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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » MTD dissapoints on earnings - harbinger of things to come?

MTD dissapoints on earnings - harbinger of things to come?

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prasa2004


Manager - Equity Analytics
Manager - Equity Analytics
MTD has reported a drop of 65% of earnings (166M to 59M) and NAV slightly reduced to 41.0. Their public float is 9% and considering the share price 35 is closer to NAV they may go for rights to meet the cut off for public float. Cannot expect major SH shedding to meet the public holding criteria. Share may retreat few Rs I guess.

Will Dec earnings put breaks to BULL? CCS has recorded 16% rise in NP their GP has dropped. However AUTO has done well.
Lets see and be cautious. Asian and Wall street dropping due to disappointed earnings last 02 days. CSE is a laggard to world markets and follow somewhat late. So I presume sometime today and next week may go for slight correction. It is good for funds to re-enter.

Global front
on the commodity front Gas is up (may affect LAUGH) and silver line is Gold is up and getting stable (Good for Banks).
As Thailand and Bangladesh in crisis and good time for Garments exports (TJL) and Tourism (KHL)

Lets hope momentum may not disappear.


Intelligent Investing


Senior Equity Analytic
Senior Equity Analytic
You've made a fundamental mistake of comparing a quarter (4th) to a different quarter (3rd). In an industry there could be different demand cycles (for example, in tourism or retail 4th quarter will be better)

Compared to last year, turnover has increased (16.7%), Gross profit has increased (30.5%), they've had to pay a off a loan so net profit has reduced a bit. Earnings per share have increased from 0.45 last year (this quarter) to 0.52 this year. For the nine months this year, net profit has still gone up by 339.5% compared to last year. Still an attractive share in my opinion since it trades below Book Value and has the lowest PE in the sector.

There are set to be more infrastructure projects in the upcoming year and MTD Walkers has made lots of investments last quarter since they expanded their business into power generation etc but they get regular income from them so no cause for concern. "Invest today, reap benefits tomorrow" strategy. They will use profits to slowly repay loans and once they get finance costs down, this will be a as solid as any company.

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@prasa2004 wrote:
.......................
Lets see and be cautious. Asian and Wall street dropping due to disappointed earnings last 02 days. CSE is a laggard to world markets and follow somewhat late. So I presume sometime today and next week may go for slight correction. It is good for funds to re-enter.

Global front
on the commodity front Gas is up (may affect LAUGH) and silver line is Gold is up and getting stable (Good for Banks).
As Thailand and Bangladesh in crisis and good time for Garments exports (TJL) and Tourism (KHL)  
Lets hope momentum may not disappear.


Good observations,
But I am not really sure, whether these Asian /Wall Street changes, Thailand/Bangladesh  crisis  affects CSE .
Yes, Stability of Gold prices will surely helpful to Banks, specially Sampath Bank. They might write back their loan loss provisions.

@  Intelligent Investing
"Compared to last year, turnover has increased (16.7%), Gross profit has increased (30.5%), they've had to pay a off a loan so net profit has reduced a bit."

Are you sure about this,
My understanding is ,....paying off a loan ..., does not affect profits of a company.

Leon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@knockknobbler wrote:
@prasa2004 wrote:
.......................
Lets see and be cautious. Asian and Wall street dropping due to disappointed earnings last 02 days. CSE is a laggard to world markets and follow somewhat late. So I presume sometime today and next week may go for slight correction. It is good for funds to re-enter.

Global front
on the commodity front Gas is up (may affect LAUGH) and silver line is Gold is up and getting stable (Good for Banks).
As Thailand and Bangladesh in crisis and good time for Garments exports (TJL) and Tourism (KHL)  
Lets hope momentum may not disappear.


Good observations,
But I am not really sure, whether these Asian /Wall Street changes, Thailand/Bangladesh  crisis  affects CSE .
Yes, Stability of Gold prices will surely helpful to Banks, specially Sampath Bank. They might write back their loan loss provisions.

@  Intelligent Investing
"Compared to last year, turnover has increased (16.7%), Gross profit has increased (30.5%), they've had to pay a off a loan so net profit has reduced a bit."

Are you sure about this,
My understanding is ,....paying off a loan ..., does not affect profits of a company.

Why not?? It reduces the finance cost of the company.

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@Leon wrote:

Why not?? It reduces the finance cost of the company.

Pl read this again, and think about  what is implied here..... ,

"Compared to last year, turnover has increased (16.7%), Gross profit has increased (30.5%), they've had to pay a off a loan so net profit has reduced a bit."

(@ Leon ...you are correct, but that happens in the subsequent period . That's not the point implied in the above paragraph).

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
If this is not clear:
If a company pays a loan for Dec 31 quarter, it should not effect the profits of that quarter.

For March 31st and onward , it should technically help them as it would reduce interest costs.


Knock was commenting on  Prasa2004 original statement.



@knockknobbler wrote:
@Leon wrote:

Why not?? It reduces the finance cost of the company.

Pl read this again, and think about  what is implied here..... ,

"Compared to last year, turnover has increased (16.7%), Gross profit has increased (30.5%), they've had to pay a off a loan so net profit has reduced a bit."

(@ Leon ...you are correct, but that happens in the subsequent period . That's not the point implied in the above paragraph).

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@prasa2004 - maybe your thread name is slightly misleading and not entirely factual.
There was an errata notice - so nine month earnings are about the same as previous year nine months.

even if there was no errata notice, Kapi has made approx 388 mill in current FY 9 months (eps 3.39 and now after errata nearly 3.65) compared to previous FY 9 months of 92 mill (or eps 0.81 cts). furthermore note that when you compare the previous FY 3rd quarter profit, it constituted 90 % of the cumulative 9 months earnings in that previous FY.

This shows the un-uniformity of their business earnings & accounting cycle. for manufacturing companies like, DOCK, AEL & KAPI etc, i am unsure how they apply the % of completion method accounting in their interim accounts.

But volatility of periodic earnings should be expected due to accounting treatment in regard to the nature of their business. another factor is that their Receivables have increased by Rs 1 Bill, (maybe GOVT ?) so financing those receivables has impacted their finance cost. and this maybe temporary.   

Therefore, it is not accurate to say that MTD disspoints on earnings, as all things considered, they are having a much better year than last.      

btw-i am not a shareholder. this is just an observation, just for your information.

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@The Alchemist wrote: i am unsure how they apply the % of completion method accounting in their interim accounts.

If you go through their annual reports, you'll find every year they are adjusting their previous year turnover, EPS, NAV etc, etc.....(restating)

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@The Alchemist wrote:@prasa2004 - maybe your thread name is slightly misleading and not entirely factual.
There was an errata notice - so nine month earnings are about the same as previous year nine months.

even if there was no errata notice, Kapi has made approx 388 mill in current FY 9 months (eps 3.39 and now after errata nearly 3.65) compared to previous FY 9 months of 92 mill (or eps 0.81 cts).


Somewhat confused about above two statements, contradictory ?

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@knockknobbler wrote:
@The Alchemist wrote:@prasa2004 - maybe your thread name is slightly misleading and not entirely factual.
There was an errata notice - so nine month earnings are about the same as previous year nine months.

even if there was no errata notice, Kapi has made approx 388 mill in current FY 9 months (eps 3.39 and now after errata nearly 3.65) compared to previous FY 9 months of 92 mill (or eps 0.81 cts).


Somewhat confused about above two statements, contradictory ?

Sorry slight errata on my part !
subsequent to their 3rd Q nine months interim results last week, they issued an errata notice on CSE. this increased their 3rd Q 2013/2014 earnings by approx 25 million, and now due to this, the 3rd Q earnings in 2013/2014 & 3rd Q earnings in 2012/2013 are approx the same.    

"so nine month earnings are about the same as previous year nine months" - this statement by me is wrong. it should have read "earnings in 3rd Q instead of 9 months" !

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
Few more  observations on KAPI  3Q financials :

# If  you examine the segment analysis , it seems company’s main business activity is ENGINEERING( 85% of the revenue, 70% of the assets).  However profit from this activity, around 300 million , represents  only 5.5% of revenue and 3% ROA.  
# Corresponding figures in POWER GENERATION is  290 million , representing 30% of revenue and 9% ROA. This implies company is surviving because of this activity.
#  Company has incurred a net loss of 146 million in INVESTMENT activity. It is not clear what are those investments .
# Trade and other receivables represents nearly 8 months revenue. As a result company  is heavily indebted 4.56 billion -  borrowings has increased by around 1.0 billion during the period
This is not a temporary phenomenon , since the company is engaged mostly in government contracts .  It is well known  , how difficult to get payments from Government,( sometimes salaries of public servants also get delayed).  Just look at CIC accounts, to see what extent they are in trouble due to non receipts of payments due from  the Govt.

# Of the shareholding, 91% held by single investor. This implies , its not a public company in real sense, though the shares are listed in CSE.

I can’t think of any  rational investor, who look at the company / business as a whole,  attracted to this stock.
Still ,  the share price may increase exponentially in  “this bull run” , since there are enough buyers/sellers , who view things differently.

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@knockknobbler wrote:
Still ,  the share price may increase exponentially in  “this bull run” , since there are enough buyers/sellers , who view things differently.
True,
Plus may be another heavy Rights Issues on the way?

KDDND

KDDND
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I take this opportunity to THANK YOU for the expert who given GREAT contribution in evaluating the this counter..... learnt a lot!
 cheers

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Note KAPI is another company which will need to sell ( about 11%) to increase public holding.

Intelligent Investing


Senior Equity Analytic
Senior Equity Analytic
@The Alchemist wrote:@prasa2004 - maybe your thread name is slightly misleading and not entirely factual.
There was an errata notice - so nine month earnings are about the same as previous year nine months.

even if there was no errata notice, Kapi has made approx 388 mill in current FY 9 months (eps 3.39 and now after errata nearly 3.65) compared to previous FY 9 months of 92 mill (or eps 0.81 cts). furthermore note that when you compare the previous FY 3rd quarter profit, it constituted 90 % of the cumulative 9 months earnings in that previous FY.

This shows the un-uniformity of their business earnings & accounting cycle. for manufacturing companies like, DOCK, AEL & KAPI etc, i am unsure how they apply the % of completion method accounting in their interim accounts.

But volatility of periodic earnings should be expected due to accounting treatment in regard to the nature of their business. another factor is that their Receivables have increased by Rs 1 Bill, (maybe GOVT ?) so financing those receivables has impacted their finance cost. and this maybe temporary.   

Therefore, it is not accurate to say that MTD disspoints on earnings, as all things considered, they are having a much better year than last.      

btw-i am not a shareholder. this is just an observation, just for your information.

This is a good observation

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