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in my opinion, I prefer to keep this counter for a longer term due to its potential growth. Hence, I am using its cash flow statement to perform valuations. if you look at its 2017 annual report, the operation cash flow increased from approx. 45M in 2016 to 64M in 2017. it invested big chunk of its cash flow for capital investment.
based on this, I assumed that d&O has the capability to generate 60M cash flow yearly after major capital spending, constant growth of 5%, global growth rate at 3% (perpetuity growth rate), and discount rate of 9%, existing outstanding share of 1106M, the per value share is valued at $1.03; using discounted cash flow analysis.
at current price of 0.69 versus valuation of $1.03 (with the assumptions above), it offers a 33% margin of safety. My personal opinion is that it is quite attractive. hope it helps.
hi Ken, you can try to buy books on corporate finance that covers equity markets, stocks valuations, risks and etc; can also try google it. probably you can find some sharing in YouTube as well.
hi joseph, try search discounted cash flow (dcf). in laymen's term - the value of a stock is equal to the present value of its future cash flow. hope it helps.
thanks for the sharing, phooi. indeed the market breadth is still weak. the only dim prospect for now is the market testing the support at 1611 heading towards earnings reporting season in May.
I added today as well, phooi. Will reserve some fund to add after analyzing its report. expectation is single digit growth and bonus will be double digit. My preference is the sales growth.
Let's monitor its upcoming report as macroeconomic in China is improving from the latest industrial production, retail sales and gdp. automotive players is looking to China to revive the industry as I read.
my guess on coming result won't as good as preceding qtr although inventory highest ever. Anyway, it's good time to collect now since the preference share conversion at 0.61
thanks Alex. overall automotive lighting industry is expected to grow at cagr of 7%. D&O sales growth is at the high side of single digit yearly since streamlining its business in 2015. the days of inventory and inventory turnover for D&O remains at approx. 120 and 3 yearly. definitely agreed with you that it's a good time to collect and ride the growth with it. I am in for a longer time until it is showing signs of stagnant growth.
waited for almost a year, finally managed to grab big on yesterday's dip, lets see how it goes as the prospect for 19Q1 is pessimistic. it's good to see an equivalent of 9mil or higher. all the best mates
the boss just said in The Edge that first half top line will be weak. I think with the improving gross margin, hopefully net profit wouldn't be much affected...
in due time, the valuations of this company will surface. the performance will determine whether the growth is sustainable or unsustainable. as long as the sales growth continues to grow, the profitability will continue to grow as well.
right now its 1107 mil. not sure whether this is what you need but you can refer to the additional listing announcement documents each time - it reports total shares after the issuance. secondly, you can also refer to its qtr report. go to the last page and it will show you the breakdown of esos, conversion of icps, and etc in dollar. hope it helps.
it will dilute if earnings shrink. The last 3 years sales growth and profitability is still growing. waiting for 2018 annual report to see whether it is still growing as shared earlier. the automotive lighting business itself is expected to grow at cagr of 7%. D&O sales growth in 2017 was at 7.73%, ROE 11%. Let's see whether 2018 sales growth and ROE will be at high single digit or entering double digit.
hi henry, the revenue or sales wasn't really flat. after the business streamlining in 2015, the sales growth in 2015 was 2.80% yoy and 7.73% yoy in 2017. ROE was at 6.4% in 2015 and 10.8% in 2017. pre 2015 performance where it has general and tv lighting as well was really volatile (swinging high and low). the net margin currently is also growing nicely. from a low of 0.17% in 2014 and 4.8% in 2017.
single digit growth is not as attractive as other double digit growth technology stock, however the significant improvement in gross margin offset that. revenue still needs to grow to be healthy!
that's right, henry. that's where the 2018 annual report will tell us whether is the revenue or sales growing again. I am hoping the revenue growth will go beyond 7.73% yoy entering double digit. then, we will have a baseline for 2019 :)
henry, sales grew by 5.9% yoy under pinned by forex. removing the forex impact, it's 11% yoy. It's pretty good. R&D spent increased as you mentioned which is also good :)
hi jensen, in my opinion, the company is growing. I was hoping for a double digit sales growth in 2018 for continuous growth and in this case, the company reported 5.9% at the back of 6% and 4% usd and rmb forex impact. minus the impact, the company sales grew by 11% which is really good.
additionally, R&D spent increased and there was also a patent acquisition. innovation is key to the sustaining of the growth as we are seeing higher and tightened regulations in this industry.
the ROE is at approx 12% (39/323) which is also growing. net income attributable to the owners of the company divided by equity attributable to the owners of the company.
aiyo. all numbers and pening. I see the graphs in the report going up yoy. I take it as good. haha. I will keep this and tambah when I have money. thank Cheng for sharing
I am holding it for a longer period based on its fundamentals and valuations. as for price trend, current price would have priced in the possibility since it came down from the high of 1.0.
yw. it's just my opinion and hope it helps. my preference is to have at least 30% margin of safety before entering. with that, the elsoft target entry for me would be at 0.805/0.81.
opportunity to add on :) do watch for April Mfg PMI data that will be released this week on 2nd of May. Mar'19 was 50.8, consensus and forecast for Apr is at 51.0.
hi phooi, it's a measure of the health/trend of the economy in the manufacturing sectors. business leaders uses the data to set/determine future business directions as well. D&O were hit last year by the slow down in China, hence, it's good to monitor the trend as well.
mar'19 data of 50.8 beat market expectation of 50.1, and was the first increase in the last 4 months and highest since jul'18. apr'19 consensus and forecast at 51.0. there's also car sales and production indicators as well.
it's still above the critical 50 levels with US China trade agreements to watch. additionally, new energy vehicles sales jumped 85.4% percent. Alex mentioned something about EV :)
you guys is amazing. all points discussed right on the dot. have a look at the latest article by the edge - LED, car sales, even TP also there. I like the last paragraph best :)
From an investment perspective, two-thirds of research firms covering the stock have a “buy” call, with target prices ranging from 86 sen to 96 sen, an upside of 30% to 45% to D&O’s closing price of 66 sen last Thursday. The group is valued at RM731 million
all is good and hopefully D&O will work hard and not disappoint its share holders. in my opinion, current share price offers slightly more than 30% margin safety. at 0.60 cents, it offers 40% and at 0.50 cents, 50% margin of safety. will be looking forward to the opportunity to add those levels if it happens :)
hi Shi No, you don't have to calculate margin of safety. it's like insurance in case the target price or valuations done is wrong or the market behaves differently. for a good company with strong fundamentals - low debt/equity, strong mgmt, consistent performance, strong products line up, a 30% margin of safety is good enough. you can take the target price by valuations and minus 30% from it. that will be your entry. example: if a company is valued at $10, 30% off is $7.0. that's your entry.
