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ARM Cement FY 2014 earnings up only 9.8%
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VituVingiSana
#11 Posted : Monday, October 12, 2015 6:47:41 PM
Rank: Chief

Joined: 1/3/2007
Posts: 18,350
Location: Nairobi
obiero wrote:
Pesa Nane wrote:
obiero wrote:
this share

what about it elder @obiero?

It has killed peoples money as @hisah has elaborated. Bloody murder.. It doesnt make sense for it to be trading at 30s while it increased profitability and is bound to continue doing so based on increased construction activity in E.A

Lots of debt on its books. That level of debt [some of it USD] makes folks nervous. Unlike KQ, its EBITDA is positive but loan servicing takes a huge chunk out of gross profit. The demand for cement is growing but so is competition & this has reduced margins.

A good buy at lower prices which reflect a lower EPS thus a more reasonable PER.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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  | | Edit by user: Monday, October 12, 2015 6:49 PM | Reason: Not specified
Aguytrying
#12 Posted : Tuesday, October 13, 2015 2:51:15 AM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
VituVingiSana wrote:
obiero wrote:
Pesa Nane wrote:
obiero wrote:
this share

what about it elder @obiero?

It has killed peoples money as @hisah has elaborated. Bloody murder.. It doesnt make sense for it to be trading at 30s while it increased profitability and is bound to continue doing so based on increased construction activity in E.A

Lots of debt on its books. That level of debt [some of it USD] makes folks nervous. Unlike KQ, its EBITDA is positive but loan servicing takes a huge chunk out of gross profit. The demand for cement is growing but so is competition & this has reduced margins.

A good buy at lower prices which reflect a lower EPS thus a more reasonable PER.


I have publicly expressed my reservations with ARM vis a vis the debt. Even when guys were harping about ARM even issuing buy recommendations at 75. As the price approaches 30 I will be buying. I feel they will learn there lesson on debt as companies such as kk learnt. A comeback yes, but hard to resist
The investor's chief problem - and even his worst enemy - is likely to be himself
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VituVingiSana
#13 Posted : Tuesday, October 13, 2015 6:45:29 AM
Rank: Chief

Joined: 1/3/2007
Posts: 18,350
Location: Nairobi
Aguytrying wrote:
VituVingiSana wrote:
obiero wrote:
Pesa Nane wrote:
obiero wrote:
this share

what about it elder @obiero?

It has killed peoples money as @hisah has elaborated. Bloody murder.. It doesnt make sense for it to be trading at 30s while it increased profitability and is bound to continue doing so based on increased construction activity in E.A

Lots of debt on its books. That level of debt [some of it USD] makes folks nervous. Unlike KQ, its EBITDA is positive but loan servicing takes a huge chunk out of gross profit. The demand for cement is growing but so is competition & this has reduced margins.

A good buy at lower prices which reflect a lower EPS thus a more reasonable PER.


I have publicly expressed my reservations with ARM vis a vis the debt. Even when guys were harping about ARM even issuing buy recommendations at 75. As the price approaches 30 I will be buying. I feel they will learn there lesson on debt as companies such as kk learnt. A comeback yes, but hard to resist

@Aguy, you must be young chap. In the 1990s, ARM was in deep trouble & ended up taking a convertible loan (& supply of clinker on credit) from Bamburi.

Microsoft (Bamburi) gave Apple (ARM) a loan/equity as well as developed (supplied) Office (clinker) to appease the competition authorities instead of letting the competition die. What Microsoft (Bamburi) didn't realize was how large Apple (ARM) would become. Microsoft (Bamburi) sold its shares in Apple (ARM) at a profit but it would have made much more had it waited a few more years.

Paunrana understands the risk of debt but he did not have the financial muscle to grow without debt hence his focus on growth using both conventional & convertible debt. He has skin in the game.

Things to look out for [I'd appreciate Wazuans collaboration, with facts & data]
1) What is the USD non-working capital debt?
2) What's the outstanding Convertible Debt?
3) What's the strike price of the Convertible Debt?
4) Production capacity in KE, TZ, RW?
5) Margins in KE, TZ, RW?
6) Competition's capacity in each market?
7) Competitors projects & capacity coming on-stream in the next 3 years?
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Aguytrying
#14 Posted : Tuesday, October 13, 2015 11:24:52 AM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
@vvs. Yes Im young smile. Thanks for the history lesson. It's a risky way to grow but seems he's done well so far. This gives me perspective
The investor's chief problem - and even his worst enemy - is likely to be himself
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Aguytrying
#15 Posted : Wednesday, October 14, 2015 4:43:17 PM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
VituVingiSana wrote:
Aguytrying wrote:
VituVingiSana wrote:
obiero wrote:
Pesa Nane wrote:
obiero wrote:
this share

what about it elder @obiero?

It has killed peoples money as @hisah has elaborated. Bloody murder.. It doesnt make sense for it to be trading at 30s while it increased profitability and is bound to continue doing so based on increased construction activity in E.A

Lots of debt on its books. That level of debt [some of it USD] makes folks nervous. Unlike KQ, its EBITDA is positive but loan servicing takes a huge chunk out of gross profit. The demand for cement is growing but so is competition & this has reduced margins.

A good buy at lower prices which reflect a lower EPS thus a more reasonable PER.


I have publicly expressed my reservations with ARM vis a vis the debt. Even when guys were harping about ARM even issuing buy recommendations at 75. As the price approaches 30 I will be buying. I feel they will learn there lesson on debt as companies such as kk learnt. A comeback yes, but hard to resist

@Aguy, you must be young chap. In the 1990s, ARM was in deep trouble & ended up taking a convertible loan (& supply of clinker on credit) from Bamburi.

Microsoft (Bamburi) gave Apple (ARM) a loan/equity as well as developed (supplied) Office (clinker) to appease the competition authorities instead of letting the competition die. What Microsoft (Bamburi) didn't realize was how large Apple (ARM) would become. Microsoft (Bamburi) sold its shares in Apple (ARM) at a profit but it would have made much more had it waited a few more years.

Paunrana understands the risk of debt but he did not have the financial muscle to grow without debt hence his focus on growth using both conventional & convertible debt. He has skin in the game.

Things to look out for [I'd appreciate Wazuans collaboration, with facts & data]
1) What is the USD non-working capital debt?
2) What's the outstanding Convertible Debt?
3) What's the strike price of the Convertible Debt?
4) Production capacity in KE, TZ, RW?
5) Margins in KE, TZ, RW?
6) Competition's capacity in each market?
7) Competitors projects & capacity coming on-stream in the next 3 years?


Thanks. I watched the rich tv mindspeak and i now understand the debt strategy of this company.

The investor's chief problem - and even his worst enemy - is likely to be himself
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faa
#16 Posted : Wednesday, October 14, 2015 5:46:16 PM
Rank: Member

Joined: 5/8/2007
Posts: 709
less that 5 months ago this share was trading at 80-90 bob.

Faida investment bank had it in their recommendations, for over 6 months,as a BUY.

I bought it at an average of 82.5 but luckily some problems come as a blessing, I sold it later at an average 84.00

Neglible profit but the right decision either way.

Had i not sold it, God knows.
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hisah
#17 Posted : Wednesday, October 14, 2015 6:36:50 PM
Rank: Chief

Joined: 8/4/2010
Posts: 8,977
3) What's the strike price of the Convertible Debt?

The convertible debt was $50M when USDKES was 84 approx KES 4.2B with a 6yr term back in 2012. At current $KES value of 103 the loan is KES 5.15B. Approx a billion KES on top as forex losses pile up. The strike price per share was set at $3.20 which was KES 269 ($KES = 84). Current $KES means the strike price is KES 330.

So working with the initial terms ($KES = 84) the strike price post split is 53.80 (269/5) - Share split of five-for-one.

Current share price is 37.50. Quite a distance from the strike price at 54 (30.6% discount). This is assuming all the forex losses are wiped out as KES recoups all the losses vs the USD by 2018 when the 6yr term expires. And also assuming that ARM continues to post profits by 2018.

Feels like a forex trade smile
$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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  | | Edit by user: Wednesday, October 14, 2015 6:38 PM | Reason: Not specified
Aguytrying
#18 Posted : Wednesday, October 14, 2015 8:15:56 PM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
@hisah.
1. What does it mean by unrealized exchange losses? Is it a paper loss or a real loss and when will it be realised?

2. About the strike price, will new shares need to be issued, or have they already been issued? Does it also mean that until the share reaches 53.80 (1$= 103 Kes) that the debt can't be converted? Or can the company be forced to pay the difference to convert the debt into shares?

I'm getting interested as price tanks, hence the many questions.
The investor's chief problem - and even his worst enemy - is likely to be himself
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hisah
#19 Posted : Wednesday, October 14, 2015 11:39:23 PM
Rank: Chief

Joined: 8/4/2010
Posts: 8,977
Aguytrying wrote:
@hisah.
1. What does it mean by unrealized exchange losses? Is it a paper loss or a real loss and when will it be realised?

2. About the strike price, will new shares need to be issued, or have they already been issued? Does it also mean that until the share reaches 53.80 (1$= 103 Kes) that the debt can't be converted? Or can the company be forced to pay the difference to convert the debt into shares?

I'm getting interested as price tanks, hence the many questions.

I can't recall all the details, but it may have been structured like that of TCL i.e. payable in 2016. I think the Nigerian firm (bond holder)was to get 13% shareholding and a board seat. Forex losses if I'm not wrong are still paper losses.

Not sure if the new shares are already issued. I think it'll depended on the debt being converted to equity at maturity.

But I'm sure by 2018 ARM will have rebounded from this market smackdown. The magic number is 54 for the conversion.
$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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murchr
#20 Posted : Thursday, October 15, 2015 12:34:01 AM
Rank: Elder

Joined: 2/26/2012
Posts: 15,980
hisah wrote:
Aguytrying wrote:
@hisah.
1. What does it mean by unrealized exchange losses? Is it a paper loss or a real loss and when will it be realised?

2. About the strike price, will new shares need to be issued, or have they already been issued? Does it also mean that until the share reaches 53.80 (1$= 103 Kes) that the debt can't be converted? Or can the company be forced to pay the difference to convert the debt into shares?

I'm getting interested as price tanks, hence the many questions.

I can't recall all the details, but it may have been structured like that of TCL i.e. payable in 2016. I think the Nigerian firm (bond holder)was to get 13% shareholding and a board seat. Forex losses if I'm not wrong are still paper losses.

Not sure if the new shares are already issued. I think it'll depended on the debt being converted to equity at maturity.

But I'm sure by 2018 ARM will have rebounded from this market smackdown. The magic number is 54 for the conversion.


If they for instant borrowed $1M which was kes 85 back then, but they now have to pay $1M+interest when the $ is trading at 105 how is that paper loss?
"There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
.
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