Thursday, February 06, 2020

Wereldhave stock Price and Value

Wereldhave has taken a huge non-cash impairment on the value of its real estate. This Graham Valuation takes book value ( EPRA NAV) and direct results (EPRA EPS) into account. 

SECTOR: [PASS]  Wereldhave was a store real estate company. Today February 6th it is calling itself a company that owns "Full Service Centers with mix of
‘LifeCentral’ experiences as a base for sustainable growth."

SALES: The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Wereldhave's revenue of €241 million, based on 2019 sales, just fails 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. Wereldhave's current ratio €85m/€264m of 0,3 is too low.

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 Wereldhave is €1 200 million, while the net current assets are - €179 million. Wereldhave fails this test.

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. Wereldhave's earnings haven't grown over the past 5 years, it has booked huge losses. 

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. Wereldhave's E/P of 14% (using this year's estimated direct 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. Wereldhave has a Graham number of (15 x €2,5 EPS x 1 x €33 Book Value) = €35 

Dividend: €1,76/€17,5 = 10% 

Note: The losses of this year, "impairments", are not taken into account in the EPS.

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