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From an earnings and dividends perspective, MADU surely is one of the worst performing plantation stocks - no dividends during past decade (although management fees have been charged - at reduced levels recently), and it has been bleeding heavily the past few years. It is a pure tea plantation company, with serious working capital constraints, and the impending wage hike from April 2011 will hurt it badly.
In a good period for most plantations, MADU reported a net loss of Rs98 mn for the 9m ended 30th Sept 2010, and its book value per share was Rs9
The timber revaluation, if brought into its books, will boost book value per share to around Rs83, but is book value the most useful or realistic way to evaluate a plantation company? Earnings, cash flow and dividends based methods, together with crop mix analysis, are surely more important. And remember that MADU is likely to continue to report losses during the next few quarters, which will bring down its book value continuously.
Monetising the book value of timber may also prove to be challenging and long term, and conversion of its book value into cash will hold the key.
Book value is much more important from a takeover perspective though, and perhaps DIST and Stassens, who jointly control 66% of company, may consider an exit - using the discount to book value as the key selling point. Group company SPEN recently exited from its investment in TPL incidentally.
In the meantime, the share's relatively low absolute share price and the fact that only 30,000 shares were needed to be among the largest 20 shareholders as at 30th Sept 2010 should keep the traders interested.
In a good period for most plantations, MADU reported a net loss of Rs98 mn for the 9m ended 30th Sept 2010, and its book value per share was Rs9
The timber revaluation, if brought into its books, will boost book value per share to around Rs83, but is book value the most useful or realistic way to evaluate a plantation company? Earnings, cash flow and dividends based methods, together with crop mix analysis, are surely more important. And remember that MADU is likely to continue to report losses during the next few quarters, which will bring down its book value continuously.
Monetising the book value of timber may also prove to be challenging and long term, and conversion of its book value into cash will hold the key.
Book value is much more important from a takeover perspective though, and perhaps DIST and Stassens, who jointly control 66% of company, may consider an exit - using the discount to book value as the key selling point. Group company SPEN recently exited from its investment in TPL incidentally.
In the meantime, the share's relatively low absolute share price and the fact that only 30,000 shares were needed to be among the largest 20 shareholders as at 30th Sept 2010 should keep the traders interested.
