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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Gain 40% from RCL within 2 weeks by 'Walking with Dinosaurs'

Gain 40% from RCL within 2 weeks by 'Walking with Dinosaurs'

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hunter

hunter
Moderator
Moderator
Recently, I spotted a 'low' risk opportunity and thought of sharing with you.
Rather than just showing numbers, will explain the reasons behind choosing this.

* What I mean by 'Dinosaurs' are the big investors. Small investors like me cannot move the market; so it's safe to follow big guys; even better if we can walk side by side with them (with our eyes open).
* I have noticed in the past, there are certain criteria in companies, 'dinosaurs' are attracted to. :Few of them are;
-Being a faily large market cap
-Fairly good value for the share price
-Stable market position and stable profits (in future)
-Recent favorable news related to the company or the industry
-Upward growth in EPS in the recent past
-Positive technical analysis

I believe RCL (Royal ceramics) meets the first four conditions.

Here is my view on EPS growth;

Gain 40%  from RCL within 2 weeks by 'Walking with Dinosaurs' Rcl_ep10


According to the graph, the EPS during the last 8 quarters have been ok; but there has not been any trend.
Similarly, if we look at the price chart below, there has not been any significant trend either (w.r.t. the overall market).
Here, it is visible that, RCL has some correlation between the earning trend and its market price trend.

Gain 40%  from RCL within 2 weeks by 'Walking with Dinosaurs' Rcl_2_10


There are 3 possible outcomes in this quarter results; as marked in the EPS graph in 3 colours. Here, I would focus on the first possibility of a higher EPS compared to earlier.
I have marked this possibility in the price chart in  'Green'.

In case things go otherwise, I have drawn the other possibilities in Red and black.

Accordingly, I have drawn the expected outcome in the price chart also with the same colours.


How long will it take to materialized this?

Base on observed past behavior, I am pretty sure, all this can happen with 2 weeks (Not next two weeks; during time of quarter results).

In conclusion;
Overall, within a period of two weeks, we are talking of a possible 40% profit against taking a loss of 10%.

I feel this is a pretty safe bet.


However, do not know why RCL has not gone up already; is there anything going wrong inside, or is the price being controlled by someone? I don't know.

Please share your view or anything I have missed here.

pathfinder

pathfinder
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
You are absolutely right.I'm on to the RCL.
It's a safe bet.directors are on action, still in consolidation wait for the ride Very Happy 

K.Haputantri

K.Haputantri
Co-Admin
Its better to check the effect of recent electricity price hyke on their profits.

CSE.SAS

CSE.SAS
Global Moderator
I m in in RCL

My Target price to collect below Rs.101...

Medi/Long Term 30% return...

pathfinder

pathfinder
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@K.Haputantri wrote:Its better to check the effect of recent electricity price hyke on their profits.

They have monopoly in tile market,so electricity bill will have to pay by the customers Very Happy 
Since DP is with gov. tax hike for imported tiles are imminent Wink 

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Guys also pay attention to TILE and LWL . LWL nav is more than RCL.

HOPL is under LWL ( good to note when plantation earning recover after this wage thing)

Oracle797

Oracle797
Equity Analytic
Equity Analytic
@hunter wrote:Recently, I spotted a 'low' risk opportunity and thought of sharing with you.
Rather than just showing numbers, will explain the reasons behind choosing this.

* What I mean by 'Dinosaurs' are the big investors. Small investors like me cannot move the market; so it's safe to follow big guys; even better if we can walk side by side with them (with our eyes open).
* I have noticed in the past, there are certain criteria in companies, 'dinosaurs' are attracted to. :Few of them are;
-Being a faily large market cap
-Fairly good value for the share price
-Stable market position and stable profits (in future)
-Recent favorable news related to the company or the industry
-Upward growth in EPS in the recent past
-Positive technical analysis

I believe RCL (Royal ceramics) meets the first four conditions.

Here is my view on EPS growth;

Gain 40%  from RCL within 2 weeks by 'Walking with Dinosaurs' Rcl_ep10


According to the graph, the EPS during the last 8 quarters have been ok; but there has not been any trend.
Similarly, if we look at the price chart below, there has not been any significant trend either (w.r.t. the overall market).
Here, it is visible that, RCL has some correlation between the earning trend and its market price trend.

Gain 40%  from RCL within 2 weeks by 'Walking with Dinosaurs' Rcl_2_10


There are 3 possible outcomes in this quarter results; as marked in the EPS graph in 3 colours. Here, I would focus on the first possibility of a higher EPS compared to earlier.
I have marked this possibility in the price chart in  'Green'.

In case things go otherwise, I have drawn the other possibilities in Red and black.

Accordingly, I have drawn the expected outcome in the price chart also with the same colours.


How long will it take to materialized this?

Base on observed past behavior, I am pretty sure, all this can happen with 2 weeks (Not next two weeks; during time of quarter results).

In conclusion;
Overall, within a period of two weeks, we are talking of a possible 40% profit against taking a loss of 10%.

I feel this is a pretty safe bet.


However, do not know why RCL has not gone up already; is there anything going wrong inside, or is the price being controlled by someone? I don't know.

Please share your view or anything I have missed here.

Good explanation buddy..I m with you..

Based on my valuations it will hit 128-130 by one year down the line..Imagine with these construction projects hotels and also expected per capita GDP ( 4000 USD end of 2016 - Based on CBSL governor ) people will go with some premium brands like RCL ( moving from low quality products)..

nkuda


Manager - Equity Analytics
Manager - Equity Analytics
Ascending triangle pattern can be shown with RCL chart. I'm waiting to breakout 110/= with considerable volume.

hariesha


Vice President - Equity Analytics
Vice President - Equity Analytics
@slstock wrote:Guys also pay attention to TILE and LWL . LWL nav is more than RCL.

HOPL is under LWL  ( good to note when plantation earning recover after this wage thing)  


I think this quarter will be a tough one of the sector. RCL and TILE will maintain the same profitability or slightly less as expenses have to be more due to electricity tariff hike. I don't think there will be an improvement. LWL will get terribly affected as @ group level HOPL will be in red, due to wage increase, average tea prices less than the last quarter, rubber being badly affected due to continues rain and without in improvement in prices.

Of cause all these companies are having lot of long term synergies. If the spending capacity of customers improved in the near future they can go for a price increase which will improve the bottom line of all companies.

As per asset value of LWL, all these will improve the asset value of RCL in the next quarter and may pass the asset value of LWL.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
I would avoid buying RCL at the moment.

sandunj


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Long term RCL will be a good investment. Im holding presently and still collecting quantity wise. Targeting over period of 1 year

pathfinder

pathfinder
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@UKboy wrote:I would avoid buying RCL at the moment.

Could you please tell the reason?

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@pathfinder wrote:
@UKboy wrote:I would avoid buying RCL at the moment.

Could you please tell the reason?

I would consider buying if it comes around 90. Ideally 85.

Fuel and electricity bill come close to 35% out of the tile production costs. Electricity tariff for industrial purpose 3 has been increased by 15%. However peak time tariff for “industrial purpose 3” has been increased by almost 80%..!!!  (from Rs13.40 to Rs24.00) So unless these tile manufacturers shift their core production time from day to night, their electricity bill will rise significantly.

In past years Royal porcelain ltd did enjoy a tax break but it’s no longer valid. They are now liable to pay 15% tax.
RCL purchased CERA by a loan from a private bank in Sri Lanka. So obviously their financial expenses will rise. The best option is find a buyer to sell HOPL

I’m keen to see how RCL is going to keep the equity holders attributable against minority interest attributable of CERA. Currently a large portion of CERA’s profit is swallowed by minority interest but not by the equity holders. My guess is group figure of RCL’s non controlling interest will increase. This will be the decider of future RCL eps.

If necessary, RCL is in an ideal situation to announce a right issue. ( I would do if I’m in the RCL’s director board.)  Public holdings stand at 41.38%.

However RCL is a good company mid-long term. They almost have the monopoly of tile business in Sri Lanka.

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
The minority interest is clever stuff isn't it?

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@rainmaker wrote:The minority interest is clever stuff isn't it?
indeed Smile 
Sometimes I wonder why Page sold such lucrative business.

It will be interesting to see CTHR earnings without CERA. Rolling Eyes

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@UKboy wrote:

If necessary, RCL is in an ideal situation to announce a right issue. ( I would do if I’m in the RCL’s director board.)  Public holdings stand at 41.38%.


Yes.. There is a higher possibility. I can't remember the place that I mentioned this 2-3 weeks ago. Such a move will drag both VONE and RCL prices further down, unless a declaration is released after a manipulated short term rally.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
hmm.....Equity holders portion Vs No controlling interest

http://www.cse.lk/cmt/upload_report_file/683_1383564751441.09.2013.pdf

can expect a right issue from RCL?

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@UKboy wrote:hmm.....Equity holders portion Vs No controlling interest

http://www.cse.lk/cmt/upload_report_file/683_1383564751441.09.2013.pdf

can expect a right issue from RCL?

The main share holder is VONE (51%).. So the idea might be to transfer the profits to
VONE and show its profits up.

But look at the top 10;
1. VONE
2. EPF
3. Mr. Amarakone
4. BOC - AC Ceybank Unit Trust
5. SLIC - General Fund
6. SLIC - Life Fund
7. AIA Insurance
8. BOC AC - Ceybank Century Growth Funds
9. NDB

Top 20 inclues; BOC - Acc1, CT Holdings thru Com Bank
MERC, CONN, Amana Bank, BOC - Acc 2, MAS Capital, CITK, HSBC acc

The percentage of shares held by the public as at 30 September 2013 - 42.12%

So it seems top business in SL has bought shares in RCL hoping for growth. Also the acquisition of CERA would mean the dominance of Tile industry.

In company section, they have more current liabilities than current assets. So nil working capital.

But in Group, significant increase in Curr. Assets from 4.29 Mil to 11.37 Mil just six months from March 2013 to Nov 2013.
Inventories have gone up to 6.79 Mil from 2.18 Mil and also receivables from 1.17Mil to 3.52 Mil.
Also Curr. Liabilities grew from 3.43 Mil to 9.24 Mil mainly becuz of Loans and borrowings.

As of now, NAV stands at 76.53 and Qtr EPS of 1.01 (due to non controlling interest going significantly high)

UAEBOY

UAEBOY
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@slstock wrote:Guys also pay attention to TILE and LWL . LWL nav is more than RCL.

HOPL is under LWL  ( good to note when plantation earning recover after this wage thing)  

LWL recently Imported large number of machinery...They are planning to increase the production significantly by 2015.....

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