Wednesday, 3 September 2014

Why I think Toyota Caetano is cheap: bullet points

Why I think Toyota Caetano is cheap: bullet points - as promised in the last post

1-They operate in Portugal: starting a recovery from the worst recession in the last 40 years (after the dictatorship fell). Still 14% unemployment (official numbers, as understated as they were when it was 17%).  – plenty of upside for consumption.
2- They have paid out as dividends 90% of net income since 2006: expected to continue. Likely to be well paid to wait.
3-  Big debt reduction, divestment and restructuring efforts since the crisis: divestment apparently is still in progress. Debt is currently low. Costs have been trimmed.
4- Parent company has higher debt and has had to negotiate with banks: pressure on the parent should mean high pressure on costs, debt reduction to progress and dividends to shareholders/parent company should be high as profits increase
5- Accompanying the recovery seems to be possible with little fixed asset investment, working capital investment should accompany sales. Investment in the improvement of the industrial unit is expected if new models are received (under negotiation with Toyota): such an investment would likely be on the currently active factory and as such I would expect it to be low in comparison with the profits added – it should be a kicker and not bad news.
6- Despite the depressed environment, they trade (at 1.3€) at around 35% of book value, at 12,5x first semester annualized net income (8% earnings yield, expected to be paid out) and at an annualized EV/EBITDA of 3,9.

And a few new data (as also promised in the last post):
August car sales are out:
- Toyota+Lexus 473 vehicles (298 last year, a 58.7% increase YOY in line with the 56% increase in July), totaling 1417 vehicles in two months and with a substantial market share increase to around 5% .

And I finally found some data on industrial machines sales:
-July forklift sales (global market) seem to have increased 225% YOY. This number most likely includes some areas where Toyota Caetano does not operate (and vice versa) but it is always better to see a substantial rise than a substantial fall.

Disclaimer: read my previous disclaimers in Toyota Caetano posts

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