Tuesday, April 04, 2017

Sif Holding N.V. intrinsic valuation based on Benjamin Graham Defensive investing

SECTOR: [PASS]  Sif  Holding is in offshore and neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Sif Holding's sales of €400 million, based on 2016 sales, pass this test.

CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Sif Holding's current ratio $90m/$91m of 1.0 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for SBM is €43 million, while the net current assets are - €1 million. Sif Holding fails this test.

LONG-TERM EPS GROWTH: [FAIL]  [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. I don't have Sif Holding's EPS from 10 years ago when it was a private company, therefore Sif Holding neither passes or failsfails this test.

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. Sif Holding's E/P of 70% (using the current Earnings) passes this test.

Graham Number value:  [FAIL]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Sif Holding has a Graham number of (15 x €1,4 EPS x 1,5 x €2,82 Book Value) = €9,8

Dividend= €0,37/€19,91 = 2%

Sif Holding due to its debt and thus low book value is currently not a company for the Graham Defensive investor.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

No comments: