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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Interest rates down and CFVF

Interest rates down and CFVF

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1Interest rates down and CFVF Empty Interest rates down and CFVF Sun Jun 16, 2013 3:05 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Will affect CFVF for some years to come. Actually the future potential for First Capital is now lower.

http://www.treasury.gov.lk/reports/annualreport/2012/6-FinacingBudget.pdf


P213 graph and table 

2Interest rates down and CFVF Empty Re: Interest rates down and CFVF Sun Jun 16, 2013 3:15 pm

balapas


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@ rainmaker. I admire your research capabilities. I had to edit the message several times since was thinking about this. Would like to clarify since these are figures ending Dec 2012, the treasury bill figure maturing in 2013 and 2014 should increase with the new bills issued and to be issued during 2013 & 2014?.



Last edited by balapas on Sun Jun 16, 2013 3:34 pm; edited 2 times in total (Reason for editing : Change of words)

3Interest rates down and CFVF Empty Re: Interest rates down and CFVF Sun Jun 16, 2013 3:37 pm

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@rainmaker wrote:Will affect CFVF for some years to come. Actually the future potential for First Capital is now lower.

http://www.treasury.gov.lk/reports/annualreport/2012/6-FinacingBudget.pdf


P213 graph and table 

That's the thing you divest your stake?

4Interest rates down and CFVF Empty Re: Interest rates down and CFVF Sun Jun 16, 2013 9:44 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Interest rates down adversely effect CFVF???

5Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 11:35 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Low interest rates have an impact on CFVFs ability to create profit next year

It also seems the structure of the debt would be changed from t bonds to SLDB debt denominated in US$.

6Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 12:10 pm

suja


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Hi Rainmaker,

Can you elaborate as to why CFVF can not make profit in a low interest enviorenment. As I know they had some of their best years when the interest rates came down. How ever when it went up the profits were down. Page 213 does not explain anything about the CFVF business. Maybe you know something.

Look forward to your comments.

7Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 12:26 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
You answered your own question. They make money when rates go down. 

Usually when a lot of funds are raised rates go up. But the CB seems determined to keep rates low to free up more funds for other budget allocations. Very Happy

8Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 4:47 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
This is not clear.. Can u put in black n white.. 

If interest rates are down, is it favourable or unfavourable for CFVF?

9Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 5:56 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Dropping interest rates are good 

Increasing interest rates are bad


If rates suddenly go up CFVF will have losses since they still have a large portfolio.

10Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 6:11 pm

Backstage

Backstage
Moderator
Moderator
@rainmaker wrote:Dropping interest rates are good 

Increasing interest rates are bad


If rates suddenly go up CFVF will have losses since they still have a large portfolio.



What a complicated way to say nothing Suspect

11Interest rates down and CFVF Empty Re: Interest rates down and CFVF Tue Jun 18, 2013 10:33 pm

suja


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
very ..... so based on this, this year will be good for the company. So I do not know the object of your mail rainmaker. Are you talking value investing and keeping this till next year. I am trying to help you here.

12Interest rates down and CFVF Empty Re: Interest rates down and CFVF Wed Jun 19, 2013 10:21 am

malanp


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@suja wrote:very ..... so based on this, this year will be good for the company. So I do not know the object of your mail rainmaker. Are you talking value investing and keeping this till next year. I am trying to help you here.

rainmaker just gave the hint, you need to see how CFVF earn its interest income and pay interest expense.
carry out a detail research then you will understand

13Interest rates down and CFVF Empty Re: Interest rates down and CFVF Wed Jun 19, 2013 11:36 am

Backstage

Backstage
Moderator
Moderator
Us lay folk have to keep reading between the lines to decipher to riddles of the knowledgeable ones. Some talk straight up (Slstock, Chinwi, Antonym,Stumpy,Arena,Alchemist,Gann,Sriranga ect)
Others are trying to work out their growing up issues by teasing people with less knowledge.
Just an observation, I am not bitter, but trying to read between the lines, as knowledge, whatever the packaging is still knowledge.   Smile

14Interest rates down and CFVF Empty Re: Interest rates down and CFVF Wed Jun 19, 2013 12:14 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
When you buy a bond you can hold it to maturity or sell it before maturity

If the rates go up after you bought the bond you will make losses

If the rates go down after you bought the bond you will make profits

So CFVF has made profits because he rates have gone down. 

But the rates could go up given the maturity profile for t bonds for this year.

15Interest rates down and CFVF Empty Re: Interest rates down and CFVF Wed Jun 19, 2013 12:28 pm

Backstage

Backstage
Moderator
Moderator
AAh thanks rainman, glad you dindnt take ofence at my jibes, thats the spirit of community.cheers

re CFVF. wouldnt that have to be calculated with the specific Bond/Bill profile and matched with the possible the possible rate scenarios forward ? or have you already done that or is this an off the cuff observation ?
Thanks for giving time for the unsophisticated. Smile

16Interest rates down and CFVF Empty Re: Interest rates down and CFVF Thu Jun 20, 2013 8:15 am

Child

Child
Equity Analytic
Equity Analytic
When dividends declare ?

17Interest rates down and CFVF Empty Re: Interest rates down and CFVF Thu Jun 20, 2013 8:39 am

suja


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Malanp, We should not go by hints. We need to understand the business first before investing. Please read my mails before if you wish to get some idea. CFVF is cyclical business which is tied to the interest rates of the country. My question was if the company has done well last FY will they pay a devident as they have paid a RS.2 last year when they were not doing well.

Also understand the parent CSEC and the holding of individual shareholders and comments they have made in the annual report.

18Interest rates down and CFVF Empty Re: Interest rates down and CFVF Thu Jun 20, 2013 9:58 am

malanp


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Suja

I think CFVF business model is little complex.

a detail study is required to assess the future, how they earn interest, pay interest and how it is affected by the change of interest rate, up or down.

there was a thread on cfvf and rainmaker mentioned how they do business, if you have time just search and read it.

19Interest rates down and CFVF Empty Re: Interest rates down and CFVF Thu Jun 20, 2013 10:49 am

Backstage

Backstage
Moderator
Moderator
My understanding from what Chinwi and Alchemist have posted in earlier thread is that its profitability is invariably  tied with the interest rate cycle. And every few years the all the factors come together that enables CFVF to cash in. If market sentiments are also positive it adds more potential to the upside of the price. So as with cyclic stocks you enter when the said conditions are  coming together and exit when it starts to peak, not hold for more profits in the future.
However my understanding is that its portfolio mix of bills and bonds is much the same as it was when they made a packet in the last cycle, but was wondering if Rainmakers was hinting that it was not so.

20Interest rates down and CFVF Empty Re: Interest rates down and CFVF Thu Jun 20, 2013 11:35 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
As you are talking much about this share may I contribute what I think; Just what I think only.
 
මට නම් දැනෙන විදියට dropping interest rates  next year - CFVF සඳහා යහපත් වෙනු ඇත.
 
 " Low interest rates have an impact on CFVFs ability to create profit next year. " මේ කියන දේ එලෙසම පිළිගත නොහැක
 නමුත් වෙන කතාවක් ඇත .
 
විස්තරය:
 
CFVF දැනට  තමන් සතු  බොන්ඩ් / බිල්  අයිතියෙන් 60% ක්ම ගත්තේ පසු ගිය මාස 12 තුල දිය .  ( ඒවා මැදි කාලින ඒවා යයි උපකල්පනය කරමිපරණ පුරුද්දට අනුව ඉන් බාගයක් වත් මැදිදිගුකාලින බොන්ඩ් වේඑනම්  තව  කාර්තු කිහිපයක් යනතෙක් වත් එම බොන්ඩ් ප්රතිලාභ අගය නොවෙනස්ව ලැබේ. මේ වසරේ හා ලබන වසරේ  පොලි අනුපාත අඩු වුව හොත් ඔවුන ගත්  ණය  සඳහා ගෙවන පොලිය ක්රමයෙන් අඩුවන බැවින් ඉදිරි වසර 2013/14 පාඩු නොව වාසි දායක වේ. එම නිසා “dropping interest rates  next year “ - CFVF සඳහා යහපත් වෙනු ඇත.
 
 ඉන්පසු නැවත අනාගතයේදී නියමාකාර ලෙස පොලි අනුපාත ඉහල යනවිට එයට මුහුණ දීමේ හැකියාව ඔවුන් සතු විය යුතුය. කල් පිරෙන බොන්ඩ් මුදල් වලින්  ණය ගෙවා නැවත ඉහල පොලියට ණය (Repo) හා අඩු ප්රතිලාභ සහිත භාණ්ඩාගාර බිල් නොගෙන සිටීම එක පියවරකි. 2011 දී  මෙසේ සිදු කෙරිණි . දස අවුරුදු ප්රගතිය බලන්න
 
කෙසේ වුවත්  2009 කාලයේ ලත් අත් දැකීම එලෙසින්ම මෙවර බලාපොරොත්තු වීමට හැකිදැයි සැක සහිතය . 2007/8 තිබු ඉහල භාණ්ඩාගාර බිල්පත්  පොලි අනුපාතයේ (19%<)   සිට 2009/10 දක්වා දක්නට ලැබුණු වූ බැංකු පොලි අනුපාත වල දැවැන්ත  අඩුවීම මෙවර ඇති නොවේ.  එලෙස අඩුවීමට තරම් ඉහල පොලි අනුපාතයක් නොපැවතුනු බැවිනි.   අනුව  බලාපොරොත්තු අදායම් ගණනය කිරීම නුවනට හුරුය. 2008/9 කාලයේ නිකුත් කල ඉහල ප්රතිලාභ සහිත දිගු කාලින බොන්ඩ් උපරිමය 4 වසර ඒව බැවින් දැන් ඒවා කල් පිරි හමාරය . (නමුත් ඔවුන් 2009   පෙර  කාලයේ ගත 20% වැනි  දිගු කාලින බොන්ඩ් සැහෙන ප්රමාණයක් තවදුරටත් නොමැරී පවතී නම් මෙම උපකල්පනය වෙනස් වන අතර ඉන් ඉදිරි වසර කිහිපය තුල සැහෙන ලාබයක් ලබා ගනු ඇත.) මහබැංකු වාර්තා පරිශීලනයෙන් එවැනි නිකුතු ගැන නිවැරදිව සොයා ගැනීමට මා හට අපහසු විය .
 
එම නිසා  මේ  rainmaker කියන්න තැත්කළ දෙයෙහි නියම අරුත දැනගත යුත්තේ විශේෂයෙන් නව ආයෝජකයින් නොව 2008/9 කාලය තුල ලැබූ  අත්දැකීම් මත යලිත් එවැනිම අධික ලාබ අපේක්ෂිතව සිහින මවමින් ඉන්න අය ය.  ( 2010 dividend > 2009 traded price !) 
 
2013  CFVF නිසැකවම හොඳින්  ලාබ ලබන අතර සැහෙන ලාබ බෙදීමක් ලබා දෙනු ඇත.  නමුත් පොලි අනුපාත වල අඩුවීම කලින් වාරයේ මෙන්  විශාල බලපෑමක් කරන මට්ටමක නැති නිසා අදායම් ප්රතිශතය අනුපාත වෙනසට සාපේක්ෂව පමණක්  අපේක්ෂා කල යුතුය.  එසේ සිද්ධ වන්නේ පොලිය අඩුවීම නිසා නොව අඩුවීමට කලින් මේ වර ලොකු පොලියක් දෙන බිල්පත් මිලට ගැනීමට නොතිබුන නිසාය. මෙය වඩාත්ම බල පාන්නේ 2014  හා ඉන්  පසුව විය හැක.
 
එම නිසා , මට නම් දැනෙන විදියට “dropping interest rates  next year” - CFVF සඳහා යහපත් වෙනු ඇති නමුත් එම අඩුවීම විශාල පරාසයක නැති බැවින් දැවැන්ත ලාබයක් අපේක්ෂා කිරීම දැනට ඇති දත්ත අනුව අපහසුය
 
 නමුත්  ඔවුනගේ වෙනත් ව්යාපාර මගින් එන ලාභයේ වැඩිවීමක් අපේක්ෂා කරන අතර ඉන් යහපත් බලපෑමක් ලැබිමෙන් හා වෙනත් ආයෝජන  වල අගය වැඩිවීම , දැනට නොගෙන සිටින ලාබ (unrealized) ඉදිරියේදී ගෙන  පෙන්වීම් යනාදිය නිසා අවසාන ලාභය අප නොසිතු ලෙස ඉහල යාමටද අවස්ථාව ඇත.
 Note:
නවතම කාර්තුවේ ලාභය අප නොසිතු තරම් විය.  
පසුගිය කාර්තුවේ (2013 Jan-Mar)කොටසක ඉපයීම EPS (1   3 කොටස් බෙදීමට පෙර සැලකුවහොත්) 2.61 x  3 = Rs. 7.80 .   මෙය අති සාර්ථක වූ 2010 සමස්ත වසරේ EPS අදායමින් 45% කි. (Rs. 17.40)
 
 
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@ UKBoy , Thanks.
 

@ pathfinder , got it ?

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