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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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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


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


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 - Page 2 Cflb10

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
oh yes, these guy reknowedged for right issues and inter group loans. I think KOTA gave a massive loan too and then goes for a right issue.

Acts like these a are certainly worry some.



@Jiggysaurus wrote:
@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 - Page 2 Cflb10

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@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.
I would be tempted to re- allocate a 8 % portfolio exposure on CFLB as folls :

4 % CFI/CIT
3 % CFLB
1 % EB Creasy
I acknowledge that Alchemist is better equipped to answer your question, since he knows the CFLB Group better than I do...
However, if it is an 'either CFLB or CIT' question, I would prefer CIT because it stands to benefit the most (on a per share basis) from any value that is unlocked within the group.
I think CIT has a kind of leverage due to (a) its pivotal position in the group's cross-holdings and (b) its lower number of shares in issue (only 6.5 million).

Refer: 'Crown Jewel of CFLB' on this forum

Bond


Manager - Equity Analytics
Manager - Equity Analytics
@Antonym wrote:
@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.
I would be tempted to re- allocate a 8 % portfolio exposure on CFLB as folls :

4 % CFI/CIT
3 % CFLB
1 % EB Creasy
I acknowledge that Alchemist is better equipped to answer your question, since he knows the CFLB Group better than I do...
However, if it is an 'either CFLB or CIT' question, I would prefer CIT because it stands to benefit the most (on a per share basis) from any value that is unlocked within the group.
I think CIT has a kind of leverage due to (a) its pivotal position in the group's cross-holdings and (b) its lower number of shares in issue (only 6.5 million).

Refer: 'Crown Jewel of CFLB' on this forum

Regardless of what anyone says CIT is better. But if you want something hands free you can always try the Lanka Opportunities Fund which will most likely mop up Buki, Cars and other firms Wink

http://lankaopportunities.com/index.php

Bond


Manager - Equity Analytics
Manager - Equity Analytics
Any observations from the latest annual report?

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