Wednesday, January 04, 2017

Nagacorp Intrinsic Value Benjamin Graham valuation.

Nagacorp is a casino / gaming / tourism company. The stock is sold in Hong Kong and the company operates in Cambodia where it has a casino monopoly. The chairman is American. It pays an 8% dividend.

Nagacorp Graham Defensive Analysis                                                                        December 2016

SECTOR: [PASS] Nagacorp is in the gaming sector. Technology and financial stocks were considered too risky to invest in when this methodology was published. 

[PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Nagacorp' sales of HKD 4 117 million, (€500m) based on 2015 sales, passes this test.

CURRENT RATIO:  [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Nagacorp' current ratio HKD1 768m/HKD327m of 5 passes this test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). The long-term debt for Nagacorp is HKD 0 million, while the net current assets are  HKD 1 400 million. Nagacorp passes this test.

LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. Nagacorp' earnings have increased 300% since 2005.

Earnings Yield:  [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. Nagacorp's  E/P of 13%  (using the average of the last 3 years Earnings) passes this test.

Graham Number value: 
[PASS] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Nagacorp has a Graham number of √ (15 x HKD 0,6 EPS x 1,5 x HKD 3,0 Book Value) = HKD 6,6 

Dividend: HKD 0.36/ HKD 4,27 = 8.4%

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