President Rice, at low valuation.
President Rice, at low valuation. In mid to late 1994, PR's share price was the same as now (47-49). But the earnings-per-share reported in that calendar, where a meager Baht 5.30. This is about a third or even less of what we think PR can earn for all of year 2000.
President Rice is another example of an undervalued small cap. stock which has good business fundamentals, a high current dividend and benefiting from brisk exports. PR just reported -yet once again- a solid 3rd Quarter earnings report.
PR is the market leader in the instant rice noodle and vermicelli business. This is a very popular basic Asian food product, exported around the world. PR also owns 51% of President Bakery, Co., a for local consumption manufacturer of bread and sandwich biscuits under the name "Farmhouse".
Demand for basic bread is growing rapidly in Thailand as more Thai's are turning to bread as alternative choice for breakfast or a light meal. Per capita consumption of bread in Thailand is increasing fast.
President Bakery produces some 100 varieties of bread and other bakery products. PB for example supplies the bread for hamburger buns for McDonald's. PB has the dominant market share in the Kingdom and "Farmhouse" bread sales volume trend has been 30-35% over the past several years.
Yet, looking back over the past few years one can see that earnings have grown much faster then its dormant stock price. In mid to late 1994, PR's share price was the same as now (47-49). But the earnings-per-share reported in that calendar, where a meager Baht 5.30. This is about a third or even less of what we think PR can earn for all of year 2000. Here we see an example in action, on what we have stated long ago: more then a few Thai smaller capitalized SET listed companies have considerably increased their earnings per share over the years. Yet, their stock prices often stayed the same. In PR's case, earnings per share have tripled in the last 6 years while the stock can be owned at the same price as back then. All the while, here is an ever more profitable firm, besides -so it seems- an ever more competitive one, on a global scale. PR excels at being a major exporter besides a dominant producer in a basic added value processed food product.
Here is another way of stating this:
President Rice's common stock price has more than doubled since early 1997, when we first mentioned it to our first subscribers. In the past four consecutive quarters, this company has earned about double of what it earned per share in calendar '97. Hence, the current trailing p/e of only 3.1 (over the past 4 quarters), is still cheaper today then it was then! In mid 1997 PR's book value was stated at 47, today is very close to 70. The last shown book value is 67 but this does not include the just announced third impressive quarter. So while PR's stock price has more than doubled since the beginning of the Asian crisis, it can be owned at cheaper valuation levels today then back then.
President Rice reported it's 3 Quarter earnings statement on November 14, 2000:
|
PR's reports: |
3 Quarter, '00 |
3 Quarter, '99 |
9 Months, '00 |
9 Months, '99. |
|
EPS |
4.46 |
3.67 |
11.58 |
10.11 |
President Rice is now focussing on booming export sales. Our own calendar 2000 estimate calls for 190 million Baht or right around 16 Baht per share. Hence the current 4 Baht dividend could well reach 5 or 6 Baht per share over the next 12 to 24 months. (PR pays dividends twice a year).
PR is a good stock to consider for any rational and diversified "value portfolio". It has a strong export element in a business segment were Thailand excels at! It is also a desirable stock to mix with larger stocks on the SET. This is so because it has a historical Beta of only 0.3, as compared to SET.
Also, this company is in a rather defensive business of producing a very basic food product of exporting and for domestic consumption, instant rice noodles and for Thai consumption, fresh bread products!
The company over the past year paid a 4 Baht dividend and retains about 3 times that amount for profitable reinvestment. Their retained earnings added over B10 to their book value in the last 12 months, yet the irrational market prices PR at 20 Baht lower than stated book value.
Paul A. Renaud.
