Wednesday, September 5, 2012

the emperor's new clothes: tanduay holdings after it becomes lt group (05 sept 2012)

i was in a buffet dinner two fridays ago with some friends from finance manila and during our discussion on mergers and acquisitions .. the topic of tdy was brought up (btw ... rfm was also thoroughly discussed) of the attendees asked whether tdy is already expensive or is it still undervalued considering the kapitan's various company assets said to be folded into tdy  (lt group post-asset infusion). the m&e expert present said that tdy was still undervalued (tdy closed @12.72 that friday) altho he did not mention his valuation of lt group) ... i said then that with the max. authorized capital stock that tdy is planning for lt group (25 B shares max) and the announced assets that will be supposedly folded into tdy ... the price of tdy is already too high ... altho i told him that i have to study again the disclosures so far posted in the pse website until that day …

with the recent disclosure: ... im making these bak of the bus tiket calculations just as an exercise …

1. 2012 net income
income before income tax: 3.1 B pesos
provision for income tax: 0.6 B pesos
net income: 2.5 B (1st half 2012)
net income annualized: 5.0 B

2. total number of shares of lt group:

3.981 B shares (as of 4 sept 2012) +
5 B shares (29 may 2012 BOD meeting) +
3 B shares (09 aug 2012 BOD meeting)

= 11.981 B shares (prospective)

3. 2012 estimated eps of lt group:

5.0 B pesos / 11.981 B shares

eps = .41733 centavos / share

4. estimated price of lt group at different p/e ratios:

at 10 x p/e = 10 x .41733 = 4.17
at 15 x p/e = 15 x .41733 = 6.26
at 20 x p/e = 20 x .41733 = 8.35
at 30 x p/e = 30 x .41733 = 12.52

so at 11.68 (closing price as of 4 sept 2012) tdy is trading at 28x 2012 estimated income ...

lets see at what price the coming share offerings of lt group will be set ;)