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AlpacaInvestments

Hi all, this post is a continuation from my earlier post on $ComfortDelGro(C52.SI).

Please let me know your comments, and enjoy your Sunday evening!

https://alpacainvestments.blogspot.sg/2017...

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24 people like this.
ThumbTackInvestor :

nice work.
Hope we can see more stuff like this from you.
Thanks for the effort

jonathanliau :

once again.. 2.15 coming soon..

AlpacaInvestments :

Hey guys, please do not take my fair value to be accurate and dyodd too. I know that some of us here are vested in CDG, in that case, I hope that I’m wrong, so you guys can make money!
For the CDG bears, even if my fair value is accurate, the market can remain irrational for extended periods of time, and we may have to wait a long time to see CDG hit those levels I estimated. That is the beauty of the market.
Personally, when CDG dipped below $2 last week, I considered pulling the trigger, because I have a rather high proportion of cash available. However, I decided to wait for the 3Q results.
Lastly, my parents have a rather sizable exposure to CDG, in the $2.10 range, so you could probably classify that as a deemed interest haha. Therefore, it isn't entirely positive for me if CDG declines sharply, but I’ll be ready to initiate a position if it reaches a reasonable price!
Cheers! :)

akwl88 :

@AlpacaInvestments thank you bro for supporting 168!

akwl88 :

''In my previous article, I valued CDG's remaining business segments at $1.339, using a P/E ratio of 14. Therefore, based on my calculations, the fair value for CDG's shares should be between $1.68 and $1.81.''

AlpacaInvestments :

Hi @bgting,
Thank you for your feedback!
Regarding the table, I should have been clearer with the labeling, it should be 'taxi operating income' and 'total net profit excluding investment income' instead. I have updated this and attached the table below, which hopefully clears up any misinterpretations!
As for the revenue projection, I used 1H 17's y-o-y fall compared to 1H 16 of 8.3% to estimate a total decline of 8.3% for FY17 from FY16. I understand your point on this, and if we estimated by a q-o-q decline instead, our projected revenue for 2H 17 would be around $580 million instead of $611 million. This would lead to a lower fair value. Alternatively, we could also use a more bearish scenario from the second table to give us a larger margin of safety.

2V_ :

There are more than 1,500 taxis parking idle, there are cost and losses to this idle taxis, how do you quantify this?

AlpacaInvestments :

Reply to @2V_ : Hi, I believe we could use a more bearish scenario from the second table to give us a larger margin of safety, by estimating higher compression of profit margins and a larger decline in revenue!

bgting :

Good work! Great to see refinements of analysis.

I'm not really that familiar with this taxi business and Comfort, so asking with some ignorance, hope you don't mind. :-)

The table states the item as "Net Profit excluding investment income", which is higher than operating income. I thought that should mean the investment income was negative?

If I don't comprehend wrongly, you have sort of projected the revenue for first half into the second. Is the revenue from taxi business mainly from rental of the vehicles? If so, it's in the news that the rental has been falling along with taxi drivers jumping ship. Is this taken into account?

akwl88 :

omg i see a 1.68!!!

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ThumbTackInvestor
Expiry:
Target Price
$2.05
(+3.54%)
NOW:

$ComfortDelGro(C52.SI)

I've been doing DD on Comfort since it was in the $2.4+ range, but held back.
Today, I've finally initiated a position: 10,000 shares at $1.98

I'm expecting a rebound in the near term, and would still be cautious over the mid to long term.
The time to enter in a BIG way is when all the ppl who have been caught holding at much higher levels, as well as those who have caught the falling knives, stop saying they'll "average down".
That's when I know the market participants have stopped hoping.
In the meantime, the current rapid fall means that the fundamentals are too juicy for me to ignore.
Historical PE range of Comfort is within 14 - 25 in the last 5 years.
But IMO, it's too dangerous to take that at face value. Simply because the business dynamics have certainly changed in the past 5 years.
So we have to reconsider the fundamentals of the whole industry.
I've incorporated in my valuation, a 10% drop in EPS for FY17 (at half year mark it's a 3% gain from y-o-y, but in mrq, it's a slight drop, so a 10% margin is certainly conservative enough)

At my entry price of $1.98, that gives me a PE of 15, taking into account a 10% drop.
dividend yield of just over 5%
More importantly, CDG has 1 thing going for it that's under estimated: the business generates a ton of FCF consistently.
In the past 5 years, only 1 year has negative FCF.

I'll be happy with a respectable gain in the short term. Longer term wise, I'd only increase the position size if the prices drop a lot more, my initial entry price leaves a lot of room and ammunition for adding.

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Salvatore

With my divestment of $ComfortDelGro(C52) I have bought into $AEM(AWX) at a price of $2.75. :) Here is my brief coverage of this company.

I previously held this counter and released all I had at a price of $2.65. After a barrage of good news, I decided to enter the foray once again.

Throughout this entire coverage, I am assuming a profit margin of only 9%, which is a tad lower than their Q12017 profit margin of about 9.8%. Therefore, all my calculations here will be UNDERSTATED if they were to improve their profit margins, which has been the case over the last few years.

What I am also assuming is that there are no further sales order received from customers, which is almost zero probability.

Ready to read on? LETS GO!

"The Company is pleased to announce that it has received as at 31 May 2017, sales orders worth S$182 million for delivery in FY2017. This represents an increase of S$30 million in sales orders received over the previous sales order received announcement made on 18 April 2017."

With a profit margin of 9%, $182m of revenue equates to $16.38m of profit, which averages out to $5.46m per quarter. Adding q1 earnings, total year earnings will be 20.5 million, which equates to an EPS of $0.32.

With such an EPS, the share price of $2.72 represents a PE ratio of ONLY 8.6x. Everyone knows that this is an INSANELY low PE ratio, and that the market has not fully priced in the growth that is to come.

Even if it goes to an undemanding PE ratio of 12x, the price would have already grown to $3.8. I personally do not think that the management would allow the stock to escalate to that price, and they would issue bonus shares to improve the liquidity of the shares.

To give a comparison, $Micro-Mechanics(5DD) is trading at a PE ratio of 13x and $UMS(558) is trading at 17x (Info extracted from Stockfacts, correct me if I am wrong.)

What else do we want? It does not stop here! The company states - "Thirdly, with clear visibility of growth into the next few years, we intend to adopt a dividend policy to pay annual dividends, including interim dividends, of not less than 25% of profit after tax excluding non-recurring, one-off and exceptional items."

With a minimal profit estimation of AT LEAST $20million, 25% profit means $5m paid out, which equates to a dividend of at least 2.8% for an insane growth company.

To top it all of, institutional investors are buying in to AEM as well. "is pleased to announce that several long-only institutional funds have bought AEM shares and have become new shareholders. The institutional funds took up 2,737,800 shares at $2.70 a share from Orion Phoenix on 5 June 2017."

With this massive inflow of funds, I believe that AEM will attract many more institutional investors. I do not see Orion Phoenix reducing the percentage of their shares any further. With Institutional Investors buying at a price of $2.70, there is a major support there and I only see the price going up.

This is only the beginning of AEM!

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JSKM

$ComfortDelGro(C52.SI)
Edited : 2.68 incoming

PREVIOUSLY
RIP big seller , 1.68 incoming

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