Friday, May 19, 2017
Sunday, May 14, 2017
Eagle Cement Corporation IPO, What you need to know fundamentally.
Eagle Cement Corporation is a fully integrated Filipino-owned company primarily engaged in the business of manufacturing, marketing, sale and distribution of cement. The Company has the newest, state-of-the-art, and single largest cement manufacturing plant in the Philippines. The Company is the 4th largest player in the Philippine cement industry based on sales volume, with the fastest growing market share among all competitors in the industry since it started commercial operations in 2010. The Company was incorporated and registered with the Securities and Exchange Commission (SEC) on June 21, 1995. Mr. Ramon S. Ang, directly (29.29%) and through Far East Cement Corporation (68.57%), owns majority of the issued and outstanding shares of the Company.
The Company has two (2) wholly-owned subsidiaries: South Western Cement Corporation (“SWCC”) and KB Space Holdings, Inc. (“KSHI”). SWCC is organized primarily for the manufacture and sale of cement and its by-products and owns mineral rights in Malabuyoc, Cebu. KSHI is a land holding company that owns several parcels of prime commercial land in Mandaluyong City.
The competitive strength of the Company is founded on its end-to-end production strategy which
seamlessly integrates critical raw material sourcing with modern manufacturing technology resulting to one of the most efficient cement manufacturing operations in the country. The Company has the largest integrated single plant production capacity in terms of cement output in the Philippines through its primary cement production facility located in Barangay Akle, San Ildefonso, Bulacan (the “Bulacan Cement Plant”). The Bulacan Cement Plant consists of two (2) production lines with an annual combined cement production capacity of approximately 5.1 Million MT or 130 Million bags per annum. It is strategically located near demand-centric areas and in direct proximity to rich limestone and shale reserves covered by the exclusive mineral rights of the Company. In addition, the Company also maintains a grinding and packaging facility in Limay, Bataan which can process 12 Million bags of cement per annum. Eagle Cement is currently in the process of constructing a third production line in its Bulacan Cement Plant (“Line 3”), due to be completed in 2018 which will increase its cement production capacity by 2 Million MT or about 50 Million bags per annum. This will bring total production capacity to about 7.1 Million MT or about 180 Million bags per annum, enabling the Company to consolidate its position as one of the leaders in the cement industry.
The Cebu Cement Plant will be a fully integrated plant built to manufacture cement using the raw materials to be extracted under the MPSAs of the Company in the province of Cebu. The plant will use approximately 2.5 Million tonnes of limestone per annum which will produce an estimated 1.5 Million tonnes to 2.0 Million tonnes of cement. Majority of the cement produced will be dispatched from the plant by sea to a network of bulk cement distribution terminals across the Visayas and Mindanao. Production in the Cebu Cement Plant is expected come on stream in 2020.
Eagle Cement currently distributes its products in the Luzon region which constitute about 65% of total cement demand in the Philippines, particularly in the following areas: National Capital Region (Metro Manila), Region I (Ilocos Norte, Ilocos Sur, La Union, Pangasinan), Region II (Batanes, Cagayan, Isabela, Nueva Vizcaya, and Quirino), Region III (Nueva Vizcaya, Nueva Ecija, Bulacan, Pampanga, Tarlac, Bataan, Zambales), and Region IVA (Cavite, Laguna and Batangas, Rizal, and Quezon) . As of 2015, NCR still serves as the center of construction and infrastructure activity in the country. Eagle Cement is considered one of the leading players in areas with the highest economic activity in the Philippines with an estimated market share of 30% in NCR, Region III, and Region IVA, based on internal Company data. As of the date of this Prospectus, the Company does not sell its products in other countries.
The competitive strength of the Company is founded on its end-to-end production strategy which
seamlessly integrates critical raw material sourcing with modern manufacturing technology resulting to one of the most efficient cement manufacturing operations in the country. The Company has the largest integrated single plant production capacity in terms of cement output in the Philippines through its primary cement production facility located in Barangay Akle, San Ildefonso, Bulacan (the “Bulacan Cement Plant”). The Bulacan Cement Plant consists of two (2) production lines with an annual combined cement production capacity of approximately 5.1 Million MT or 130 Million bags per annum. It is strategically located near demand-centric areas and in direct proximity to rich limestone and shale reserves covered by the exclusive mineral rights of the Company. In addition, the Company also maintains a grinding and packaging facility in Limay, Bataan which can process 12 Million bags of cement per annum. Eagle Cement is currently in the process of constructing a third production line in its Bulacan Cement Plant (“Line 3”), due to be completed in 2018 which will increase its cement production capacity by 2 Million MT or about 50 Million bags per annum. This will bring total production capacity to about 7.1 Million MT or about 180 Million bags per annum, enabling the Company to consolidate its position as one of the leaders in the cement industry.
The Cebu Cement Plant will be a fully integrated plant built to manufacture cement using the raw materials to be extracted under the MPSAs of the Company in the province of Cebu. The plant will use approximately 2.5 Million tonnes of limestone per annum which will produce an estimated 1.5 Million tonnes to 2.0 Million tonnes of cement. Majority of the cement produced will be dispatched from the plant by sea to a network of bulk cement distribution terminals across the Visayas and Mindanao. Production in the Cebu Cement Plant is expected come on stream in 2020.
Eagle Cement currently distributes its products in the Luzon region which constitute about 65% of total cement demand in the Philippines, particularly in the following areas: National Capital Region (Metro Manila), Region I (Ilocos Norte, Ilocos Sur, La Union, Pangasinan), Region II (Batanes, Cagayan, Isabela, Nueva Vizcaya, and Quirino), Region III (Nueva Vizcaya, Nueva Ecija, Bulacan, Pampanga, Tarlac, Bataan, Zambales), and Region IVA (Cavite, Laguna and Batangas, Rizal, and Quezon) . As of 2015, NCR still serves as the center of construction and infrastructure activity in the country. Eagle Cement is considered one of the leading players in areas with the highest economic activity in the Philippines with an estimated market share of 30% in NCR, Region III, and Region IVA, based on internal Company data. As of the date of this Prospectus, the Company does not sell its products in other countries.
Click this link to see the prospectus.
Eagle offer price was adjusted from 16Php at 15Php, the price is being offered from May 11, 2017, to May 16, 2017, and will be tentatively listed on May 29, 2017. But, how reasonable is the offer price based on their financial standing? Do note that some of the factors that likely play a larger role in IPO valuation are not the numbers or financial projection but, how the company's story or its qualitative elements are being presented to the public. Sometimes, these are even more powerful than the revenue projection and financials, this article will be based only on their financial standing.
Eagle book value from 2014 to 2016 increases on average of 28.78%. The offer price if based on their 2016 book value would be 4 times higher than its book value per common outstanding share. I guess, the company believe that they are worth 4 times than their book value per share. But, will the investors share the same sentiment as Eagle? I guess we'll find out when it's finally listed.
In terms of earning, the net income from 2014 to 2016 increased on average of 13.48%. The offer price would give 18.03 price to earning ratio (P/E) basing from their 2016 net income. Meaning, investors of this company are enticed to buy 18.03Php for every 1Php earning last 2016. With a 18.03 P/E and with earning per common outstanding share (EPS) growth rate of 11.06% from 2015 to 2016, the company PEG ratio would be 1.56 which means, investors to be of this company are enticed to pay 18.03Php for every 1Php income last 2016 for an 11.06% EPS growth rate from 2015 to 2016. A fair valued stock usually has PEG ratio of 1 meaning, what you are paying for that earning (P/E) is equivalent to the growth rate (increase in EPS).
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Eagle offer price was adjusted from 16Php at 15Php, the price is being offered from May 11, 2017, to May 16, 2017, and will be tentatively listed on May 29, 2017. But, how reasonable is the offer price based on their financial standing? Do note that some of the factors that likely play a larger role in IPO valuation are not the numbers or financial projection but, how the company's story or its qualitative elements are being presented to the public. Sometimes, these are even more powerful than the revenue projection and financials, this article will be based only on their financial standing.
Eagle book value from 2014 to 2016 increases on average of 28.78%. The offer price if based on their 2016 book value would be 4 times higher than its book value per common outstanding share. I guess, the company believe that they are worth 4 times than their book value per share. But, will the investors share the same sentiment as Eagle? I guess we'll find out when it's finally listed.
In terms of earning, the net income from 2014 to 2016 increased on average of 13.48%. The offer price would give 18.03 price to earning ratio (P/E) basing from their 2016 net income. Meaning, investors of this company are enticed to buy 18.03Php for every 1Php earning last 2016. With a 18.03 P/E and with earning per common outstanding share (EPS) growth rate of 11.06% from 2015 to 2016, the company PEG ratio would be 1.56 which means, investors to be of this company are enticed to pay 18.03Php for every 1Php income last 2016 for an 11.06% EPS growth rate from 2015 to 2016. A fair valued stock usually has PEG ratio of 1 meaning, what you are paying for that earning (P/E) is equivalent to the growth rate (increase in EPS).
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Disclaimer: Trade or invest at your own risk.
Friday, May 5, 2017
Know Your Stocks - How Expensive is SM Investment Corp. (SM) fundamentally based from their Dec 2016 Annual Report?
SM Investments Corporation (SM) was incorporated on January 15, 1960 to serve as the holding company of the SM Group of Companies. For management purposes, SM is organized into business units based on products and services. As a result of the property group corporate restructuring in 2013, SM changed the presentation of its segment information and has identified three reportable operating segments as follows: property, retail, and financial services and others.
The property segment is involved in mall, residential and commercial development and hotels and convention centers operations. The retail segment is engaged in the retail/wholesale trading of merchandise such as dry goods, wearing apparels, food and other merchandise. The financial services and others segment primarily includes the Company which engages in asset management and capital investments, and associates which are involved in financial services.
The Company is engaged in businesses through its subsidiaries, namely: retail ("The SM Store", "SM Supermarkets", "SM Hypermarkets", "SaveMore" and Waltermart Supermarket, Inc.); property (SM Prime Holdings, Inc.); financial services (BDO Unibank, Inc. and The China Banking Corporation); and others (Belle Corporation, Atlas Consolidated Mining & Development Corporation, and The Net Group).
On February 29, 2016, the Board of SM approved the merger of its retail arm, SM Retail Inc., with several related retail companies. The related companies operate local retail chains including "Ace Hardware"; "SM Appliance Center"; "Homeworld"; "Our Home"; "Toy Kingdom"; "Watsons"; "Kultura"; "Baby Company"; "Sports Station"; and several other specialty stores. The combined entity will have 1,927 outlets and 2.4 million square meter of gross floor area
The property segment is involved in mall, residential and commercial development and hotels and convention centers operations. The retail segment is engaged in the retail/wholesale trading of merchandise such as dry goods, wearing apparels, food and other merchandise. The financial services and others segment primarily includes the Company which engages in asset management and capital investments, and associates which are involved in financial services.
The Company is engaged in businesses through its subsidiaries, namely: retail ("The SM Store", "SM Supermarkets", "SM Hypermarkets", "SaveMore" and Waltermart Supermarket, Inc.); property (SM Prime Holdings, Inc.); financial services (BDO Unibank, Inc. and The China Banking Corporation); and others (Belle Corporation, Atlas Consolidated Mining & Development Corporation, and The Net Group).
On February 29, 2016, the Board of SM approved the merger of its retail arm, SM Retail Inc., with several related retail companies. The related companies operate local retail chains including "Ace Hardware"; "SM Appliance Center"; "Homeworld"; "Our Home"; "Toy Kingdom"; "Watsons"; "Kultura"; "Baby Company"; "Sports Station"; and several other specialty stores. The combined entity will have 1,927 outlets and 2.4 million square meter of gross floor area
As of May 04, 2017, SM was last traded price at PHP 755.00, a gained of 1.34% from the last traded price. SM is part of PSE index with a percent weight of 10.86% meaning, of all the 30 companies within PSE index, SM effect on PSEi movement is the highest.
The current market price of this company is 2.19 times higher compared to their recorded book last December 2016, not yet expensive for most value investor since a PBV of more than 3 is considered expensive. In terms of P/E, the company recorded a trailing P/E of 29.15 meaning, for every 1PHP earning last 2016, investors of this company are willing or is paying 29.15Php. With a 29.15 P/E and with growth rate of 7.6% from 2015 to 2016, the company trailing PEG ratio would be 3.83 which means, investors of this company are paying 29.15Php for every 1Php income last 2016 for a 7.6% growth rate only from 2015 to 2016. A fair valued stock usually has PEG ratio of 1 meaning, what you are paying for that earning- the P/E is equivalent to the growth rate- increase in EPS.
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The current market price of this company is 2.19 times higher compared to their recorded book last December 2016, not yet expensive for most value investor since a PBV of more than 3 is considered expensive. In terms of P/E, the company recorded a trailing P/E of 29.15 meaning, for every 1PHP earning last 2016, investors of this company are willing or is paying 29.15Php. With a 29.15 P/E and with growth rate of 7.6% from 2015 to 2016, the company trailing PEG ratio would be 3.83 which means, investors of this company are paying 29.15Php for every 1Php income last 2016 for a 7.6% growth rate only from 2015 to 2016. A fair valued stock usually has PEG ratio of 1 meaning, what you are paying for that earning- the P/E is equivalent to the growth rate- increase in EPS.
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Disclaimer: Trade or invest at your own risk.
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