From now until 29-Jan, you could access https://app.sli.do/event/lxmezhxh and ask questions anonymously. This is one of the questions post.
It is not in my interest to discuss individual companies but I think there is a learning opportunity in discussing Samudera, which I owned for a couple of years. I would refrain from discussing SUTL as I am still vested in the company (I do not think SUTL is very attractively priced atm).
This is a very quick, back of the envelope look which may not appeal to everyone. It is also overly conservative for many people.
(all screen captures are from www.stocks.cafe. It is a wonderful site that I used since I started value investing, and the fees are worth it)
***
Samudera is currently selling at market valuation of about 538m shares multiply by 0.26 SGD = 139m SGD. I going to convert this to USD, because the financials are reported in USD.
Hence, Samudera's market cap is about 104 USD.
Is Samudera attractive from its earnings ability?
over 13 years of cashflow statement, Samudera's total sum of free cash flow is...
-64.3m
That tells you that it is a poor business.
The following details my quirky way of looking at the earnings as a owner, if there is a way to privatize this company (by taking advantage of the stock market's pessimism). I would adjust the market valuation based on its cash net of loans.
It has 56.519m cash (USD) and 60.421m trade receivables. Usually I will at least discount 33% off the trade receivables. That sums up to about 100m USD.
Total bank loans are 28.605+7.090= 35.695m.
Its payables, which I will conservatively take at full value, 23.617+22.532= 46.149m
That sums up to about 82m (35.695 + 46.149) USD in "liabilities". When you subtract 100m USD of "cash + receivables", that is about 18m of cash after paying off these quick liabilities.
So to someone who is thinking of delisting this company from the stock market: if it cost about 104m USD (stock market valuation at the moment) to buy over the entire company off the stock market, pay up the entire "debt" with its cash on hand, and still have 18m left in cash. I am actually paying 104-18 = 86m USD for the entire company.
Looking back at the income statement over the last 12 years, Samudera earns about an average of 6.3m USD in profits. Do note that income statements are the least reliable (and yet, ironically, influence stock prices the most). In order words, the numbers is more likely to be worse than better. That means I am paying 86m for 6.3m every year. That is a multiple of 13.5. That is not on the low side.
Looking at it assets wise
I tend to be very conservative and be selective in assets I deem as valuable, but would accord liabilities at 100% of its stated value.
The big ticket in asset value is its property, plant and equipment, it has about 115m in USD. At footnotes 12, it stated that it has 28m of freehold land, which is attractive. It has 4m in freehold properties.That makes it 32m. The vessels are stated at 55m, which I have no idea how to value. If we were to halve them, that is about 28m.
Taking its freehold land and properties (32m), vessels, (28m, which is very unreliably valued, I might add), and cash+receivables (100m), that is about 160m in assets.
There are 93m in total liabilities.
Net asset is about 160-93 = 67m USD. Compare this to the current market cap of 104 USD, it isn't favourable. Even if we were to value the vessels at 55m, as it was in the books, the net asset is 95m, still lower than the market cap of 104m USD.
(Just to express this value into "per share"...
Since there are about 538m shares, that is about 0.125 USD (67/538) per share of net asset, which is about 0.17 SGD.
I don't think at the current price of 0.26 SGD a share is attractive, assets wise)
Dividend History
Its dividend history is respectable, but I think it would be a mistake to look at dividends here.
Firstly... it is a cyclical industry and thus unreliable as a dividend payer. Secondly, its cashflow generation is poor, and from the perspective of a business owner, it shouldn't be paying dividends at all!
Summary
Because of its poor cash generation, and that the market is already fairly pricing in its (my opinion) net current assets, it is not attractive at its current price.
Of course, if the market do sell it at a substantial discount, there is an opportunity. In my opinion, that figure is 0.17 SGD a share.
(the red line marks 0.17 SGD a share, and everything below is a buying opportunity)
For the last 3 years, the biggest margin of safety avail was 0.11 SGD a share, which represent a 36% discount to adjusted asset value. However I feel:
a) On hindsight, this opportunity took place during the pandemic sell down. It would have make more sense to buy companies with decent earning power.
When you buy and hold a good company, it would reward you with increasing cashflow, increasing asset value which would usually translate to increase stock prices in a sane, rational market. This company did not demonstrate the ability to do either over the decade..
If you had bought Samudera instead, you could have made a substantial profit. But you would have to expend effort and time look for better opportunities.
b) Its liquidity is low, and as such, you might not be able to buy it easily. Sure, you could buy them in batches, but that would require more effort monitoring the stock market for sellers, and incur higher trading costs.
3-4 years ago, I was holding the share at about 0.18 SGD per share and liquidate at break-even. I thought that it is a cheap company, and dreamt of the potential profits coming my way.
But I was wrong, and I learned.
I hope this example of my (very conservative) way of valuing stocks is helpful to you.
