Thursday, November 08, 2018

SIF Holding intrinsic value


SIF has had a bad 2018, so I have extended a very rough estimate to 2019. I found this interesting; This year the water levels in the Rhine river have been so low that ships couldn't travel it fully loaded: SIF "With a production level of 19 Kton, the capacity utilization remained somewhat low in Q3, due in part to delays in the supply of steel and the extremely low water levels in various rivers."

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 €327 million, based on 2017 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 $72m/$97m of 0,7 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 SIf Holding is €1,3 million, while the net current assets are - €25 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: [FAIL] 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 2% (using an estimate of 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 EPS x 1,5 x €3,5 Book Value) = €8,7

Dividend ? the company pays dividend when it can.

Conclusion 2018: Sif Holding due to its debt and thus low book value is currently not a company for the Graham Defensive investor.

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