Before i start, i would like to personally apologise to Donmehaihai, my previous figures on Noel is taken from Businessweek, and it prove that a website also can provide me with wrong figure, thus for the past week, i have done my own excel spreadsheet with all the formulas done up and do my own calculations. These are the renewed findings:
1) EBITDA =$2,662,000 (earnings(11,184,000+interest(337,000)+tax(439,000)+depreciation(702,000)-Extraordinary item(10,000,000))
2)PE is 6.22
3)ROE is 11.53, using EBITDA/Equity
4)Price to Book is 23.263x
5)Debt to equity is 0.168
6)Price to Cash per share is 50.35x
To me, Noel still look good, but not as good as when it is at 0.205 (now is 0.235), when i first shouted this stock. Just to note, there is a point when this stock run to 0.315. I still believe in this stock.
P.S: Who want the spreadsheet, can email to me @ miketong240286@gmail.com i am more than happy to have beta testers for my spreadsheet. :D
Now on to Courage Marine:
For its competitor, i chose Chuan Hup as a comparison as they have similar Market Cap.
Valuation:
Courage Marine: Current Price is at 0.345
P/E: 13.14
ROE: 34.38% (Using Earning, not EBITDA)
Price to Book: 4.518x
Debt to Equity: 0.119
Price to cash: 14.155x
Quick Ratio: 3.64x
Dividend Yield: 1%
IV(using Discounted Cash Flow): 0.58 (using 3 years CAGR of 21.36%)
Chuan Hup: Current price is at $0.405
P/E: 30.441
ROE: 85.65% (Using Earning) and 4.54% (Using EBITDA)
Price to Book 1.3827x
Debt to Equity: 0.114
Price to Cash: 15.9826x
Quick Ratio: 1.8988x
Dividend yield: 3%
IV(using Discounted Cash Flow): 0.60 (using same CAGR as Courage Marine)
Elevator Pitch: Courage Marine Group (Courage) owns and operates a fleet of dry bulk carriers and provides a range of marine transportation services. The Group provides transportation services mainly for commodities goods such as coal, cement, iron ore etc to Russia and mainly to countries in the Asian region. Its Net profit increase by 42% year on year.
Value proposition:
A) Business Strategy and Plans
Expansion and Upgrades
Improvement of the technology on board the ship is stated in the Annual report, of which i believe is essential part of its business. It mention about additional safety and more advance navigation system, which i think will attract customers.
Reduction in ballast days (Days ships were carrying no cargo)
I think the company realise that this is one good way of improving the margin of the company. By reducing the idle day of its ships, i think Courage will maximise (another word squeeze dry) its ships, and in which, Courage realise that she needs more ships!
Expansion of Network
I like it when a company build office in its frequent customers' countries. Because nothing beat convenience, thus when i read that "... we plan to expand ... Hong Kong and Taipei operations and establish our Shanghai and Qinhuangdao offices inthe People’s Republic of China (“PRC”). Our increased presence in Hong Kong and Taipei enables us to undertake more extensive marketing to customers in these countries and to increase our managerial and operational capabilities beyond the comprehensive range of services offered." My mouth goes 'wow', this company really knows the direction she want to go!! I believe the new office can provide a good network between Courage and her customer.
B) Experience Management
This is a funny thing that i realise when i read about the annual report, is that its uses second hand ships, yet they can control the cost of the ships. According the the AR, they attributed it to their directors as shown: "Despite the higher cost of operations, repairs and maintenance that
one would expect of a relatively older fleet, our Directors’ technical skills and experience enable us to effectively contain such costs." and "Leveraging on our Directors’ networks and contacts in the shipping industry, we have been very selective in our purchase decisions." From this i can only say Courage' Directors are her greatest assets. Not only their purchase decision was good, their experiences are invaluable. Powerful indeed! Lets see who are the directors behind this:
For accquisition of second hand ships is:
Chiu Chi-Shun (Director of Systems and Standard Compliance)
This guy is the whose "... key role is identifying second-hand ships in excellent condition suitable for acquisition, drawing from over 30 years in ship design, building, and maintenance.
For repairs and maintenance is:
Chen Shin-Yung (Director of Technical, Repair and Maintenance)
he "...comes with more than 30 years’ experience in the shipping industry in supplies, repair and maintenance. As the Group’s Technical Director since 2001, he is responsible for the fleet’s overall technical management."
If anyone realise, their directors all experienced old man, which led us to think, who will take over them once they move on.. hmm..
C) Strong Assets & Cash Position
Compared to Chuan Hup, which is more diversified, Courage has stronger assets than it, excluding Chuan Hup's investment in shares. In terms of core business in shipping transportation, Courage is stronger. One thing about companies i realise is that, if your core business is not that established, try not to diversified. Look at Eng Wah and its Crazy Horse! Well but this can be arguable as readers may say that Chuan Hup diversification in Properties and bonds is to ensure good returns even in negative events. But i still think establishing Core business is like building a stronge economic moat, just like Cosco! I think Courage is working its way to be the next Cosco if possible.
Courage's ROE stands at 34.38% which is a very promising figure, and in addition its price to book is only at 4.518 times. Her debt to equity stand in similarity to Chuan Hup's at 0.119, which is quite good given that they are capital intensive companies. But one thing i want to note that Courage is superior than Chuan Hup is its Quick Ratio, Courage's 3.64 times compared to Chuan Hup's 1.89 times, shows that Courage's has more than enough to cover its immediate obligations.
At the current market price of $0.345, the risk-reward ratio is skewed in the investor’s favor. We consider the worst downside to be limited to the cash floor of $0.298. Courage should turn in EPS of $0.04for FY07. Applying the annual growth rate of 21%, the fair price is at least $0.58 within the next 3 years. Hence, the upside potential return of 68.12% from the current price compares favorably against the downside risk of 13.62% to the support level.
Risk:
A)Mis-management of the rich cash position.
Lets just hope that Courage does not diversify like Chuan Hup. From my point of view, I feel that Courage should purchase more ships, regardless of whether is it second hand or not. Because of the rising demand in the region, especially from Asia. If Courage made a wrong investment, or acquire a poorly managed company, the cash will return a negative rate on investment. Thus, we must keep a look out for FY07,08 and 09, to make sure they make a good investment using its cash.
Drivers:
A) Uses of second hand ships
I feel that one of its strongest drivers is Courage's director's ability to buy good second hand ships to run the show of Courage. With this, once Courage overtake Chuan Hup in Shipping Transportation, it will be a company to be reckon with.
B) Clear Vision and Management
I feel that Courage knows its needs and area of improvement such as the issue on ballast days and they are very focused compared to Chuan Hup. With the rising economy, i believe it will do better than Chuan Hup.
Second method is using projected cash flow method: cash flow is $28.629M, growth at 7%, and guess what!! The intrinsic value is also exactly $1.38 (first time i got both calculations with same value)
