Monday, March 19, 2018

Analysis of Fast Retailing 2018

Logo of Fast Retailing 2018

Company: Fast Retailing

ISIN JP3802300008 | WKN 891638

Business: A Japanese retail group. They stand on a couple of brand pillars: UNIQLO (their largest brand), GU (offer low price fashion), Theory (offering fashion for the contemporary woman, launched in New York), COMPTOIR DES COTONNIERS (French origin offering fashion for women), PRINCESSE tam·tam (also French origin offering "lingerie made by women for women") & finally J BRAND (Californian origin offering fashion denim).

Active: Highly brand based but with their biggest one Uniqlo they are present in Japan, China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand, Philippines, Indonesia, Australia, USA, UK, France, Germany, Russia and in Belgium. 

P/E: 37.5

Contrarian analysis of Fast Retailning 2018 with P/E, P/B, ROE as well as dividend.

The P/E is far too high for me with 37.5 and the P/B is also obnoxious with 8 which gives a very, very clear no go from Graham.
Their earnings to sales still need to improve because it is down at 6% but I am happy to see the change that has happened since last year. The ROE has also been pushed up slightly and is now at an excellent 21%. The book to debt ratio is also great with 1.8.
in the last five years they have managed to have a yearly revenue growth rate of over 10% which is great which then gives us a motivated P/E of 26 to 29 which means that they are still over valued by the market.
They pay out a tiny dividend of 0.8% which shockingly correspond to 33% of their earnings so they better start making more money soon.

Conclusion: Graham very clearly says no and so do I. The P/E is too high and the dividends are too low. I hope that 2017 was the year that changed Fast Retailing and that we will only see stronger and stronger improvements but I am afraid to make any such claims of it actually being the case. The e-shopping is a far too powerful movement at the moment. I will remain as a shareholder.

Sunday, March 18, 2018

Fast Retailing annual report 2017

Front page of the annual 2017 report from Fast Retailing

It is not their "true" annual report but it is from the publication that they made with the results.

For the report in full please go here, to find out more concerning Fast Retailing then please visit analysis of Fast Retailing 2017.

As can be seen in the income statement below Fast Retailing have started to do much better again. They had some hard years and hopefully they have finally managed to turn it around. The biggest problem they had was with their domestic market, so in Japan, where they were forced to shut down a couple of stores but now it seems as if they have managed to push up the margins again due to this. The revenue increase is only so, so with +4% but the profit increase is excellent with +148% which tells more about the sorry state that they were in than what it has to do with the earnings really being spectacular. Still it is a good start!

Income statement of Fast Retailing 2017

Conclusion: I hope that this was now the turning point for Fast Retailing. That they have closed down the majority of stores that they needed to deal with due to over expansion + the staggering increase of sales over internet. I will remain as a shareholder.

Friday, March 16, 2018

Analysis of DBAG 2018

DBAG, logo, 2018


Business: A German private equity company. Their focus lies with the management buy out of small and medium sized companies that have excellent products. To see their full company portfolio then please click here. They divested six companies and invested in five new ones during 2017.

Active: Germany, and surroundings. Companies are sometimes more globally oriented. 

P/E: 6.9

Here you can find the previous analysis of DBAG 2017.

Contrarian analysis of DBAG with P/E, P/B, ROE and dividend

The P/E is excellent with 6.9 and the P/B is also great which leaves us with a clear buy signal from Graham. The earnings to sales are artificial due to the nature of their business and reporting but the ROE is great with 20.3%. Since they have pretty much no debt also the book to debt ratio is excellent with almost 16.
In the last five years they have had an amazing yearly growth rate which, to be honest, comes from 2017 being an insanely profitable year which therefore have given them a value of almost 22%. This then gives us a motivated P/E value of around 20.
They pay out an acceptable dividend in the size of 3.3% which only corresponds to 23% of their earnings so there is room for them to increase.

Conclusion: Graham says yes and so do I. The P/E is excellent as is the P/E and ROE. The dividends is fully acceptable but one must keep in mind that 2017 was an extraordinary year and having more "normal" earnings in mind then the P/E would have been doubled and the investment benefit is no longer as clear. I will keep my shares but I will not invest any more money at this moment into DBAG.

Thursday, March 15, 2018

DBAG annual report 2017

Front page of the annual 2017 report from DBAG

Please make sure that you are viable to read the report that can be found in full here. To read the previous summary please go to DBAG annual report 2016 or why not visit the analysis of DBAG 2017.

DBAG had an exceptional year in 2017. They managed to divest several of their investments and made a nice profit out of each and every one of them. I have probably mentioned this before but back in the days when I lived and worked in Germany I met a bunch of these elderly men that had built up the companies but without having any clear heir to their thrones. These companies are perfect for DBAG to make an MBO of.

As can be seen below DBAG increased their earnings from around 43 M € to 93 M €. They decided to increase the dividends to 1.4 € per share which I personally would have loved to see go higher but I am these days fully confident that they will invest my money very well for me and to be honest... better than what I would do so I can live with a small dividend.

Income statement of DBAG 2017

Conclusion: Here I am just letting the flower growing as it sees fit. I am not so confident that they will keep doing this well in ten years from now but that is far, far away into the future. I will remain as a shareholder.

Monday, March 12, 2018

Analysis of ABF 2018

ABF, logo, 2018

Company: ABF

ISIN GB0006731235 | WKN 920876 

Business: A British conglomerate with agriculture, agricultural products as well as retail. Currently they have five business segments: Sugar, Agriculture, Retail, Grocery and Ingredients. To find out more about their grocery brands then please click here and to find out about their businesses in general then please click here.

Active: Europe, Africa, USA and Australia. Heaviest in the UK and Ireland.

P/E: 17.04

Here you can find the previous analysis of ABF 2017

Contrarian analysis of ABF with P/E, P/B, ROE and dividends 2018

The P/E of ABF is still very high but starts to be more reasonable at 17 and the P&B is down at 2.5 which is on the same line as for the P/E however Graham would still not go for the company.
The earnings to sales have improved significantly and are now up at 8% and the ROE is up at 14.5%. The book to debt ratio is good up at a ratio of 1.9.
Th yearly revenue growth rate has increased slightly and is up at 2.9% which gives us a motivated P/E of around 12 to 14 which means that ABF is still slightly overvalued by the market today however is has been a long time since they was this close to a more proper valuation.
The dividends are still silly with only 1.6% which happily correspond to less that 30% of their profits so there is room for improvement.

Conclusion: Graham always said no to this investment and he still does. I realise that I should have taken the money and walked away when they were traded over 50 € per share but since it is impossible to turn back time I just have to suck it up. To be fair ABF start to look like a better investment today than what it ever was however a large part of the profit came from successful sale of business which means that it is not a consistent growth earnings increase and we might expect a decrease during 2018 in earnings if not in revenue. I will not invest more into ABF but I will remain as a shareholder with the long term target of making an IPO of Primark at some point in time.

If this analysis is outdated then you can request a new one.