2014 – The Great Irish Share Valuation Project (Part IV)

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CPL Resources, Glanbia, Grafton Group, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, ISEQ 20 UCITS ETF, Papua Mining, Petroceltic International, Petroneft Resources, San Leon Energy, TGISVP, The Great Irish Share Valuation Project

Continued from here:

Company:   Grafton Group

Prior Post(s):   2012 & 2013

Ticker:   GFTU:LN

Price:   GBP 665p

Revisiting last year’s post, I see this prediction: ‘don’t be surprised to see Grafton suggesting a GBP re-denomination later this year…they might just go the full hog & dump their Irish listing in favour of the UK.’ Six months later, that’s exactly what they announced! Which makes sense really – over 75% of Grafton’s revenue now comes from the UK. On the other hand, you’d think the bloody Celtic Tiger was back, considering how the share price has behaved – a triple in just 18 months!? I was pretty bullish originally on Grafton, but my valuation estimate’s certainly been marking time ever since…

In the latest trading update, FY-2013 revenue reached GBP 1.90 billion & like-for-like sales were up nicely across the board. Recent reports suggest the 4.2% operating free cash flow (cash generated from operations, less net capex) margin’s still running well ahead of underlying operating profit – let’s assume that’s still the case on a FY basis. And I continue to believe Grafton will, in time, revert to its prior 7.0% peak operating FCF margin. For valuation purposes, averaging the two seems fair – a margin of 5.6% still deserves a 0.5 Price/Sales multiple, in my opinion. With net interest hovering ’round 15% of operating profit, no further debt/cash adjustments are necessary. [At this point, I don’t believe a P/E multiple’s a practical (or effective) valuation alternative to also incorporate here]. Which gives us:

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TGISVP – H1-2013 Performance

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alpha, Alpha Portfolio, Beta Portfolio, Clontarf Energy, Continental Farmers Group, DCC, Elan Corp, Fastnet Oil & Gas, Glanbia, Greencore Group, Irish shares, Irish value investing, ISEQ, junior resource stocks, muppets, Petroceltic International, Petroneft Resources, portfolio allocation, portfolio performance, Smart Alpha Portfolio, Smart Beta Portfolio, TGISVP, The Great Irish Share Valuation Project, US Oil & Gas

Time to wrap up the mid-year review(s) – let’s finish with The Great Irish Share Valuation Project. To recap:

– A total of 73 Irish companies are included this year (same as last year – but US Oil & Gas (USOP:G4) & Fastnet Oil & Gas (FAST:LN) were subsequently listed, so I added them later in the year, increasing the 2012 total to 75).

– Each company’s been individually reviewed & valued, some time between Jan & May, and I’ve kept a record of all share prices (at time of evaluation) & price targets to properly assess performance.

– I’ve made no subsequent changes to the file, except: i) to adjust for DCC (DCC:LN) migrating to a London-only listing & for Petroceltic International (PCI:LN) consolidating its shares 1 for 25, and ii) Continental Farmers Group (CFGP:LN) will continue to be included at its GBP 36p takeover price (the Saudi bail-out came in the nick of time, just before the cash ran dry!).

– Since my TGISVP review/valuation phase was spread over 4 1/2 mths, we need to adjust our benchmark (the ISEQ) accordingly. Like last year, I’ll take the mid-point (in terms of companies valued) of this phase – i.e. Feb-25th – as the most appropriate start date for the index.

I’m bemused to see I’ve apparently become more bearish this year! Last year, I was bullish on 48% of all stocks, while this year that’s now dropped to 40%. But consider the unique nature of TGISVP, which includes an extraordinary selection of junior resource stocks, complete with assorted incompetents & cowboys! Not surprisingly, I’m bearish on pretty much all these rubbish stocks – so stripping ’em out, it’s fair to say I remain bullish on Irish stocks. 🙂 OK, perhaps a little less so today, but with the ISEQ up +17.1% in 2012 & another +16.7% this year, that’s no great shocker..!

TGISVP – Hot & Not, Mid-Year 2013

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Continental Farmers Group, Donegal Creameries, Irish shares, Irish value investing, junior resource stocks, Petroceltic International, Petroneft Resources, portfolio performance, TGISVP, The Great Irish Share Valuation Project

After resisting the lure of reporting quarterly performance at end-March, I’m now left mulling whether I should even report my semi-annual performance(s). Sigh, I probably will… Which is a little silly really, a public (or even private) review of any six month period/return is basically meaningless! Not that I’m complaining, I think you’ll agree the first half of the year treated us all pretty damn well. 🙂 Of course, that cozy warm feeling may simply confirm we’re all addicted to ‘monetary heroin’ now.

Anyway, I noted down quarter-end prices, so why don’t I first do a (brief) post giving you a timely snapshot of current rankings for The Great Irish Share Valuation Project. [For reference, here are my first & last posts in the valuation phase of TGISVP this year].

I’ve updated all share prices, plus some underlying variables (primarily FX rates), as of June-28th. I’ve also reflected the recent 1 for 25 consolidation of Petroceltic International (PCI:LN) shares, and eliminated Continental Farmers Group (CFGP:LN) after its successful takeover in June. At this point, I haven’t otherwise updated/revised any individual company valuations, so if a particular stock grabs your attention please check for subsequent news-flow/results. Of course, you may totally disagree with my valuation(s) anyway – so I’ll provide a complete Excel file below, which you’re welcome to amend as you see fit.

2013 – The Great Irish Share Valuation Project (Part XI)

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Barryroe, CRH, DGO, Dragon Oil, Fiordland, IFG Group, IFP, Irish shares, Irish value investing, Melrose Resources, PCI, Petroceltic International, Providence Resources, PVR, TGISVP, The Great Irish Share Valuation Project

Continued from here.

Company:   Petroceltic International

Prior Post:   Here

Ticker:   PCI:LN

Price:   GBP 6.3p

Last year, I correctly tagged Petroceltic as slightly over-valued. Despite that, I’ve been surprised to see the share price continue its decline in the past few months…because 2012 was a game-changing year! There were two key events:

First, Petroceltic closed on a GBP 170 mio merger with Melrose Resources in October. This was essentially a merger of equals (with PCI shareholders getting 54% of the enlarged company), and both companies possessed nicely overlapping portfolios in the MENA, Mediterranean & Black Sea regions. The key attraction of the deal, however, was the fact it was the merger of a producer & an explorer. This is an incredibly powerful combination in the hands of the right management team: Production can actually fund a company’s exploration plans on a self-sustaining basis. In this instance, pre-merger cashflows suggest operating cash generation (after interest & taxes) is now running around $155 mio pa post-merger, which nicely funds Petroceltic’s forecasted 2013 exploration & development programme.