CEYLON INVESTMENT PLC (CINV.N0000)

[yellow knifeTop contributor]

Ceylon Investment Plc, uses fundamental analysis in selection of its investment portfolio. It has invested mostly in Central Industries considering the capital adequacy and management of CFIN. However in recent rallies many other shares out performed the selected portfolio of CINV.

Company	%
Central Finance	25.53
Commercail Bank	7.62
Sampath bank	6.91
HNB	6.91
Hemas	4.74
Meltacorp	4.53
Dialog	4.2
Ceylinco Insurance	3.97
HNB Non Voting	3.56
Cargills	3.42

[yellow knifeTop contributor]

Ceylon Investment PLC(“the Company”) -Scrip Dividend Please note that1,886,982 ordinary voting shares of the Companyhave been listed with effect from 24thSeptember 2020, pursuant to a Scrip Dividend in the proportion of 1:52.6666735511

[The AlchemistTop contributor]

Yellow Knife, in your post regarding portfolio, you have forgotten the most important share - Bukit Darah ! both CINV and GUAR have more than 10 million shares each.

[yellow knifeTop contributor]

YES, alchemist these days I have failed to write complete posts on shares. Yes I should have covered entire Carsons Group as well as investments in unquoted to get a full picture.

[smallvilleTop contributor]

Yellow Knife, in your post regarding portfolio, you have forgotten the most important share - Bukit Darah ! both CINV and GUAR have more than 10 million shares each.

OMG.. Alchem is bak.. How r u old friend?

We need more post from you

[The AlchemistTop contributor]

Hi Small its a small small world after all !

?

[slstockVeteran]

So 2nd Quarter ended today 30th Sept.
what Group will have the best results for the 2nd Q ? I PREDICT Carson Group companies Profit / EPS for 2nd Q as follows -

CINV - NPAT = 3.7 BILLION , EPS = 37
GUAR - NPAT =7.4 BILLION , EPS = 90
CARS - NPAT = 6 BILLION , EPS = 30
BUKI - NPAT = 3 MILLION , EPS = 30  

plus or minus 5 % please excuse :-)
what do you think ?

Alchemist, as courtesy to you am responding ( at the forum these days
as I wanted  to help this guy as you would  have noticed)  

How are you attributing these EPS numbers for CINV/GUAR ?

I presume you are not talking here about, Real Cash profit ?

Are you taking Capital gains of investments of CINV and GUAR
( considering  CARS and BUKI price ups recently) to add them to
the total  eps?

[The AlchemistTop contributor]

DELETED

[slstockVeteran]

Okay.  

I have not analyzed  BUKI/CARS cash profit senario or
CINV / GUAR  vs recent BUKI/CARS market price up in depth
to comment.

But if they can report these numbers ( +- 5%),  you have done
an amazing job.

Let see.

[slstockVeteran]

Okay.
I took a look at the past 10 year  Annual Eps of CINV.

Highest I saw was Rs 13.6 in 2011.

If they can report these  very high numbers you presented
for just 1 quarter,  you would have done an amazing job. 

Lets see.


Below is for 2011- 2015

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Below is for 2016 to 2020


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[The AlchemistTop contributor]

accounting rules changed i think in 2016. Earlier only realised gains were considered earnings and eps. now due to mark to market, even unrealized gains are considered earnings. vice versa with losses.

[The AlchemistTop contributor]

still, all these gains, profits and fancy eps for CINV & GUAR in 2nd Q are small (ville) potatoes compared to what may happen if and when the Loan to Private Equity conversion happens at Goodhope Asia Noh ? Remember then BUKI owns 60 % of Goodhope usd 1.7 Bill pie. and CINV & GUAR own over 20 % of BUKI.
how high can BUKI go ?

[pathfinderTop contributor]

Thanks everyone for good discussion.I remember Alchem talking about carsons group earlier,Here is the link, [You must be registered and logged in to see this link.]

[seekTop contributor]

To be honest, being with most of you since 2010-2011 from SLEF, I still can't understand these calculations presented by Alchem.

[slstockVeteran]

Alchem.


You are the king of analysis on this  CARS group.
You favor and study this group a lot  I know.
So when you post I usually take what you say on the face value itself.

But as the eps numbers you presented were very high,  your post did raise
my academic interest.  So I spent some time to analyze further.


Here are my observation and questions out of Academic interest
( I think you asked for feedback too)

~~~~~~~~~~~~~~~~


1) I asked initially

Are you taking Capital gains of investments of CINV and GUAR
( considering  CARS and BUKI price ups recently) to add them to
the total  eps?

Then I noted

Okay.
I took a look at the past 10 year  Annual Eps of CINV.

Highest I saw was Rs 13.6 in 2011.

If they can report these  very high numbers you presented
for just 1 quarter,  you would have done an amazing job.

Lets see.

2) You replied with something I  did not think about. Thanks for that.  

accounting rules changed i think in 2016. Earlier only realised gains were considered earnings and eps. now due to mark to market, even unrealized gains are considered earnings. vice versa with losses.
 

Usually such gain in the past, boosted the NAV not EPS.

If this is accurate it can be a game changer  for investment trust
and companies during bull markets to report high numbers.
So , this can help companies like VONE too then ?  

Need to see what this New Account policy does for Investment trusts.

But still I have some observations on this on CINV as below 


ps : Anycase, in reality it is not actual profits but unrealized gains right!
Assuming the numbers are accurate , as much as the  reporting numbers  
goes up during bull , in bear,  the losses will be equally bad.
So we need to assess this on median mind set I feel. 



~~~~~~~~~~~~~~


I will just stick  to CINV to stay on topic and also simplify things.

CARS/BUKI group must of the king of cross holding , mind boggling
company set ups in history of man kind  haha ( CFLB doesn't hold a candle)

So much for Warren Buffet  need to invest in Simple business one can understand


Here are some indepth observations I made. 

~~~~~~~~~~~~~~~

OBSERAVATION 1)

If I understand right, I think you are taking  the recent price jump of BUKI from
Rs 200 to 500 and counting it as marked to market  gain converted to Eps of Rs 30
for CINV.  Am I right or wrong on this ? 

My whole below observation is based if this is right only.


DOUBT  1: 


Here is one doubt I have about this.
Effectively CINV does not hold BUKI directly.
They hold BUKI though RIT!Am I right so far?


In essence, as CINV hold 49.9% of RIT.
RIT holds 20% of BUKI.
So CINV holds 10% of BUKI INDIRECTLY.

As for accounting as I see, CINV is allowed   to consider
RIT  % of profits as equity accounted investee
( so BUKI 10% is represented though RIT not directly)

and not  Net change in fair value,  to mark to market the share price gains?



Also we should note , RIT is an unquote/unlisted company.
There is no market trading price for RIT.

CINV only reports % of Profits of RIT as I mentioned.


So can CINV directly add price jump of BUKI from Rs 200-500 ( Rs 30)
which essentially is not directly under CINV ( but only under RIT) ?


~~~~~~~~~~~



Observations 2 : On the matter of Goodhope.


1) Can you please find me a link to this "Loan to Private Equity conversion"
   I like to study more about it.



2)  So in essence Goodhope on paper can be valued at USD 1.7 Bil.
60% of that holding ( for BUKI) is about USD 1 Bil right?

But what about the loan cost already accounted for in books.
How much will be the gain is they do convert?

3) I am just raising this issue as an  alternative way to think.


This Loan to Equity thing  has been going on for 6-7 years now right?
Why are they never coverting this loan ? Why the delay ?


What are the chances they will not do it and do some jimart
for the Selva Family to keep the money benefits of this deal
( not minorty share holders.) 


We know CFLB holds  lands.
I also know you follow that group too due to possible  land sale values.

But if we look at the practical situation, for nearly a decade CFLB does
nothing but only making massive losses  year after year.
Right issues to suck investor dry on top of it.

Anushman does regular trades to boost share price and dump on
retailers  certain companies of the group +  they do husband wife like swaps
too.


I know CARS/BUKI  cannot be compared to CFLB group.
I find CARS/BUKI so much  better and of value than CFLB group
( and its Rights factory.) 


Bottom line is , it is wise/ feasible fir us small sprats to  expect these
bigFamily businesses to  think about giving any big  benefits to  Minority shareholders or can they do jilmarts to keep chunk to themselves?

What do you think ?

[The AlchemistTop contributor]

Hi SLS, Thanks for some good feedback.

Ref your observation 1, yes you are right about the unrealized gains. earlier, only realized gains and dividends / interest constituted reported earnings. however, given the nature of their business ie buying, holding and selling equities, recognizing unrealized gains is fairer as otherwise, it would distort their returns. recognizing earnings only when you sell tells only half the story. as you said,  earlier the unrealized gain was captured as an increase in NAV only. one can argue, that too is pointless ?

The other point regarding how this flows through the CINV / GUAR / RIT Group is as follows

A) RIT first accounts for gain as 20.2 million shares of BUKI into Rs 280 (460 minus 180). RIT also has many other shares.

B) CINV will book half of that (pls refer last 2 q's Earnings Statement of CINV. It appears as share of equity accounted investee. you will see the format and get the idea).

C) GUAR will take entire RIT Profit and deduct the share it does not own in CINV (34 %) as minority interest.

Regarding your observation 2, re DEBT to PRIVATE EQUITY conversation, Please refer BUKI Annual Report 2019/2020, Pages 183/184, Note 38 A (b), (c).

Perhaps i can anticipate your next question, so i will answer that with this question. were you present at BUKI / CARS Virtual AGM on ZOOM on 18th September ?

[Value]

Hi Alchemist and Forum members,

The BUKI shares held by GUAR/CINV are held as "Investments in Fair value through other comprehensive income". The changes to fair values are not taken into profit or EPS calculation. It is rather accounted as other comprehensive income and taken to revenue reserves in the balance sheet (this, in turn, will affect the NAV). This can be checked in even in the latest financial statements (Q1 20/21) of CINV and GUAR. If there was a change in the accounting policy, it should have been reflected in Q1 20/21, but it is not the case.

It is therefore very clear that changes to the fair value of BUKI will not impact the EPS.

Let me come to the calculations now.

RIT holds 20,438,250 shares of BUKI. The market value of BUKI has increased by Rs. 287.6 per share during the quarter. The total gain that RIT will get due to FV change of BUKI is is 5.878 Bn. This is not a profit to RIT, but an OCI in line with the accounting policy. I want to emphasize again that this gain of 5.878 Bn will not be taken into the profits or EPS of RIT. This gain will however certainly increase the NAV of RIT.

Now let's look at the effective shareholding/ownership of RIT

CINV has 49.95% control on RIT.
GUAR group has 82.98% control on RIT.
CARS group has 56.97% control on RIT
BUKI has 26.02% control on RIT

All these above numbers are published in the respective company annual reports.

Now let's see how the Rs. 5.878 Bn gain that RIT has made will go into each company accounts.

[You must be registered and logged in to see this image.]

Kindly note again that these gains will not be taken into EPS of the any of the companies discussed above. These gains will be treated as OCI and will be taken to reserves in the balance sheet. It is therefore will increase the NAV. E.g Buki's net asset value will increase by Rs. 15 per share and no impact to EPS.

The sales of WAPO has not been done yet and therefor no gains from that will be recorded in Q2 20/21 financials.

Palm oil prices have improved YoY and this is a positive for Buki. However it is going to record exchange losses for Q2 as IRD currency has unfavourably changed during the quarter.

I have no idea about what was told at the AGM regarding good hope asia listing and or debt to equity conversion. Please enlighten us on this.

Cheers!

[slstockVeteran]

Alright Alchem. 

I took a further look , here are my latest observations 


1) Reg CINV/RIT profits: 

This was my initial question too if you read.

Due to 20.4% longer term holding, what I understand is  
RIT should claim   BUKI as an Associate.  

So shouldn't the "Share of profit / (loss) of equity accounted investees" 
be part of the  Profit RIT makes  ( not marked to market capital gain on BUKI share price movement) 


In other words
a) Any EPS CINV claims are part of profits of RIT. 
b) Any BUKI capital gain effects CINV NAV and  not  its EPS. 



2) Reg GoodHope  RCPS


OB 1 : 

Report says 
" GAHL together with its subsidiary plantation companies secured a USD 105 million,  6-year Senior Secured Non-Amortizing Term Loan Facility, from a private credit arm  of a global investment and private equity firm"
  

Who is this Global Investment Firm? 
Is this firm  100% owned by BUKI? 
Else how does BUKI come into giving the $105 Mil Loan.
 

OB 2: 

Providing this Global Firm is Directly BUKI who has given the Loan. 

I still see a Choice/ Catch. 

"RCPS has to be redeemed at the end of the term at a pre-determined amount 
and if not converted to ordinary shares of the GAHL already.

I think you are assuming,  they will go with option 2 
to convert RCPS  to Good Hope shares and not option 1


3) No . 
I was not present at  BUKI / CARS Virtual AGM on ZOOM on 18th September . 
 
 So ,what was said there? 

[subash]

Thanks Alchem, SLS and value for educating us on this group

[The AlchemistTop contributor]

VALUE - Welcome to the Forum. Great first post. keep it up and keep us informed.  
VALUE, Yes you are right. and SLS too. I stand corrected. i overlooked the fact the BUKI is an Associate Company of RIT with RIT owning over 20 %, and Price gain of BUKI will flow into Other Comprehensive Income (OCI)  and not be counted in EPS.  I rechecked the Income Statements and this is the case.  

As i stated earlier, all these EPS, NAV etc are minor matters. The point is RIT owns over 20 % of Buki. BUKI owns 60 % of GOODHOPE ASIA HOLDINGS LIMITED (GHAHL). If the usd 105 Million Loan given by a leading International Investment Bank and PE Company to GHAHL is converted to Equity, it will value GHAHL AT USD 1.7 Billion, more than the combined market capitalization of the 2 largest market cap companies in town ie. JKH + CTC.      

I am reminded of one of Warren Buffets favourite quotes -

If a tree grows in a forest partially owned by us, but we don't record the growth in our financial statements, we still own part ... We care not whether the auditors hear a tree fall in the forest; we do care who owns the tree and what's next done with it.

[Value]

Thanks Alchemist.

It would be great if you post your revised EPS calculations. Innocent people must not be misled after all.

The loan to equity conversion thing - this seems to be in discussion for a long time now. Any reliable source / recent news item on this suggesting that this will get through ?. Even if this happens - a detailed analysis will be required to decide on how the existing shareholders will benefit.

[The AlchemistTop contributor]

VALUE, for ease, i have deleted my posts in above post concerning eps forecasts.
I have neither the time nor the inclinication to do calculations now

Since you seem very knowledgeable and informed, please do so if so inclined. Add VALUE !  

I was not aware that the Loan to Equity conversion matter was in discussion for a long time now. first i heard was in the Annual Report 19/20 released about a month ago. How do you know it was in discussion for a long time ?

Re detailed analysis required to determine how  
existing shareholders will benefit, this is common sense. what comes after a PE Deal ?

[Value]

Hi Alchemist,

I am sorry if my reply was a bit harsh. I didn't want the new comers to the market to be misled.

I would love to post my calculations if time permits.

I was under the impression that this debt to equity conversion was part of the initiatives related to listing Good Hope Asia. Still we need certain details of the deal ( if there is any) to work out likely benefits.

[The AlchemistTop contributor]

VALUE, its so refreshing that a new comer such as you who joined today and first post was a few hours ago, is so concerned about other new comers being misled. Fantastic.  

But honestly i am confused about your intentions. May i ask you, are you a shareholder of the Group, a follower, an insider, a potential collector of the shares of this Group ?  

What is confusing me most how you could be under the impression that this debt to equity conversion was part of the initiatives related to listing Good Hope Asia and that it was ongoing for sometime, when first shareholders heard about it was in the AR about 4-5 weeks ago.
Obviously since you were not at the virtual zoom AGMS, you are unaware of the details of the deal.  The likely benefits are common sense.

[Value]

Hi Alchemist,

I am a new member of the forum but not new to the market. I may have used a bit harsh words as i got a few messages from people about your post and got carried away a bit. I saw some extensive posts about the Buki Group from you in the past and they seem quite impressive. I was however somewhat surprised about your post yesterday regarding the EPS calculations and that’s why I came here to comment.

It will help everyone if you could please explain whether there was any hinting of the GHA listing or the USD 1.7 BN PE/loan matter you mentioned at the virtual AGM meeting. That would help everyone a lot and not arrive at wrong conclusions.

Again, my intention was to get the matter cleared only. Anyway, I dont want to drag this any further .