CSE LESSON : ASSET VALUE IMPORTANCE ( Ex : SFL- and CSF)
DO YOU KNOW THERE IS A BIG ISSUE AT CSE
Fact :Lot of people are trying to make CSE a Gamblers den. They think they can put Rs 1 Lak today and make it Rs 1.2 Lak tomorrow.
The famous French Footballer and Actor, Cantona once said "When the seagulls follow the trawler, it's because they think sardines will be thrown into the sea."
TAKE A FEW SECONDS TO THINK ABOUT WHAT IT MEANS.
The Penny share games played by certain Brokers and Big Traders + MANIPULATIVE SMART LOOKING POSTS/PROMOTIONS by the "NEW GURUS" at Youtube , Whatapp , Facebook , Twitter and Forums are making a MOCKERY OF CSE NOT AS INVESTMENT VENUE BUT A GAMBLERS DEN.
Even bigger issue is, these 60% or so New CDS Accounts are following the above mentioned Promotional "TRAWLERS" to get "Sardines" ( Shares) thrown at them to make quick money without THINKING or UNDERSTANDING CSE AND SHARES HAVE VALUATIONS. When Fish and Parippu have a value, so does shares.
Don't forget it.
Most people when they make some money from a successful day trade following one of these Herd run shares promoted by so called "Gurus" , they think they can do it again and again. and make money at CSE everyday. So they become slaves of these Trawler "Gurus" .
REAL CASE: There was guy I recently spent multi hour to help who got once got caught to Promoters and Bought BLI at Rs 150.
Now BLI Rs 9 and actually is the biggest troubled finance company at CSE right now.
Think about the value drop from Rs 150 to 9 for a minute
I am sure, if BLI start running after some promotion , people will chase it and value it to Rs 20 and 30 ect etc. Where as the MAX fundamental value I can give for BLI at this time is Rs 10.Actually that is too expensive too provided that they are making losses and in deep trouble. Fair value is about Rs 7-8. They will need to eventually amalgamate with some company or go for massive Right issue or Private placement for it to be saved.
POINT : At one time BLI was trading at Rs 150. Gurus were promoting it to Rs 200 etc. Now Rs 9.
One time REEF was Rs100, Now Rs 9.
GREG was Rs 150 +. Now Rs ???
DO YOU GET MY POINT ?
STOP BEING A SEAGULL AND STOP FOLLOWING TRAWLERS.
Instead understand what VALUE IS as most people are Gambling with luck now at CSE and not investing .
SOONER THAN LATER YOU ARE GOING TO GET BURNT BIG TIME CHASING OVERVALUED SHARES. All is fun until the "Crab is in the pot while water is not boiling"
ASSET VALUE EXAMPLE : SFL AND CSF AMALGAMATION
SFL ( Sinhaputhra Finance) and CSF ( Nation Lanka Finance) are planning to merge to meet Core capital requirements of CB. They are seeking Central Bank advice for VALUATIONS for each company for this Amalgamation to go ahead. When this happens , final surviving entity will be SFL ( CSF will be part of SFL)
IF YOU READ CAREFULLY. IT PROVES THAT FOR REAL STOCK MARKET TRANSACTIONS VALUE IS VERY IMPORTANT . Some people smart promote or demote ( the Trawlers ) to distorts value to pump or dump shares to the SEAGULLS who follow. I asked some logical questions on EXPO in my last post ? Can someone answer them ?
When nobody wanted , I highlighted VALUE for RCL at Rs 55 as an investment. Now at Rs 120 promoters started promoting.
RWSL at Rs 2 ( now some trying to value it to Rs 12-14 !)
CIND at Rs 30 ( now when it went to Rs 75 some say it worth Rs 100)
CDB at Rs 40 (that was years ago )
UNDERSTAND THE DIFFERENCE OF UNDERSTADING UNDEVALUE AND OVERVALUE.
Back to SFL and CSF
I saw some people trying to value CSF at Rs 2 using this opportunity to pump and dump. ( now trading at Rs 1.1)
SFL NAV is about Rs 13
( Trading at Rs 10 for SFL.N and SFL.P at Rs 6,2)
CSF NAV is about Rs 0.7
Both these shares have been manipulated in the past to high values like SFL to Rs 25+ etc and CSF Rs 2 +.
But what I can say now is , SFL is trading at a bigger Discount to asset value very much more than CSF. ( as you can see above)
So what is the real valuation Central bank will use to value these 2 companies? I don't know. Actually, they can use many models.
But I will use the simplest of them so all of you can understand and LEARN TO VALUE SOMETHING IN VERY SIMPLISTIC MANNER.
More than many other sectors, BANK AND FINANCE rely on Asset value ( Ofcourse Earnings, cash flow, management, future growth dividends , financial ratios etc etc etc matters too)
If am to fairly value CSF on Assets itself
( not looking at anything else) , I will use a multiplier of 1.4-1.5.
So CSF NAV Rs 0.7 X 1.5 = Rs 1.1
( actually that is the present trading price of CSF)
If I use the same multiple of 1.5 for SFL ,
SFL should be trading at about Rs 20 !
This also proves what I said before that SFL is valued more than CSF on assets and present market price.
Even if CB wants to value CSF at Rs 1.5 ( which is the maximum I can think of using a multiplier of 2) , then similarly SFL should be valued at Rs 25+ ( but now trading at Rs 10)
1) Don't get caught to promotions saying CSF can be valued at
Rs 2-3. It can't be and shouldn't be.
2) Please note that Share valuation is very complicated. It not simple as above. Depending on the Company, Size, Sector its in, Management capacity, Past and Future growth , dividend policy, balance sheets, cash flow etc etc things can change.
So don't use multiplier of 1.5 or 2 for every thing.
Asset value is also not everything. Its only one thing.
If you try this with NEST, LLUB or CTC , you are going to get a shock ! Do it as an exercise and see
If I value CDB using same model , CDB should be about Rs 250 using multiplier of 1.5!
All I can say is CDB is massively undervalued now but nobody chases or care about such. People follow Trawlers to chase after smaller prices overvalued shares to push price up and dump to make money in a day.
Don't forget what happened to
BLI from Rs 150 to Rs 9
REEF from Rs 100 tp Rs 9.
DPL from Rs 140 Rs 7
chasing overvalued shares in short term.
PLANTATION SHARES :
Please do go read my previous posts on the Plantation topic.
ALSO THE WARNING ABOUT CERTAIN PLANTATION SHARES.
Btw, I did talk about KVAL last time when it was Rs 78 for a TRADE. Then the very next day it hit Rs 88. With Covid sell off, it came down in price again. You had a chance to buy it again for Rs 74-75 even!
Now it back to Rs 84.
If today the interest remains, this can touch Rs 88-90.
Like I said if Sept report is good ( I expect such), this can go higher.
But today , the short term target to see is whether it can clear Rs 88-90 or not.
So if you trading know the difference on time of entry ( which was at Rs 75-80 not chasing high). For investment on KVAL, I need to see Sept report.
`When the seagulls follow the trawler, it is because they think https://www.independent.co.uk/news/uk/when-the-seagulls-follow-the-trawler-it-is-because-they-think-sardines-will-be-thrown-into-the-sea-1613641.html