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

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Aer Lingus, Andor Technology, Botswana Diamonds, Clontarf Energy, Escher Group Holdings, Irish shares, Irish value investing, Merrion Pharmaceuticals, Ryanair Holdings, San Leon Energy, TGISVP, The Great Irish Share Valuation Project, US Oil & Gas, USOP

Continued from here. Right, here’s the next batch of TGISVP stocks!

Company:   Ryanair Holdings

Prior Post:   Here

Ticker:   RYA:ID

Price:   EUR 5.689

Last year, I was still mildly bullish on Ryanair, but also in the process of selling down an RYA position I held. Since then, the share’s out-performed my target price by just over 20%… But I don’t feel much regret: a) while RYA’s more defensive than most, airline stocks are inherently volatile – I demanded, quite rightly, a wide margin of safety to compensate, b) a year’s passed, I’m sure my current target will be that much higher, and c) I was generally pretty happy with the re-investment of any proceeds last year!

There’s little new to observe here – Ryanair remains a bloody awesome earnings machine! Current operating margin has been squeezed slightly by fuel costs, but at 14.2% it still deserves a 1.33 Price/Sales ratio. A positive debt adjustment is also appropriate, considering RYA’s currently sporting 10 times interest coverage & has a history of share buybacks & a special dividend in the past year. YTD earnings growth is at +12.5%, while last FY earnings growth was running at 25%+. Considering the potential for earnings volatility here, a 15 P/E is still pretty much the maximum I’m comfortable with (based on an estimated EUR 0.3875 EPS run-rate).

Fastnet – What’s the Forecast?

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2P Reserves, Aventine Resources, Bruce Rowan, bubbles, Cathal Friel, Cove Energy, FAST, Fastnet Oil & Gas, Independent Resources, Island Oil & Gas, John Craven, Jubilee Field, junior resource stocks, Kosmos Energy, Michael Nolan, Minco, Minmet, Mizzen Basin, Molly Malone Basin, oil, Oisin Fanning, Orogen Gold, Paul Griffiths, Petroceltic, prospective resources, Raglan Capital, Rathdowney Resources, San Leon Energy, shipping forecast, short sellers, shorting, Sterling Green Group, Terra Energy, TGISVP, Tiger Resource Finance, US Oil & Gas, USOP, value investing

I eyed up US Oil & Gas (USOP) here (‘I swear, yer ‘onor, I wuz just looking…I nevah touched ‘er!‘), and promised to return to Fastnet Oil & Gas (FAST:LN)… Ooh er, collywobbles – what’s he going to say about this one? Well, I really don’t know, we’ll just have to see where this post takes us – a reminder I never have an agenda when taking a first look at a company. My only wish is to find an undervalued & interesting company, regardless of sector or business. That, to me, is sheer bliss..! On the other hand, finding a ridiculously overvalued company is simply a fascinating glimpse of (in?) humanity. Because shorting such a stock would be all too rare for me.

And no, I don’t think shorting stocks is the inverse of good (value) investing. In fact, I can’t emphasize that enough! I believe there are v few investors with the aptitude & fortitude to regularly short stocks successfully. And there’s whole other dimensions to that skill, anyway – as I’ve noted about overvalued stocks:

‘…there’s always a chance, on their journey to oblivion, that they’ll bubble higher & longer than you might ever expect. After all, you can’t analyze irrationality, and you certainly can’t analyze stupidity…’

Right, back to the job at hand: Aah, Fastnet… That really conjures up childhood memories of the shipping forecast. ‘Specially on a stormy night. It’s amazing the drama one could wring from such rigid & clipped broadcasts. Comfortably sprawled in front of a blazing fire – half asleep before bed-time… Drifting away to the cadence of the names – Fastnet, Malin Head, Dogger. Thoughts of far-off barren rocks, mournful lighthouse flashes, giant crashing waves, and lonely fishing boats adrift in the black night, were sure to send a delicious thrill down one’s spine. Seems I’m not the only one who fell under this spell – just take a look here: ‘Influences on Popular Culture’. Here’s another fond tribute... And finally, here’s a marvelous Economist piece on the Fastnet lighthouse.

The Great Irish Share Valuation Project X

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Fiomi Diagnostics, Galantas Gold, George Soros, John Teeling, Lisa B, Minco, NAMA, New Ireland Fund, Norish, O'Donoghues, Oisin Fanning, Orogen Gold, Papua Mining, Papua New Guinea, Petrel Resources, Phillip Goldstein, Rathdowney Resources, Raven Russia, Real Estate Opportunities, San Leon Energy, shorting, Strongbow Capital, TGISVP, Trinity Biotech

Continued from here:

OK, we’re in the home straight now, at least within the original valuation stage of TGISVP. Eight companies left, mostly junior resource companies, so that should be fun..! I’ve booted Real Estate Opportunities (REO:LN), as trading was suspended in January. And please, let’s not bother talking about NAMA, court cases etc… For years now, REO’s had terrible corporate governance, far too much leverage, and pretty much promised to totally fuck investors... And so it has come to pass, and shareholders don’t even have a luxury Moroccan get-away to show for it…

I’ve no desire to short shares usually – a value mindset is far too dangerous an attribute to possess if you want to play that game. But watching REO fly far too close to the sun, and not even notice its wings were melting, I just got far too itchy… I really wasn’t worried what the price was – GBP 20p, 5p, 3p…who cares when it’s going to zero anyway. Unfortunately, I couldn’t find a spread-better who would deal in it – even Worldspreads (and their zero spreads…), if I recall..!? Perhaps I didn’t ring around/push hard enough? If anybody managed to do this successfully, I’d love to hear more details?