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LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

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LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 3:44 pm

Let me first refer Power Inc, of David Rothkopf from page 210.

" John D. Rokefeller , son of a snake oil saleman from upstate New York was all business. He founded Standard Oil. Standard Oil Ohio was established in 1870. By 1878  the company account for 33 million barrels of America's 36 million barrel refining capacity. In 1895 , Standard's buying arm declared that from then , it would unilaterally decide the price of American crude .

Later President elected by the people of US, McKinley, dealt with the monopolies in a very tough manner. He played a major role to pass Anti-Trust act.  President was assassinated and he was replaced by then the Vice President Theodore Roosevelt.

Roosevelt forced to use and 1890 piece of legislation called Sherman Antitrust Act to hammer Standard Oil. Standard Oil was dissolved. Rockefeller's empire appeared to be dead and defeated.  The parent company was broken into seven new companies; Standard Oil of New York, Standard Oil of California, Standard Oil of Ohio, Standard Oil of Indiana, Continental Oil , and Atlantic.

Standard Oil of New Jersey became Exxon. Standard Oil of New York became Mobil. The California company became Chevron, the ninth largest company in the world in 2010. It is also worth noting that Exxon Mobil alone has sales roughly equivalent to the GDP of Sweden.

So we are going to talk about the operations of Chevron the 9th largest company in the world.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 3:46 pm

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Chevron has recorded a profit above Rs 3 Billion.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 3:51 pm

EPS of the company has been  growing faster than many companies.


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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 3:53 pm

PE ratio felt below 10 in 2007

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 3:54 pm

We often look at 1.5 figure as an ideal value to think as a fair value of a share. There are few companies where its Market Value is not moving to such ideals. LLUB is one such.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 3:55 pm

Not all companies provide Growing Dividends. LLUB is a good dividend grower.


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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 4:01 pm

Among the Dividend growing companies evaluated so far, LLUB is outstanding


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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 4:09 pm

LLUB is proud of 14 years of safety record. Company is focused on improving safety in work place.

Even though EPS was growing company faced many challenges.

1. Recorded drop of Institutional sales. This is because power generation sector as the source of energy mix to the national grid varied with less lubricant intensive coal power and hydro power as opposed to lubricant intensive thermal power in comparative period of last year. A fully functional Norochcholai power plant and higher rainfall in hydro catchment areas led the shift towards  coal and hydro power.

2. Phasing out of many large scale public infrastructure projects pending reassessment.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 4:15 pm

3. In addition to that another threat was mentioned in 2016 budget proposal for LLUB.

" We have concerns about the 2016 Budget proposals in respect of the lubricant industry. The government's proposal to open up the lubricant market and remove lubricants from the BOI negative list will affect all existing players. The market may be at risk of further fragmentation with 13 players and possibly more competing for a share of the 54 mn liter market in a backdrop of sluggish industry growth. "

 p.8 Annual report 2015

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 4:23 pm

These Multi National Companies know how to turn the threats into opportunities.

Winning Strategies of 2015

1. Promoting Havoline Eco and other brands for Hybrid and new vehicles.

2. Expanding sales outlets. The more area you cover the more sales you get is known as Production Concept in theory of marketing.

3. Reinforcing advertising. MNCs often advertise heavily and The more Ads you do the More sales you get is Sales Concept in theory of Marketing.

4. Well managed inventories to get the advantage of falling raw material prices. The drop of raw material prices albeit not to the same proportion to the crude oil.

5. Strengthening export markets and that is Bangladesh and Maldives.

6. Operational efficiency. Warehouse was co-located at the plant premises thus reducing transportation cost.

7. Training and developing employees.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Mon Mar 21, 2016 4:28 pm

My average of this Share is Rs 182. Shares of MNCs if entered at right price is worth holding. MNCs are often well managed and good at paying dividends.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by Expert on Mon Mar 21, 2016 5:20 pm

Thanks for the analysis YK. Good work!
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by CubedSol on Mon Mar 21, 2016 5:21 pm

WoW !

MNCs, CHILDREN & Foreign Owned companies r mostly well managed & r better in dividends ryt ?

But MNCs have another advantage... The influence they have Wink
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by First Guy on Tue Mar 22, 2016 7:53 am

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by CubedSol on Wed Mar 23, 2016 6:26 am

YK : If you don't mind me asking, when did you enter LLUB ?
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Wed Mar 23, 2016 7:03 am

2011 and I know your second question on that...

Opportunity Cost... that is a concept I never had a look at.. All accountants and economists are worried about Opportunity Cost..

My concept is Delayed Gratification....

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by CubedSol on Wed Mar 23, 2016 7:07 am

:-P

I was never going to ask the second question Wink

Because for better or worse I too am NOT much concerned about opportunity cost.

Very Happy
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by First Guy on Thu May 05, 2016 7:31 am

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Good performance in March 2016 quarter

P/E - 12.2x
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by Ethical Trader on Thu May 05, 2016 7:55 am

YK, its a superb presentation. Thanks for your professional approach. I presume there may be many who wants to learn presentation skills from you.

I need you to make just one minor clarification inserted to make it more useful for the local consumption. You started with US company data & then on local company which is more relevant to us.

?Can you kindly state which data are US & which are local with the chart itself. FG appears to be posting local company data.

Thanks again for your nice presentation. Continue the good work.
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by yellow knife on Thu May 05, 2016 8:04 am

Only the first slice is about US

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by dhanurrox on Thu May 05, 2016 9:14 am

LLUB people were concerned yet they delivered.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by Dileepa on Thu May 05, 2016 1:25 pm

EPS up by 33% (Rs.8.22)
Company already paid a dividend of Rs.6/= for the 1Q
With this earnings growth, we can safely expect another Rs.21/= for the year.
That is impressive 8% dividend yield at current market price(27/340)

Also 20% increase in NAV is noteworthy.
This is mainly due to inventories (up by 23%).
Inventory will provide a hedge against base oil price fluctuations.

Any guess about the price after split?
Small foreign selling is bit worrying,
but I think price will settle around Rs.180/= after split.

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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by Ethical Trader on Thu May 05, 2016 3:05 pm

Hi Dileepa, after a long time. Thanks for cmmenst.
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Re: LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)

Post by Ethical Trader on Thu May 05, 2016 3:06 pm

yellow knife wrote:Only the first slice is about US
Thanks.
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What Next ?

Post by HUNTER on Thu May 05, 2016 8:13 pm

Another good thread YK.

LLUB has not been in my watch-list for a long time, due to my criteria of valuation. But now it has come to some 'visible' range.

LLUB has been a highly respected counter from my end due to consistent business and market performances alike. Specially, as a counter which did not fall during market drop in 2011~2012.

If we look at how LLUB has moved in the market during past 10 years, we can clearly identify two price channels; One before 2009 and another after 2010.

Until 2009, the price has gained approximately 15% a year. After the upward breakout near the end of 2009, we can observe the price has been appreciating about 20% a year (from 2010).

LLUB earnings have been very consistent. The dividend payouts have also been very consistent and growing with the earnings.

Therefore, it is not unacceptable to assume that the market price growth has been fueled mainly by the earnings growth.

If so, it is equally acceptable to assume, the price growth should be comparably proportional to the earnings growth.

However, while the price has been appreciating at a rate of 20%, business has been growing only at a rate of around 15% (according to my calculations).

However, based on our assumptions, we cannot expect a business growth of 15% to justify a price growth of 20%.

Therefore, in the long run, the market will ultimately react to negate the divergence at some point.

Considering the above, what I expect is, the market will move sideways for some more time until the earnings catch up with the past price movements and then resume the long term uptrend.

So, what I expect during next 1~2 years, is a sideways movement between 280/-~430/- (Or an equivalent range after the subdivision).

On a positive tone, by any chance, if price drops any further, it will a very good level to buy for some medium term trading opportunities.

As a swing trader, I am ready to dip in.

The chart below summarizes my story.

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