KNM
Current Price ~ 41 sen
KNM had made one BIG wrong decision. To acquire Borsig at the wrong price and wrong time.
In cyclical business, the best time to acquire is during the bottom cycle. It is still okay to acquire at the mid cycle, but to acquire at the very PEAK of Mount Everest was definitely a "Gone Case" scenario.
During this peak, Borsig had been able to asked a for very very high price, with oil price of USD 150 as a backup reason. How KNM fall into this showed that the management is a big FOOL of all the fool. Even a fool could see the oil price will fell down, and fell down it did ... all the way to below USD 40 in less than 2 month after the acquisition. This is no hindsight theory. At the time of acquisition, the high oil price had already showed its dire effects to a lot of business and with the inventories that keep rising and rising, it was as obvious as it could be that the ridiculous high oil price could not be sustained any longer.
Let's come back to now.
What do we expect to see in the coming 1st quarter report on May ?
Oil price for the first 3 months hovering at average of USD 43.
Some may argue that oil price started to go over USD 50 this few days but please look at the inventory level ! At 16 YEARS record HIGH and at the middle of Global Recession !
But of course the counter argument will be to look at how CHEAP the KNM has dropped too.
So, what is the liquisation value for KNM.
I will take the current asset and minus all the total liabilities ... and it came out "minus 19 sen" per share .... meaning I should not use the liquidation value to value KNM.
Hey ! How come I don't take account of the Non-current asset !
Because this is how I value the "liquidation value" of a company who is "not planning to liquidify."
Therefore, the KNM value will depend on its next 12 month earning.
And this is a definitely just a GUESSING game, meaning I could not take any credit even if my guessing is 100 % right, but I should learn some lesson for making the wrong guess.
My guess for the coming EPS will be Q1 at 1.9 sen, Q2 at 1.75 sen, Q3 at 1.5 sen & Q4 at 1.25 sen. This will bring the whole year EPS to 6.25 sen. But looking at how the EPS keep dropping in stepcase fashion .... the psychological effect will bring down it market PE to 6.5 at the end of the year.
Conclusion : KNM should worth less then 35 sen a share to me !
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Current Price ~ 41 sen
KNM had made one BIG wrong decision. To acquire Borsig at the wrong price and wrong time.
In cyclical business, the best time to acquire is during the bottom cycle. It is still okay to acquire at the mid cycle, but to acquire at the very PEAK of Mount Everest was definitely a "Gone Case" scenario.
During this peak, Borsig had been able to asked a for very very high price, with oil price of USD 150 as a backup reason. How KNM fall into this showed that the management is a big FOOL of all the fool. Even a fool could see the oil price will fell down, and fell down it did ... all the way to below USD 40 in less than 2 month after the acquisition. This is no hindsight theory. At the time of acquisition, the high oil price had already showed its dire effects to a lot of business and with the inventories that keep rising and rising, it was as obvious as it could be that the ridiculous high oil price could not be sustained any longer.
Let's come back to now.
What do we expect to see in the coming 1st quarter report on May ?
Oil price for the first 3 months hovering at average of USD 43.
Some may argue that oil price started to go over USD 50 this few days but please look at the inventory level ! At 16 YEARS record HIGH and at the middle of Global Recession !
But of course the counter argument will be to look at how CHEAP the KNM has dropped too.
So, what is the liquisation value for KNM.
I will take the current asset and minus all the total liabilities ... and it came out "minus 19 sen" per share .... meaning I should not use the liquidation value to value KNM.
Hey ! How come I don't take account of the Non-current asset !
Because this is how I value the "liquidation value" of a company who is "not planning to liquidify."
Therefore, the KNM value will depend on its next 12 month earning.
And this is a definitely just a GUESSING game, meaning I could not take any credit even if my guessing is 100 % right, but I should learn some lesson for making the wrong guess.
My guess for the coming EPS will be Q1 at 1.9 sen, Q2 at 1.75 sen, Q3 at 1.5 sen & Q4 at 1.25 sen. This will bring the whole year EPS to 6.25 sen. But looking at how the EPS keep dropping in stepcase fashion .... the psychological effect will bring down it market PE to 6.5 at the end of the year.
Conclusion : KNM should worth less then 35 sen a share to me !
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