further Rs 50-60 Per share, just due to this accounting treatment. Thus, I consider NAV of CIT to be between Rs 300-320.
This would have been the case had CIT owned 51 % instead of current 40 % of CFI (or if CFI Market Price = NAV)


In this case the high NAV is utterly useless to minority shareholders since these jokers will never sell their cross holdings. Similar case with LMF. Because they need to keep control of their holdings they will never sell so you should values these almirah case on a dividend yield basis (since that is all the shareholders ever get).
With all these high NAVs this management shamelessly begged for money from shareholders via rights issues. Fun the mentally you'd be mental to pay 300-320 for this (a 50% discount maybe more reasonable)

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Jiggy

the point is this. If we are holding very long term as a solid investment I see your issue. But if we beleive the market will move at some point and value of CFLB will increase with better earning ( I am not talking this year), CIT/CFI will move invariably. If so capital gains from these share will be big.

Having faith in the company/management and the share movements (if we belivee in a future run ) is 2 different thing right?

To this matter only I also hold some .

Probably I will dispose at a good opportunity but there is a long way to go still I think ( not short term and maybe not this year)




@Jiggysaurus wrote:
@The Alchemist wrote:
@Antonym wrote:
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.

@Antonym - Yes , if you go strictly by their Portfolio valuation, taking the CIT & CFI portfolios seperately, the current NAV of CIT is approx Rs 260. But their is a small problem with that approach. CIT owns approx 40 % of CFI shares, and since this is below the 51 % consolidation threshold, it does not consolidate them so it takes the CFI shares at market value, which as at 31st March could have been around Rs 100.
Now, Current NAV of CFI maybe Rs 240, so CIT'S CFI stake is potentially undervalued by further Rs 50-60 Per share, just due to this accounting treatment. Thus, I consider NAV of CIT to be between Rs 300-320.
This would have been the case had CIT owned 51 % instead of current 40 % of CFI (or if CFI Market Price = NAV)


In this case the high NAV is utterly useless to minority shareholders since these jokers will never sell their cross holdings. Similar case with LMF. Because they need to keep control of their holdings they will never sell so you should values these almirah case on a dividend yield basis (since that is all the shareholders ever get).
With all these high NAVs this management shamelessly begged for money from shareholders via rights issues. Fun the mentally you'd be mental to pay 300-320 for this (a 50% discount maybe more reasonable)

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@Jiggysaurus wrote:
@The Alchemist wrote:
@Antonym - Yes, if you go strictly by their Portfolio valuation, taking the CIT & CFI portfolios seperately, the current NAV of CIT is approx Rs 260. But their is a small problem with that approach. CIT owns approx 40% of CFI shares, and since this is below the 51% consolidation threshold, it does not consolidate them so it takes the CFI shares at market value, which as at 31st March could have been around Rs 100.
Now, Current NAV of CFI maybe Rs 240, so CIT'S CFI stake is potentially undervalued by further Rs 50-60 Per share, just due to this accounting treatment. Thus, I consider NAV of CIT to be between Rs 300-320.
This would have been the case had CIT owned 51 % instead of current 40% of CFI (or if CFI Market Price = NAV)
In this case the high NAV is utterly useless to minority shareholders since these jokers will never sell their cross holdings. Similar case with LMF. Because they need to keep control of their holdings they will never sell so you should values these almirah case on a dividend yield basis (since that is all the shareholders ever get).
With all these high NAVs this management shamelessly begged for money from shareholders via rights issues. Fun the mentally you'd be mental to pay 300-320 for this (a 50% discount maybe more reasonable)
@Alchemist: I understand.

@Jiggysaurus: I have a different opinion...
(i) For investment trusts, NAV is a better basis of valuation than dividend yield. In the present context, I think a 25% discount would be appropriate.
(ii) A rights issue is a legitimate way for a company to fund its growth plans; there is nothing shameful or beggarly about it. It provides existing shareholders the opportunity to buy additional shares, generally at a discount to market.

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Jiggysaurus wrote:
@The Alchemist wrote:
@Antonym wrote:
@The Alchemist wrote:
@Bond wrote:They sold securities at a loss instead of collecting during the bear period Razz
Incorrect. They actually bought Rs 80.5 Million worth of shares during Jan-Mar 2013 and not sold any. Check the cash flow statement.

The Rs 59 Mill loss on fair value through proft or loss financial assets was at 31st March Mark to Market and not relevent as of today.
@Alchemist: Thanks, I was on the verge of clarifying... Also, Rs 80.6 million shares were bought during the year, and mostly during 2012.
Would you agree that the most important number in the financial statements is the NAPS = Rs 211.86 as on 31.03.2013?
With the increase in share prices since then, my estimate is that NAPS is approx Rs 255 now.

@Antonym - Yes , if you go strictly by their Portfolio valuation, taking the CIT & CFI portfolios seperately, the current NAV of CIT is approx Rs 260. But their is a small problem with that approach. CIT owns approx 40 % of CFI shares, and since this is below the 51 % consolidation threshold, it does not consolidate them so it takes the CFI shares at market value, which as at 31st March could have been around Rs 100.
Now, Current NAV of CFI maybe Rs 240, so CIT'S CFI stake is potentially undervalued by further Rs 50-60 Per share, just due to this accounting treatment. Thus, I consider NAV of CIT to be between Rs 300-320.
This would have been the case had CIT owned 51 % instead of current 40 % of CFI (or if CFI Market Price = NAV)


In this case the high NAV is utterly useless to minority shareholders since these jokers will never sell their cross holdings. Similar case with LMF. Because they need to keep control of their holdings they will never sell so you should values these almirah case on a dividend yield basis (since that is all the shareholders ever get).
With all these high NAVs this management shamelessly begged for money from shareholders via rights issues. Fun the mentally you'd be mental to pay 300-320 for this (a 50% discount maybe more reasonable)

Some truth to this but remember the following -

1. In 2011, when CFLB was motoring along just before the the 1 :5 Split happened, CIT/CFI were trading at Rs 500-Rs 700 range. This shows that these shares have the potential in future, to act as call options on CFLB which i believe is seriously undervalued, maybe discounted due to its below par governance and disclosure track record.

2. Nothing wrong with giving attractively priced Rights at a fair ratio. The CFI/CIT rights at Rs 80 were issued way below their instrinsic NAV and subsribers have benefitted by over a 50 % return in this short period.
I guess this is one way of creating value for Shareholders in the Short / Long Term.

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@slstock / Alchemist,

What is the best way ? - Holding CFLB or going for CIT at current prices?

8% of my MT portfolio is CFLB.

Bond


Manager - Equity Analytics
Manager - Equity Analytics
Wow just logged back. Didn't realise that one line set off a war. Made you all look Razz
Noticed they made a loss on the available for sale as well so OCI also got hit.

They only realised a 59m loss which they probably should have not done. Anyone can speak in hindsight Wink

It's down by 5/= today. What's the target?



Last edited by Bond on Fri May 31, 2013 1:40 pm; edited 1 time in total

Bond


Manager - Equity Analytics
Manager - Equity Analytics
Noticed that CIT has a tendency to pull back quite quickly.

@Jiggy is correct about the cross-holdings never being sold. It's not like Selva is going to give minority holders a special dividend Razz

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Antonym wrote:

@Jiggysaurus: I have a different opinion...
(i) For investment trusts, NAV is a better basis of valuation than dividend yield. In the present context, I think a 25% discount would be appropriate.
(ii) A rights issue is a legitimate way for a company to fund its growth plans; there is nothing shameful or beggarly about it. It provides existing shareholders the opportunity to buy additional shares, generally at a discount to market.

1)Totally agreed investment trusts should be valued on NAV (with an appropriate small discount), but in this case CIT is not a full scale investment trust like GUAR. Part of it (the part that owns the cross holdings in other Rajaratnam group companies) will never be brought/sold/traded, so this part should be excluded and valued separately on a dividend yield. The regular shareholdings (in non group companies) can be valued on NAV.
2)A rights issue is beggarly when done by the Rajaratnam group, just add up the number of rights done over the last 5 years (I think you'll get close to 15 issues). When a rights is done by someone like JKH then it is as you say.

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Chinwi wrote:@slstock / Alchemist,

What is the best way ? - Holding CFLB or going for CIT at current prices?

8% of my MT portfolio is CFLB.

A very good & tough question and the answer will ultimately depend on you and many external events , i.e, type of Investor Value vs Growth, Tenor- Short, Medium or Long, surprise value unlocks in CIT/CFI (Merger) or Huge Bonus / Split in EB Creasy etc etc.

To me, CFLB is one of the most undervalued most diversified mini conglomerates.
FY 2012/2013 is not going to be a great year for them for many reasons. without knowing their FY 2012/2013 results, i will stick my neck out (and at the risk of looking like a complete idiot) and estimate that FY 2013/2014 EPS will be close to Rs 10. then you can plug in a multiple depending on your risk tolerance / discount of other factors etc and arrive at a suitable price for you. I am estimating Rs 10 as all their sectors look well set to perform after drought / flood of 2012/2103 which affected their crop protection business, fertilizer, chemical and paints section. also motors was affected due to duty etc.

CFLB directly and through Colo, CIT & CFI owns approx 67 % or 1.7 Million shares of EB Creasy (issued 2.5 Mill shares). With Hemas buying MORI at Rs 2 Billion can we estimate what the value of EBC is ? i would guess at Rs 10-15 Billion. (Just few of Creasy subs + Darley Butler etc are much bigger than MORI). So you can calculate the value for CFLB with its EBC + COLO + Other stakes.

CIT / CFI are trading at approx 50 % of their NAV considering their holdings on CFLB @ Rs 39 and EBC @ Rs 1200. Due to factors mentioned above such as Earnings, Valuations, possible Splits etc, it is possible for CFLB & EBC to sometimes double in value in the next 12 months. If this happens, I will be very surprised if CIT/CFI prices also dont double, most importantly due to their illiquidity.

I would be tempted to re- allocate a 8 % portfolio exposure on CFLB as folls :

4 % CFI/CIT
3 % CFLB
1 % EB Creasy

Bond


Manager - Equity Analytics
Manager - Equity Analytics
Does EB Creasy still give loans to CLFB ?

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
I think ALchemist put it well.

Few other notes ;

* CFLB is safer to hold due to liquidty. Usually CIT/CFI is lagging as you know. Also the sudden drops can happen with CIT/CFI ( but opposedly in last few weeks 50% gain from CIT from Rs 100 to 150)

* EBCR am a bit concerned about their inconsistant earnings. Let see how this quarter goes.
LCEY seasonal effects seems to play a role in EBCR profits. ( major shareholder of LCEY)

So in summary I see no problem in allocating partly on CIT/CFI and CFLB. But in a major run of the group CIT/CFI, EBCR can give better returns due to illiquidity.


EBCR I am still watching.


@The Alchemist wrote:
@Chinwi wrote:@slstock / Alchemist,

What is the best way ? - Holding CFLB or going for CIT at current prices?

8% of my MT portfolio is CFLB.

A very good & tough question and the answer will ultimately depend on you and many external events , i.e, type of Investor Value vs Growth, Tenor- Short, Medium or Long, surprise value unlocks in CIT/CFI (Merger) or Huge Bonus / Split in EB Creasy etc etc.

To me, CFLB is one of the most undervalued most diversified mini conglomerates.
FY 2012/2013 is not going to be a great year for them for many reasons. without knowing their FY 2012/2013 results, i will stick my neck out (and at the risk of looking like a complete idiot) and estimate that FY 2013/2014 EPS will be close to Rs 10. then you can plug in a multiple depending on your risk tolerance / discount of other factors etc and arrive at a suitable price for you. I am estimating Rs 10 as all their sectors look well set to perform after drought / flood of 2012/2103 which affected their crop protection business, fertilizer, chemical and paints section. also motors was affected due to duty etc.

CFLB directly and through Colo, CIT & CFI owns approx 67 % or 1.7 Million shares of EB Creasy (issued 2.5 Mill shares). With Hemas buying MORI at Rs 2 Billion can we estimate what the value of EBC is ? i would guess at Rs 10-15 Billion. (Just few of Creasy subs + Darley Butler etc are much bigger than MORI). So you can calculate the value for CFLB with its EBC + COLO + Other stakes.

CIT / CFI are trading at approx 50 % of their NAV considering their holdings on CFLB @ Rs 39 and EBC @ Rs 1200. Due to factors mentioned above such as Earnings, Valuations, possible Splits etc, it is possible for CFLB & EBC to sometimes double in value in the next 12 months. If this happens, I will be very surprised if CIT/CFI prices also dont double, most importantly due to their illiquidity.

I would be tempted to re- allocate a 8 % portfolio exposure on CFLB as folls :

4 % CFI/CIT
3 % CFLB
1 % EB Creasy

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Bond wrote:Does EB Creasy still give loans to CLFB ?

Those games will never stop amongst cross held babies

Interim Financial Statements 31-03-2013 - Colombo Investment Trust Cflb10

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