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Samsung Electronics Co Ltd (005930) Extended Graph Analysis

February 12th, 2020 Posted by Extended Analysis No Comment yet

Company Profile

Samsung logo

Samsung Electronics Co Ltd is a multiple consumer electronics business which manufactures and sells IT and Mobile Communications and Device Solutions around the world. They have diversified products from home appliances to health and medical equipment aside from smartphones, semiconductor chips, printers and telecom network equipment. Samsung was ranked as one of the top 10 global in technology..

Samsung is a public company traded as KRX: 005930. The company was founded on January 13, 1989 by Lee Byung-chul. The company was headquartered in Suwon, South Korea.

 

Samsung Electronics Co Ltd (005930) Extended Graph Analysis

 

1. SAMSUNG CASH FLOW

SAMSUNG CASH FLOW

2014 2015 2016 2017 2018 2019
Net cash flow provided by operating activities 36,975,389,000,000 40,061,761,000,000 47,385,644,000,000 62,162,041,000,000 67,031,863,000,000 48,093,855,000,000
Net cash used for investing activities -32,806,408,000,000 -27,167,787,000,000 -29,658,675,000,000 -49,385,216,000,000 -52,240,453,000,000 -37,225,406,000,000
Net cash provided by (used for) financing activities -3,057,109,000,000 -6,573,509,000,000 -8,669,514,000,000 -12,560,867,000,000 -15,090,222,000,000 -18,480,578,000,000
Capital expenditure -23,367,250,000,000 -27,382,103,000,000 -25,190,641,000,000 -43,775,974,000,000 -30,576,923,000,000 24,496,471,000,000
Free cash flow 13,608,139,000,000 12,679,658,000,000 22,195,003,000,000 18,386,067,000,000 36,454,940,000,000 23,597,384,000,000

Facts:

  • Net cash flow from operations was KRW 48 trillion. In the trailing twelve months.
  • Net cash used for investing activities  was -KRW 37 trillion in the trailing twelve months.
  • New cash provided by (used for) financing activities was -KRW 18 trillion in the trailing twelve months.
  • Capital expenditure was KRW 24 trillion in the trailing twelve months.
  • Free cash flow was KRW 23.597 trillion in the trailing twelve months.

Explanation:

  • Net income, depreciation and amortization have a significant amount in the cash from operating activities.
  • Net cash from operations were increasing year-over-year from 2014 to 2018. Moreover, the growth was 81 percent in five years.
  • The net cash used for investing activities were property, plant and equipment and purchases of investments.
  • The net cash provided by (used for) financing activities were debt repayment, dividends paid and other financing activities.
  • Capital expenditures were purchases of property, plant and equipment, and purchases of intangibles.
  • Free cash flow was erratic in movement in the last five years, however the company has managed to provide a free cash flow for the business operations.

Interpretation

The cash flow shows that the company is liquid, the management managed to provide a free cash flow per share at KRW 4555.25 in the trailing twelve months. Cash was provided for dividends payment and debt repayment. The net income was sufficient to provide cash from operations.

 

2. SAMSUNG BALANCE SHEET

SAMSUNG BALANCE SHEET

2014 2015 2016 2017 2018 2019
Total cash 61,817,340,000,000 71,493,074,000,000 88,182,313,000,000 83,184,201,000,000 100,939,943,000,000 101,946,477,000,000
Current Assets 115,146,025,999,999 124,814,725,000,000 141,429,704,000,000 146,982,464,000,000 174,697,424,000,000 186,042,134,000,000
Net property, plant and equipment 80,872,950,000,000 86,477,110,000,000 91,473,041,000,000 111,665,648,000,000 115,416,724,000,000 116,855,571,000,000
Total non-current assets 115,276,932,000,000 117,364,796,000,000 120,744,620,000,000 154,769,626,000,000 164,659,820,000,000 167,343,851,000,000
Total assets 230,422,957,999,999 242,179,521,000,000 262,174,324,000,000 301,752,090,000,000 339,357,244,000,000 353,385,985,000,000
Current liabilities 52,013,912,999,999 50,502,909,000,000 54,704,095,000,000 67,175,114,000,000 69,081,510,000,000 63,303,192,000,000
Non-current liabilities 16,227,320,000,000 18,799,845,000,000 21,045,901,000,000 27,363,560,000,000 30,206,741,000,000 34,679,343,000,000
Total liabilities 68,241,232,999,999 69,302,754,000,000 75,749,996,000,000 94,538,674,000,000 99,288,251,000,000 97,982,535,000,000
Retained earnings 169,529,603,000,000 185,132,014,000,000 193,086,317,000,000 215,811,200,000,000 242,598,956,000,000 251,761,348,000,000
Stockholders equity 162,181,725,000,000 172,876,767,000,000 186,424,628,000,000 207,213,416,000,000 240,068,993,000,000 255,403,450,000,000

Facts

  • Total cash was KRW 101.9 trillion in Q3 2019.
  • Current assets were KRW 186 trillion in Q3 2019.
  • Net property, plant and equipment was KRW 116.856 trillion in Q3 2019.
  • Non-current assets are KRW 167 trillion in Q3 2019.
  • Total assets are KRW 353 trillion in Q3 2019.
  • Current liabilities are KRW 63 trillion in Q3 2019.
  • Non-current liabilities are KRW 34.7 trillion in Q3 2019.
  • Total liabilities were KRW 97.982 trillion in Q3 2019.
  • Retained earnings were KRW 252 trillion in Q3 2019.
  • Stockholders equity was KRW 255 trillion in Q3 2019.

Explanation

  • Total cash was increasing year over year and has a growth of 63 percent in five years.
  • Current assets increase year-over-year and have a growth of 62 percent in five years.
  • Net property, plant and equipment increase year-over-year and have a growth of 44 percent in five years.
  • Total non-current assets increase year-over-year and have a growth of 45 percent in five years.
  • Total assets increase year-over-year and have a growth of 53 percent in five years. 
  • Current liabilities represent 65 percent of the total liabilities.
  • Non-current liabilities represent 35 percent of the total liabilities.
  • Total liabilities represent 28 percent of the total liabilities and stockholders equity.
  • Retained earnings represent 99 percent of stockholders equity and has a growth of 49 percent in five years.
  • Stockholders equity represents 72 percent of total liabilities and equity.

Interpretation

The company has a strong balance sheet and is liquid and financially healthy. It has 3 times current assets than current liabilities. Its liquid assets are enough to pay for its current obligations. The stockholders have more stake in the company than of the creditors. It is using more of the stockholders’ investment for the operation of the business.

 

 3. SAMSUNG INCOME AND MARKET

SAMSUNG INCOME AND MARKET

2014 2015 2016 2017 2018 2019
Revenue 208,205,987,000,000 200,653,482,000,000 201,866,745,000,000 239,575,376,000,000 243,771,415,000,000 229,781,171,000,000
EBIT 25,025,071,000,000 26,413,442,000,000 29,240,672,000,000 53,645,038,000,000 58,886,669,000,000 31,408,838,000,000
Net Income 23,082,499,000,000 18,694,628,000,000 22,415,655,000,000 41,344,569,000,000 38,573,066,000,000 21,625,415,000,000
Market Capitalization 200,085,060,000,000 180,755,714,000,000 245,868,758,000,000 341,450,038,000,000 257,157,237,000,000 375,782,850,000,000
Intrinsic Value 102,886,880,946,227 152,775,056,577,764 192,305,845,455,446 589,116,872,065,884 544,412,951,961,468 619,972,272,761,983

Facts:

  • Revenue was KRW 230 trillion in the trailing twelve months.
  • EBIT was KRW 31 trillion in the trailing twelve months.
  • Net income was KRW 22 trillion in the trailing twelve months.
  • Market capitalization was KRW 376 trillion in the trailing twelve months.
  • Intrinsic value was KRW 619.972 trillion in the trailing twelve months.

Explanation:

  • Revenue was averaging KRW 221 trillion in five years and has a growth of 17 percent from 2014 to 2018..
  • EBIT was averaging KRW 37 trillion and has a growth of 135 percent from 2014 to 2018. 
  • EBIT represents 14 percent of the revenue.
  • Net income was averaging KRW 28 trillion and has a growth of 67 percent from 2014 to 2018.
  • Net income represents 9 percent of the revenue.
  • Market capitalization was erratic in movement in the last five years, however it has a growth of 88 percent in five five years.
  • Intrinsic value is greater by 65 percent against market capitalization.

Interpretation

The company was profitable and the management is capable of generating sufficient revenue for the business operation. The financials have not seen any negative bottomline in the last five years.

 

4. SAMSUNG FINANCIAL RATIOS

SAMSUNG FINANCIAL RATIOS

2014 2015 2016 2017 2018 2019
Asset turnover (average) 0.93 0.85 0.8 0.85 0.76 0.67
Return on assets % 10.39 7.91 8.89 14.66 12.03 6.26
Return on equity % 15.07 11.17 12.49 21.02 17.26 8.83
Debt/Equity 0 0.01 0.01 0.01 0 0.01
Return on invested capital % 13.41 10.01 11.23 19.01 15.56 7.66
Interest coverage 48.01 34.43 53.25 86.74 91.66 48.71

Facts:

  • Asset turnover was averaging 0.67 in the trailing twelve months.
  • Return on asset was 6.26 percent in the trailing twelve months.
  • Return on equity was 8.83 percent in the trailing twelve months.
  • Debt/Equity ratio was 0.01 in the trailing twelve months.
  • The return on invested capital was 7.66 percent in the trailing twelve months.
  • Interest coverage was 48.71 in the trailing twelve months.

Explanation:

  • Asset turnover indicates that for every one KRW in asset, the company generates 67 chon of sales. 
  • Return on asset indicates that for every KRW invested in assets, the company generates 6.3 chon of net income.
  • Return on equity indicates that for every KRW of shareholders equity, the company generated 8.83 chon of profit.
  • Debt/Equity ratio means that the company has KRW 0.01 in debt for every KRW of asset.
  • Return on invested capital indicates that the return generated from its investment was 7.66 percent.
  • Interest coverage indicates that the company has more than enough cash to pay for the interest payment.

Interpretation

The company is liquid and financially healthy.

5. SAMSUNG KEY EXECUTIVE COMPENSATION

Name Title
Kinam King Vice Chairman and CEO
Hyun Suk King President and CEO
Dong Jin Koh President and CEO
Oh-Hyung Kwon Executive Director,Vice Chairman and CEO
Boo-Keun Yoon Executive Director,President and Co-CEO
Jong-Kyun Shin Executive Director,President and Co-CEO
Sang-Hoon Lee Executive Director,President and Chief Financial Officer

Facts:

The company does not disclose its key executive compensation. 

 

6. SAMSUNG LOBBYING AND CONTRIBUTIONS

SAMSUNG LOBBYING AND CONTRIBUTIONS

DATA

Period USD Period USD
1998 83,070,000 2009 130,550,000
1999 52,050,000 2010 131,000,000
2000 80,660,000 2011 128,440,000
2001 66,060,000 2012 124,320,000
2002 75,870,000 2013 130,730,000
2003 89,829,000 2014 119,520,000
2004 97,010,000 2015 124,770,000
2005 110,710,000 2016 121,150,000
2006 120,510,000 2017 147,520,000
2007 134,380,000 2018 147,750,000
2008 137,380,000 2019 156,390,837

Explanation

The company, Samsung Electronics Mfg and Equipment have been incurring lobbying and contributions expenses since 1998 and onwards. The figures above are the calculations by the Center of Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on January 23, 2020 from January 1 to December 31. Prior years include spending from January through December, according to the Center for Responsive Politics.

Interpretation

Total spent on Electronics Mfg and Equipment in 2019 was USD 156,390,837, the number of clients was 262.

The number of lobbyists /percent of former government employees was 1,089 at 72.73 percent.

Source:  OpenSecrets.org Center for Responsive Politics

 

7. SAMSUNG FINANCIAL STRENGTH

SAMSUNG FINANCIAL STRENGTH

DATA

Working capital 105,615,914,000
Total assets 339,357,244,000,000
Sales 229,781,171,000,000
EBIT 31,408,838,000,000
Market value of equity 375,782,850,000,000
Book value of total liabilities 99,288,251,000,000
Retained earnings 242,598,956,000,000

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets 0.0003 1.20 0.00
B – Retained Earnings / Total Assets 0.71 1.40 1.00
C – EBIT / Total Assets 0.09 3.30 0.31
D – Market Value of Equity / Book Value of Total Liabilities 3.78 0.60 2.27
E – Sales / Total Assets 0.68 1.0 0.68
Z-Score     4.25

Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Explanation:

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

Samsung Electronics Co Ltd. has a Z-Score of 4.25. Dr. Altman’s grading scale of 3.0 and above indicates that the company will not declare bankruptcy in near future. In other terms, the company is not close to insolvency. The main factors of this statistical measurement are profitability, liquidity, leverage and efficiency.

Overview

Samsung Electronics Co Ltd.was profitable and is financially healthy and liquid. The calculated financial strength was strong. Based on the calculation of its intrinsic value, the stock was undervalued on the date of posting of this article and could be a good candidate for a Buy.  

 

CITATION

https://www.samsung.com/us/aboutsamsung/home/

https://www.opensecrets.org/federal-lobbying/industries/summary?cycle=2019&id=B12

https://www.morningstar.com/stocks/xkrx/005930/quote

Research and written by Criselda

 

Research In Motion Ltd (RIMM)

Research in Motion Ltd (RIMM) basically the maker of BlackBerry

November 16th, 2012 Posted by Investment Valuation No Comment yet

Research in Motion Ltd (RIMM) is a leading designer, manufacturer, and marketer of innovative wireless solutions for the worldwide mobile communications market. RIMM is known principally as the maker and provider of BlackBerry wireless devices and e-mail services.

RIMM Value Investing Approach 

This model is prepared in a very simple and easy way to value a company, it adopts the investment style of the Father of Value Investing Benjamin Graham. The essence is that any investment should be purchased at a discount, meaning the true value should be more than the market value. Graham believed in fundamental analysis and was looking for companies with a sound balance sheet and with little debt. The basis for this valuation is the company’s five years of historical financial records, the balance sheet, income statement, and cash flow statement. We calculated first the enterprise value as our first step. We believed this is important because it measures the total value of the company.

The Investment in Enterprise Value 

The concept of enterprise value is to calculate what it would cost to purchase an entire business. Enterprise Value EV) is the present value of the entire company.  Market capitalization is the total value of the company’s equity shares. In essence, it is a company’s theoretical takeover price, because the buyer would have to buy all of the stock and pay off existing debt, and taking any remaining cash.

Enterprise Value = Market Capitalization + Total Debt – (Cash and Cash Equivalent + Short Term Investment)

RIMM EV

Explanation

The market value of Research in Motion Ltd was decreasing at 29 percent averages well as its enterprise value at 34 percent average.  The enterprise value total debt was 0.005 percent. Thus resulting in a no-debt-equity ratio of zero, impressive. While cash and cash equivalent was 7 percent of the enterprise value, enterprise value was lesser by 7 percent than the market value. Buying the entire business of RIMM would mean buying 100 percent of its equity, with no debt.

The market price of RIMM has dropped at a rate of 27 percent average. The buying price to date, October 27, 2012, for the entire business was $1735 at $3.31 per share.

Net Current Asset Value (NCAV) Approach

The Net Current Asset Value (NCAV) is a method from Benjamin Graham it is to identify whether the stock is trading below the company’s net current asset value per share, specifically two-thirds or 66 percent of net current asset value. Meaning they are essentially trading below the company’s liquidation value and therefore, the stocks are trading in a bargain, and it is worth buying.

Net Current Asset Value (NCAV) Method

   RIMM NCAVPS

The net current asset value approach for RIMM shows that the stock was trading at an overvalued price because the market price was greater than the 66 percent of NCAV. The result of 66 percent was only 7 percent of the market price.

Market Capitalization/Net Current Asset Value (MC/NCAV) Valuation

Another stock test by Graham is by using market capitalization and dividing it to net current asset value (NCAV).  The idea is, if the result does not exceed the ratio of 1.2, then the stock passes the test for buying. 

RIMM MC NCAV

The table above indicates that in MC/NCAV method, the price was overvalued from 2007 to 2011 because the ratio was greater than 1.2 thus telling us the stock did not pass the stock test. While during ttm6 2012, the price was undervalued because the result of the ratio did not exceed 1.2 therefore, the price was cheap.

 The margin of Safety (MOS)  

The margin of safety is used to identify the difference between company value and price. Value investing is based on the assumption that two values are attached to all companies – the market price and the company’s business value or true value. Graham called it the intrinsic value. The difference between the two values is called the margin of safety. According to Graham, the investor should invest only if the market price is trading at a discount to its intrinsic value. Value investing is buying with a sufficient margin of safety. Graham considers buying when the market price is considerably lower than the intrinsic or real value, a minimum of 40 to 50 percent below. The enterprise value is used because, in my opinion, it is a much more accurate measure of the company’s true market value than market capitalization.

RIMM MOS

Intrinsic Value =  Current Earnings x (9 + 2 x Sustainable  Growth Rate) 

EPS, the company’s last 12-month earnings per share.  G: the company’s long-  term (five years) sustainable growth estimate.   9: the constant represents the appropriate P-E ratio for a no-growth company 2: the average yield of high-grade corporate bonds.

RIMM IV

Explanation

The intrinsic value factors earning per share and the sustainable growth rate. To arrive at the intrinsic value, we must calculate first the annual growth rate. Then by 9+2 multiplied by the growth or the sustainable growth rate (SGR). The factors used in the calculation were explained above.

As we can see, the intrinsic value has increased from 2007 to 2010  averaging 42 percent. It experienced a sudden drop of 87 and 94 percent in 2011 and ttm6 2012, respectively.

RIMM SGR

The sustainable growth rate factors return on equity and payout ratio.  RIMM was not paying the cash dividend to its shareholders’, therefore, there was no payout ratio. Thus, the result of the sustainable growth rate is the same as the return on equity. In the calculation above, I have used the relative return on equity.

RIMM Graph

Explanation

The graph above shows that the intrinsic value line was higher than the price or enterprise value. This goes to show that there was a margin of safety for RIMM from 2007 to ttm6 2012.  In the trailing twelve months,  it had almost intersected with each other. If we put in figures or in percentage the distance between the two lines, that is the margin of safety. In the above table, the average percentage from 2007 to ttm6 2012, was 69 percent, this is the distance of the space between the two lines from 2007 to ttm6 2012. In 2010, the intrinsic value soared up very high at a rate of 63 percent from 2009, then a  sudden fall in 2011 at a rate of 87 percent and it continues to fall in ttm6 at 94 percent.

There are two approaches in calculating SGR, and that is the relative and the average approach.

RIMM Relative

Using the average approach, it produces a higher result.  On the other hand, this does not work for the margin of safety in which it was using the relative approach gave us a higher percent of MOS.

Price to Earnings/Earning Per Share (P/E*EPS)  

This valuation determine whether the stocks are undervalued or overvalued by multiplying the Price to Earnings (P/E) ratio with the company’s relative Earning per Share (EPS) and comparing it to the enterprise value per share, we can determine the status of the stock price.

RIMM PE EPS

The price was undervalued because the enterprise value was lesser than the P/E*EPS ratio. The stock was trading at an undervalued price because the enterprise value was 80 percent average of the P/E*EPS  ratio.

There is another approach in calculating the P/E*EPS valuation and that is the average approach.

RIMM Relative PE

Using the average price to earnings ratio produces a higher percentage because it takes into consideration the performance of the company in the prior periods.

Enterprise Value (EV)/Earning Per Share (EPS) or (EV/EPS)  

The use of this ratio is, to separate price and earnings in the enterprise value. By dividing the enterprise value into the projected earnings (EPS), the result represents the price (P/E) and the difference represents the earnings (EPS).

RIMM EV EPS

In the EV/EPS valuation tells us that the price (P/E) was 30 percent average. On the other hand, the earnings (EPS) was 70 percent on average.

Enterprise Value (EV)/ Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) or (EV/EBITDA).  

This metric is used in estimating business valuation. It compares the value of the company inclusive of debt and other liabilities to the actual cash earnings exclusive of non-cash expenses. This metric is useful for analyzing and comparing profitability between companies and industries. It gives us an idea of how long it would take the earnings of the company to pay off the price of buying the entire business, including debt.

RIMM EV EBITDA

It will take 9 years or 9 times cash earnings of Research in Motion Ltd to cover the costs of buying the entire company.

Conclusion

The market value of RIMM was decreasing at a rate of 29 percent average. While the enterprise value was also decreasing at a rate of 34 percent average. RIMM has a debt-equity-ratio of zero, impressive.  Cash and cash equivalent were 7 percent.  Buying price to date, October 27, 2012, was $1735 at $3.31 per share. Buying the entire business will be buying 100 percent of its equity.

The net current asset value approach tells us that the stock of RIMM was trading at an overvalued price. Because the price was trading above the liquidation value of the company. While the MC/NCAV  indicate that the price was overvalued because the ratio was greater than 1.2.

The margin of safety

On the other hand, the average margin of safety was 69 percent.  In 2010 the intrinsic value was the highest at 92 percent. Using the average return on equity, the margin of safety was 66 percent.

The sustainable growth rate was $27 average, while the annual growth rate was $63 average. Moreover, the return on equity was $27 average. The margin of safety was at $206.98 average.

Relative Valuation

Furthermore, the price was undervalued because the enterprise value was lesser than the result of P/E*EPS. In an average approach, the P/E represent 146 percent while in relative approach, the P/E was 132 percent.

The EV/EPS indicate that the price (P/E) represents 30 percent and the earnings (EPS) was 70 percent.

In addition, it will take 9 times the cash earnings to cover the cost of buying the entire business.

The margin of the safety was 69 percent and the price was trading at a price undervalued. Therefore I recommend a BUY in the stock of Research in Motion Ltd (RIMM).

Researched and Written by Cris

 

Interested to learn more about the company? Here’s investment guide for a quick view, company research to know more of its background and history; and value investing guide for the financial status.

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