Weekend Notes: Another "P" for Jollibee (JFC-P52.0), The GEO Grace (GEO - P1.96) phenomenon
Another "P" For JFC
JFC added another "P" in its "4P" metrics.
Last Friday, JFC announced that it will acquire Beijing based Hongzhongyuan chain of congee restaurants. JFC is paying US$50.5m for the acquisition. In a disclosure, the company said that Hongzhongyuan operates 33 stores and generates close to US$24.5m in sales. It also mentioned that Hongzhongyuan is "highly profitable" and debt-free. This is the second acquisition of JFC in P.R. China. In 2004, JFC paid US$22.5m for a controlling stake in Shanghai-based Yonghe King. This brings JFC total store count in P.R. China to 138.
The acquisition should bolster the potential of JFC. China is a vast market for JFC to grow. Each province in China can potentially be as big as JFC's reach in the Philippines. I am confident that JFC can replicate its success in Yonghe King. In 2005, Business Week named Yonghe King as "Top 10 Most Valuable Brand Franchise" in China. From how things are shaping, JFC will likely develop a "home-grown" franchise for each province in China to suit the local taste.
As a "4P" stock, the value of JFC should approximate its average growth prospects in the next 3 years. JFC is currently trading at 17.0x PER. To my mind, JFC should trade at around 20-22x PER.
The GEO phenomenon
Is GEO a "hype" or a "reality"?
GEO has a market capitalization of P5.0bn. On paper, it has P500m in cash that was generated from the recent rights offering and P173.0m worth of mining claims. For 2008, GEO expects to generate US$70m in revenues and US$20m in net income. So from a valuation perspective, GEO trades at 7.4x and 7.8x Price to Assets (P/A) and Price to Earnings (PER) respectively based on 2008 forecast.
Thus at these levels, valuations look "hyped-up" and the "reality" of seeing any earnings is still months away. Who knows what will happen to commodity prices in 2008.
However, more than the argument on "hype" or "reality"; GEO is a phenomenon that we cannot ignore for as long as the commodity boom stays its course. GEO is a proxy play on the renaissance of the local mining industry. Based on estimates, the sector is expected to generate US$6.0bn revenues by 2010 or roughly 10x what it was three years ago. In 2004, total mineral output reached a mere US$650m. What is happening to GEO is a microcosm of the turnaround in the mining sector. Despite the huge run-up of mining stocks, the combined market capitalization of the sector is "just" P85.0bn. This suggests that mining is still underrepresented in the market. For comparison, Megaworld (MEG - P3.20) has a market capitalization of P60.0bn.
Looking back, the "GEO phenomenon" is not an aberration. It is a reality that we saw during past booms - internet, property, telecoms, emerging markets etc. At the height of the internet boom, 2 stocks that best reflect this phenomenon are College Marketing Group, Inc. (CMGI) and Softbank Capital (SB). Both companies saw its market value surge from less than US$1.0bn to almost US$140.0bn. CMGI and Softbank seeds start-ups that will eventually become major players in their markets. Some notable names include Yahoo, eTrade, Snapfish and Geocities.
So, beyond "hype" or "reality"; investors should learn to live with the phenomenon.
Quote of the week
Henry Sy: You cannot just depend on what is happening; you should always be ahead. Many of the things that we do are not according to market trends
Deconstructing Henry Sy, The Asset, July/Aug 2007 Issue
For comments, you can send me an email at jack.galt888@gmail.com
JFC added another "P" in its "4P" metrics.
Last Friday, JFC announced that it will acquire Beijing based Hongzhongyuan chain of congee restaurants. JFC is paying US$50.5m for the acquisition. In a disclosure, the company said that Hongzhongyuan operates 33 stores and generates close to US$24.5m in sales. It also mentioned that Hongzhongyuan is "highly profitable" and debt-free. This is the second acquisition of JFC in P.R. China. In 2004, JFC paid US$22.5m for a controlling stake in Shanghai-based Yonghe King. This brings JFC total store count in P.R. China to 138.
The acquisition should bolster the potential of JFC. China is a vast market for JFC to grow. Each province in China can potentially be as big as JFC's reach in the Philippines. I am confident that JFC can replicate its success in Yonghe King. In 2005, Business Week named Yonghe King as "Top 10 Most Valuable Brand Franchise" in China. From how things are shaping, JFC will likely develop a "home-grown" franchise for each province in China to suit the local taste.
As a "4P" stock, the value of JFC should approximate its average growth prospects in the next 3 years. JFC is currently trading at 17.0x PER. To my mind, JFC should trade at around 20-22x PER.
The GEO phenomenon
Is GEO a "hype" or a "reality"?
GEO has a market capitalization of P5.0bn. On paper, it has P500m in cash that was generated from the recent rights offering and P173.0m worth of mining claims. For 2008, GEO expects to generate US$70m in revenues and US$20m in net income. So from a valuation perspective, GEO trades at 7.4x and 7.8x Price to Assets (P/A) and Price to Earnings (PER) respectively based on 2008 forecast.
Thus at these levels, valuations look "hyped-up" and the "reality" of seeing any earnings is still months away. Who knows what will happen to commodity prices in 2008.
However, more than the argument on "hype" or "reality"; GEO is a phenomenon that we cannot ignore for as long as the commodity boom stays its course. GEO is a proxy play on the renaissance of the local mining industry. Based on estimates, the sector is expected to generate US$6.0bn revenues by 2010 or roughly 10x what it was three years ago. In 2004, total mineral output reached a mere US$650m. What is happening to GEO is a microcosm of the turnaround in the mining sector. Despite the huge run-up of mining stocks, the combined market capitalization of the sector is "just" P85.0bn. This suggests that mining is still underrepresented in the market. For comparison, Megaworld (MEG - P3.20) has a market capitalization of P60.0bn.
Looking back, the "GEO phenomenon" is not an aberration. It is a reality that we saw during past booms - internet, property, telecoms, emerging markets etc. At the height of the internet boom, 2 stocks that best reflect this phenomenon are College Marketing Group, Inc. (CMGI) and Softbank Capital (SB). Both companies saw its market value surge from less than US$1.0bn to almost US$140.0bn. CMGI and Softbank seeds start-ups that will eventually become major players in their markets. Some notable names include Yahoo, eTrade, Snapfish and Geocities.
So, beyond "hype" or "reality"; investors should learn to live with the phenomenon.
Quote of the week
Henry Sy: You cannot just depend on what is happening; you should always be ahead. Many of the things that we do are not according to market trends
Deconstructing Henry Sy, The Asset, July/Aug 2007 Issue
For comments, you can send me an email at jack.galt888@gmail.com
posted by jack galt at
5:46 PM
0 Comments:
Post a Comment
<< Home