I have done this analysis more than 3 years ago and now I updated with comparative 2018 audited financial data.
In items 1.2, 1.3 & 1.4, the minimum benchmark for these ratios should be greater than 1 or 100%. But companies in different industries have different needs, so acceptable ratios differ from one industry to another. For the property industry, the ratio that falls below 1:0.75 or 75% is below norms. Mark: Failed.
Current Ratio: 1:2.65 or 265% is spectacular. A minimum benchmark for the current ratio is 1:2 or 200%. This means that a firm can cover its current liabilities in the short term. But then again, companies in different industries have different needs for liquidity. So acceptable ratios differ from one industry to another. Any current ratios of less than 1:1.75 or 175% for any industry is below standard. Mark: Passed.
P/E Ratio: 1:21.43 or 21x. Most common P/E for any industry as follows: Below 12x is cheap, 12x-25x is standard and above 25x is very expensive. Mark: Passed.
P/S Ratio: 1:0.79 or 79%. The lower the P/S ratio, the more attractive the investment. Price-to-sales provides a useful measure for sizing up stocks. For this industry sector, the P/S ratio at this level is extraordinary. Mark: Passed.
P/B Ratio: 1:5.13 or 513%. A lower price-to-book ratio could indicate that a stock is undervalued. Again, these vary from industry to industry. However, most value investors may often consider stocks with a P/B value under 3x as their benchmark. Mark: Failed.
D/E Ratio: 1:1.18 or 118%. Acid test ratio measures the ability to pay short term liabilities while D/E ratio measures for the long-term leverage. Higher leverage ratios tend to indicate a company or stock with higher risk to shareholders. Investors will often modify the D/E ratio to focus on long-term debt only because the risk of long-term liabilities are different than for short-term debt and payables. Capital-intensive industries such as manufacturing, and telecom tend to have a debt/equity ratio above 2, while tech or services firms could have a typical debt/equity ratio under 0.5. For real property investment, this ratio level is outstanding. Mark: Passed.
IPO DCF Values:
2018 DCF Values:
Based on the DCF calculation, my estimated HVN IPO valued at PHP 69.06. My assumption here is within the international industry standard. Property is a risky investment. It’s an interest-driven risk. The higher the interest rate the risky the investment. The global interest rate is 4-5%. In the Philippine setting, the property interest rate is higher at 6-7% vary from institution to institution. Why discount rate at 21%? As I said Philippine interest rate at 7%, this should be doubled for the market risk rate and add another 7% for a market risk premium. Mark: Passed.
My conclusion:
On the debut day, 29-Jun-2016, the open price at 11.00, ceiling as high as 15.74 then low at 10.82 and closed at 15.74.
Although all are in a passing mark, it is worth to note that in 2018 P/E Ratio is at 169x. It is overvalued 11 folds at my standard level.
If you invest at its IPO price of 10.50 and you hold it until 29-Nov-2019 at its close price of 410.00, your gain is a whopping 3,804.76%. Now the question remains if you invest today at the price of 410.00, is it worth 2,696.58 after 5 years? If you look at the analysis above, the answer of course is it depends on the person interpreting these results. But then again, is the above numbers the same, better or worst 5 years from today?
After all, there are no right or wrong valuations, it all depends on your risk tolerance and your due diligence.
DISCLAIMER: I'm not a Certified Financial Planner. Published herein is my personal opinion and should not be construed as a recommendation, an offer, or solicitation for the subscription, purchase or sale of this security.
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