stocks hunter wrote:When ASI is going up we should have a closer look for CINV for early positions.
Yes, GUAR too was trading around 100/=
Value wrote:Introduction - CINV
1.CINV is an investment trust - much of its exposures are in capital markets. CINV’s total market value of the investments were Rs. 8.7 Bn as at 31st March 2017.
2.CINV’s total value of equity as at 31st March 2017 was Rs. 8.5 Bn. This figure is very much close to the total portfolio value of the CINV. This means that CINV is not dependent on debt.
3.CINV has an associate company with 49.95% control - Rubber Investment Trust Limited which is also into similar operation such as CINV’s.
4.Around 50% of CINV’s total investment portfolio is directly held under CINV as a company and the remaining 50% is held through the above mentioned associate company.
5.On estimate, 75% of the total portfolio of CINV group is held as long term investment in shares. I.e. Available for sale investments (AFS Investments).
6.And 22% of the portfolio consists of short term investment in shares and the remaining 3% is invested in interest earning instruments.
Around 50% of the CINV’s share investments are on Banking and finance companies.
Accounting treatment of Investments held
CINV makes its profits through,
1.Gain on sale of shares held
As mentioned earlier, since around 75% CINV’s portfolio consists of AFS investments, performance of this portion of portfolio will be mainly measured through Other Comprehensive Income (OCI). This figure would indicate the change in market value of the shares held as AFS investments. OCI will not be taken into account for EPS calculation but will be included in the N/A calculation.
CINV’s EPS will depend only on profit after tax. So to effectively evaluate the CINV’s performance, we need to take into accounts its Profit After Tax (PAT) as well as Other Comprehensive Income (OCI)
Summary of financial performance
1.CINV has continuously delivered profits across the years irrespective of the market performance which is indicated by the change% in ASPI.
2.The continuous profits, despite its fluctuations, indicate that CINV has invested in good dividend paying shares and also exits its shares held mostly only with profits.
3.Other Comprehensive Income (OCI) indicates the change in market value of long term investment in shares. This part is to be read in conjunction with the performance of ASPI.
4.Clearly OCI of CINV hugely depends on the performance of the wider market and the sensitiveness to it is very high.
5.Total comprehensive income (PAT+OCI) has been fluctuating with high volatility.
The following table shows the key ratios of CINV across the last five yearsCINV2.png
1.CINV has reported positive EPS across the five year period but the N/A per share has dropped considerably mainly due to very high negative Total Comprehensive Income per share in certain financial years.
2.EPS of CINV doesn’t represent a fair view of its financial performance due to significant allocation of the portfolio into AFS Investments, performance of which is represented through OCI. So P/E based valuation is not an appropriate method.
3.It’s the PBV that can be relied better than P/E in valuing companies like CINV.
4.Clearly the share has been at a considerable discount to its book value.
5.CINV has had book value based ROE of 7.5% on average which is very low for a company in Sri Lanka considering the inflation rates and interest rates.
6.Low BV based ROE% of CINV justifies the low PBV of CINV.
7.CINV has had encouraging DPO% ratio but the dividend yield is not attractive.
Real value of CINV
At the introduction, it was mentioned that total market value of the portfolio held by CINV is almost equal to the total book value of the equity of the company due to almost zero external liabilities.
Total equity = market value of the CINV’s investment Portfolio +/- minor adjustments
The below table tests the above fact. CINV3.png
Clearly CINV has N/A per share that is very close to the market value of the portfolio held per share.
So to represent the true value, CINV should trade at a PBV equal to 1.
However due to poor ROE%, CINV is expected to continue to trade at a significant discount to its BV unless otherwise public float is reduced considerably.
Volatility of CINV’s share price.
CINV’s share price performance has been very volatile which is obvious considering the fluctuations in the financial performance of CINV. The below table highlights the highest, lowest and year end closing share prices of CINV under the respective financial years. CINV4.png
CINV has not given appreciable returns in the five year period. However looking at the extent of deviation between highest and lowest share prices, CINV could have rewarded smart traders handsomely.
Performance forecast for 2017/18
Since CINV hugely depends on the performance of the capital market, the main KPI that is to be used in the prediction of CINV’s performance is ASPI movement.
From 31st March 2017 to 30th June 2017, ASPI has gained by 11.3% which is remarkable.
It is very easy to predict that, CINV would report excellent performance for the quarter ended 30th June 2017 with considerable total comprehensive income which will boost the N/A value of CINV.
However retention and growth of profits/gains made by CINV in Q1 2016/17 will largely depend on the performance of ASPI in the current quarter and beyond.
1.The share has already gained 25% from its last low of Rs. 40 to reach Rs. 50 now.
2.It is no doubt that CINV will report commendable performance for the Q1 2016/17. Increase in N/A could be expected as much as Rs. 10 per share.
3.With the release of results, CINV could see a notable upward movement in its share price.
4.However, a sustainable move in the share price will depend on the performance of ASPI in the current quarter and beyond.
5.CINV is a high risk investment and could be recommended as a short term investment option for risk lovers with the upside potential of 25% to 30%
6.CINV is not recommended for long term holding.
prasa2004 wrote:Pathetic performance
100% drop in profits
EPS (0.02) from 1.63
Portfolio also dropped
With ASI in downward journey next Qtr also seems a sure loss
https://cdn.cse.lk/cmt/upload_report_fi ... 675153.pdf