Re: CIND.N0000 (Central Industries PLC)

[yellow knifeTop contributor]

Following is just calculations on different ratios and is not a buying or selling recommendation.

1. Net assets per share.

Normally a share trades above Net assets value and even Market value for Net assets value at or below 1.5 is attractive . CIND net assets per share is Rs 126 and if so it must be trading at a value above Rs 126.00

If Market Value to Net assets value at 1.5 is still attractive it must be trading at Rs 189.00

EPS

Share has recorded Rs 18.23 for EPS and at a PE ratio of 10 it must be trading at 182

Above two calculations show us share should be trading somewhere around 180s. Yet even after releasing financials share is not trading even closer to that.

This is how market behave. Fundamentals alone is not enough to make accurate predictions.

[yellow knifeTop contributor]

My average of CIND is 60.87 and currently the unrealized capital gain is 77% and the dividend yield for 60.87 is 9% and can be happy with the way dividend grew.

[Yin-Yang]

In that case, what do you think can make accurate predictions?

Sometime ago, I read and interesting theory; it said, predictions can be accurate for a group of incidents but at the same time not accurate for any of individual incidents.

For example, one can say, the height of a typical Sri Lankan is exactly 5 feet and 5 inches and it could be accurate but at the same time, if we sample 100 individual, none of them could be exactly that tall.

May be, what they say is true, 'averaging' is not a good investment strategy.

[yellow knifeTop contributor]

If fundamentals does not really work out then what ? So you can look into Mirror thread...and check how technical side work...

So this Investing strategies leave lot of space for us to develop theories, check them with market and abandon them once nullified...

Anyway if you enter in the right price and just passively hold , that is fine for long term players..If the players are shot term they tend to rely on TAs, hot news, gossips and manipulations...

Regarding CIND...it has performed well in real business and at any moment commensurate increase can take place in stock market...

[yellow knifeTop contributor]

CIND has looked after its shareholders well. Now I like to make a calculation based on the assumption that I sell my investment today and for easy calculation I assume that I have 20,000 shares of CIND. ( Both assumptions are not real ).

In this calculation I adjusted dividend income and Selling of capital at 10% discounted value. Even though officially inflation remained low I prefer to adjust 10% in my calculation.

Even in this situation my return for holding for two years is 40% and CIND was a share good for long term holding if entered at right values...

Cashflow	Quantity	2014	20142	2015	2016
Cashflow	20,000.00	-1,217,400.00	60,000.00	90,000.00	130,000.00
Discount 10%		1	0.9091	0.8264	0.7513
Adjusted value		-1,217,400.00	54,546.00	74,376.00	97,669.00
Selling Capital	20,000@107				2,140,000.00
After Adjusting					1,607,782.00
Net Gain					1,834,373.00
Real Gain					616,973.00
Gain Percentage					50.68

[yellow knifeTop contributor]

With special thanks to Hunter I got this chart...

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[yellow knifeTop contributor]

Now I can go back in time tunnel and check what if I sold in May 2014...

I would have sold below my purchasing value..at 59.97 and I would have ended up making a loss..

Cashflow	Quantity	2014	20142	2015	2016
Cashflow	20,000.00	-1,217,400.00	60,000.00
Discount 10%		1	0.9091
Adjusted value		-1,217,400.00	54,546.00
Selling Capital	20,000@59.97				1,199,400.00
After Adjusting					1,090,374.54
Net Gain					-127,025.46
Real Gain					-72,479.46
Gain Percentage					-5.95

[yellow knifeTop contributor]

I would have sold in May 2015 and at 96 and ending up 40.92% gain...

Cashflow	Quantity	2014	20142	2015	2016
Cashflow	20,000.00	-1,217,400.00	60,000.00	90,000.00
Discount 10%		1	0.9091	0.8264	0.7513
Adjusted value		-1,217,400.00	54,546.00	74,376.00	0.00
Selling Capital	20,000@96				1,920,000.00
After Adjusting					1,586,688.00
Net Gain					369,288.00
Real Gain					498,210.00
Gain Percentage					40.92

[yellow knifeTop contributor]

Upto now I can be happy with holding CIND ...

[Yin-Yang]

You're putting a lot of effort in what you're doing; much appreciated.

Just wondering if you'd be happier if sold the entire lot at the end of 2015 and bought back in March 2016.

[yellow knifeTop contributor]

Ok...just give me values that you sell and buy back... So I can redo the calculations....

This is what I miss often selling and buying back...

[Yin-Yang]

Ok...just give me values that you sell and buy back... So I can redo the calculations....

This is what I miss often selling and buying back...

Say, sell just below 120 (NAV), and buy just above 80/- (A cheap price).

[yellow knifeTop contributor]

You are up on the deal...

Cashflow	Quantity	2014	20142	2015
Cashflow	20,000.00	-1,217,400.00	60,000.00	90,000.00
Discount 10%		1	0.9091	0.8264
Adjusted value		-1,217,400.00	54,546.00	74,376.00
Selling Capital	20,000@120			2,400,000.00
After Adjusting				1,983,360.00
Net Gain				765,960.00
Real Gain				894,882.00
Gain Percentage				73.51

[yellow knifeTop contributor]

So you proved trading is good over long term holding...  

2016	March	May-16
Buy back 30,000@80		Sell @ 107
	2,400,000	3210000
Gain		810,000
Gain Percentage		33.75

[Yin-Yang]

It's a debate which will never end; if trading is better than holding a position.

Both have it's own pros and cons.

Mathematically, in a market with lot of fluctuations, trading will have better chances. In a bullish market, position holding will have a better chance of outperforming.

What about a bear market then.................?

[yellow knifeTop contributor]

Bears do hibernate....So during bear sleeping and not seeing the market may be the best ...

Nice Discussion Ying-Yang...

[First Guy]

Following is just calculations on different ratios and is not a buying or selling recommendation.

1. Net assets per share.

Normally a share trades above Net assets value and even Market value for Net assets value at or below 1.5 is attractive . CIND net assets per share is Rs 126 and if so it must be trading at a value above Rs 126.00

If Market Value to Net assets value at 1.5 is still attractive it must be trading at Rs 189.00

EPS

Share has recorded Rs 18.23 for EPS and at a PE ratio of 10 it must be trading at 182

Above two calculations show us share should be trading somewhere around 180s. Yet even after releasing financials share is not trading even closer to that.

This is how market behave. Fundamentals alone is not enough to make accurate predictions.

There are two things I like to 'discuss' further or disagree.

Net assets - if you are looking at net assets, look at the rate it is increasing. If it is increasing (growing shareholder funds) faster than similar risked asset, you would buy it more than what it is worth currently. But if opposite happens, you would not buy it even for that amount. At the moment, CIND has a ROE of around 15%. That's little more than less riskier interest rates. So it is priced below net assets. By being priced at 0.8x net assets, either market has not realised its value, or is expecting it to return lower ROE in future.

This when converted to P/E around 6x gives earnings yield of 16.6% What you can evaluate is, is this right for a company with the risks that it has (or the lack of it)

Then we have valuing companies at relative level

[HUNTERTop contributor]

Thanks YK for continuing this useful discussion.

Regarding NAV and P/E.....

On logical and mathematical grounds, I totally agree with FG. In fact, my adopted valuation calculations are based on the same principles.

I believe, the value of a share needs to represent both the present value as well as the rate of growth compared to the ongoing opportunity cost (less risky opportunities).

However, when thinking in this line, by observing the market, as I believe, we see lot of 'inefficiencies'. There are some shares, which should value high, logically, trading at lower prices. And other way round also.

May be, it happens because, sometimes the crowds do not act rationally; may be there are other factors crowds 'feel' but mathematics fail to capture, or may be there are 'genuine' hidden 'gems' crowds have failed to identify.

This is one aspect in the market I like to keep on studying.

For the time being, as I have noticed, the market is not immune to all type of common behavior of human we see in any other area. People usually make decisions based on their 'perception'.

Just like good brands are sold at premium prices, it seems, some shares are also traded at premium prices because their 'brand image' is appealing to the majority.

Any idea why some vehicle models manufactured by Dihatsu are sold at a higher price with a Toyota badge, with no physical changes except for just a sticker?

[xmartTop contributor]

There are two things I like to 'discuss' further or disagree.

Net assets - if you are looking at net assets, look at the rate it is increasing. If it is increasing (growing shareholder funds) faster than similar risked asset, you would buy it more than what it is worth currently. But if opposite happens, you would not buy it even for that amount. At the moment, CIND has a ROE of around 15%. That's little more than less riskier interest rates. So it is priced below net assets. By being priced at 0.8x net assets, either market has not realised its value, or is expecting it to return lower ROE in future.

This when converted to P/E around 6x gives earnings yield of 16.6% What you can evaluate is, is this right for a company with the risks that it has (or the lack of it)

Then we have valuing companies at relative level

FG, you sum it up nicely. thanks

[yellow knifeTop contributor]

Thanks FG and Hunter

[slstockVeteran]

Oh so people moved on to comment on this thread.
Thats why not a single comment even on the CIND discussion thread
( even to update the CIND dividend declaration)


I just read all you comment here.
So your concern now CIND has not moved though it is a value share?

See below ( second part of the answer) as it may have something you like to read.
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Also one needs to understand how shares move.
Ex: Why did VFIN not move after dividend ( atleast till yesterday?)

[yellow knifeTop contributor]

Well SLS

This is a problem I too came across...

I started Movies to watch thread...later I found that LSE had started something similar and I have commented in that thread as well...


I started RCL.N thread... later found Pathfinder has started RCL.N thread earlier and I have commented on that.. I even asked from admin to merge

Later and quite recently I found I am competing with Rana on dividend announcements.. I often wait a little bit then added dividend announcement in relevant thread.. but found Rana update almost simultaneously...

None of these events were intentional and apologize if I caused a harm to any...

[RanaTop contributor]

[yellow knifeTop contributor]

Its time to read 2015/16 annual report of the company.

Company recorded best ever year in all ratios.

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[yellow knifeTop contributor]

Net assets of the company is growing steadily.

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