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PSE Stock: SEMIRARA MINING CORP. (SCC)

bauer · 71 · 32050

verumuno

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Reply #15 on: Apr 15, 2010, 11:53 AM
It went to 71.
Now im starting to think of an exit strategy.


master

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Reply #16 on: May 24, 2010, 01:04 PM
why think of exiting this early? its semirara's ex-date today for its dividends of P6.

very nice, they manage to give out dividends regularly. like what i said, its in the dividends. its enough income for me, its more than 20% roi.


bauer

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Reply #17 on: May 25, 2010, 02:01 AM
sayang nga eh sold out too early! ganyan talaga.... some are luckier than others.


TSO

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Reply #18 on: May 27, 2010, 01:10 PM
Anyone here delving into SCC's fundamentals? 'Cause I got one question:

Open up the 17A and view the income statement. Do you see an item there under OPEX, called government share? According to its website, it is basically a royalty payable to the DOE by nature of the Coal Operating Contract granted to SCC. The question is, do you consider this an operating expense?

Because I sure as hell don't.


bauer

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Reply #19 on: May 27, 2010, 01:56 PM
yes for me its an operating expense if its a government royalty fee


TSO

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Reply #20 on: May 27, 2010, 02:10 PM
What makes a difference between a government and a non-government royalty fee? I mean, what does that have to do with it being considered an OPEX item?

fyi, OPEX = operating expense. ^^


verumuno

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Reply #21 on: May 27, 2010, 06:45 PM
Where would you think the royalty fee be placed? Well i think they put it on OPEX for tax purposes, because they can deduct it or something with the income tax.

Good thing i havent sold mine, thinking of holding this stock for a long time.


TSO

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Reply #22 on: May 27, 2010, 09:40 PM
Accounting will definitely put it in OPEX.

Anyway, if you were to think of it realistically, the "DOE Share" has absolutely no relation to the business operations, i.e. the costs of running the business. It's basically a commission and simply a nonoperating cost tied to revenues by nature of calculation rather than operation.

My dad said he'd treat it as a variable expense, i.e. COGS. I'd say to take it out of OPEX and put it smack-dab in the non-operating expense items. It'll significantly bring up operating income, but the end result is the same.


bauer

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Reply #23 on: May 27, 2010, 11:24 PM
it all depends on the purpose and intention of the accountant doing the books.  bottomline, all expense must be duly accounted


TSO

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Reply #24 on: May 28, 2010, 12:58 AM
Well, that's accounting for you. Accountants do the recording and crap and ultimately how they view things cascade down to the format of their financial statements. It's regrettable we don't have access to the contribution margin format, as that would show a better picture of the companies' expenses. Financial analysts, on the other hand, play with the numbers :P


TSO

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Reply #25 on: Jul 13, 2010, 10:49 PM
Okay. Even though I haven't compiled my findings of SCC into a formal report (which I can use when I'm job-hunting in the USA... at least that's what I think), I have pretty much finished my analysis of SCC using its SEC 17A, covering years 2004 to 2009.

Summary:

At first glance, Semirara Mining Corporation appears to be a company operating in an industry with links to modern infrastructures commonplace today--the power and cement businesses. Coal, its primary product, is a necessary catalyst for steam power plants and for the mixing of cement. Cement and Fossil-fuel Energy are two things that aren't likely to disappear within one or two decades, at least unless science doesn't come up with some miraculous discovery that is bound to revolutionalize reality as we know it... which is a highly remote scenario.

Dividends distributed by Semirara have grown from 333.1M on 2006-07 to 1.67B on 2009 (which translates to approx. 5.71 DPS, a little less than the 6.00 DPS distributed on 2010). On another note, sales volume has experienced a 16.5% compounded annual growth rate since 2003, landing at 250% of its original value, i.e. 4464 thousand metric tons of coal. Even better, SCC had recently acquired its long-time customer, the Calaca Power Plants, a move that not only preserved its coal supply contract but also added a new revenue channel for the company.

However, a closer scrutiny at SCC revealed several holes in the sustainability of its dividend policy, the reliability of its coal sales growth, and the cascading consequences arising from the Calaca PP acquisition. Despite an overall increase in coal production efficiency and the highest net profitability in the 2003 to 2009 period (notwithstanding the two outlier figures on 2004 and 2005), in the end SCC is a rather overvalued company. Valuations performed with a DCF model show a (33%) margin of safety. Following recent disclosures, even if power sales were to suddenly triple from 2009's 443M to 1.5B, experience a 25% yearly growth for the next six years, and a 5% terminal growth rate, and miraculously lower its power COGS from 77% to 47%, the end result is a (14%) margin of safety. Still overvalued at 97 a share.

A Quick Look:

Questionable Growth in Coal Sales
- 16.5% compounded annual growth is a very attractive figure. A sales breakdown reveals a lingering dependency on Calaca and declining sales on the local side. Do I have to mention that export sales literally went through the roof for three straight years?

Issue with operational efficiency
- Without a doubt, SCC is achieving efficiency in its ROM Coal processing and materials movement. Further, the company has high confidence in the quality of its receivables. Inventory turnover is at a high 3.8, significantly higher than the median 2.2. However, there appears to be a liiiiitttle inefficiency on SCC's sales and its coal extraction process.

Inherent Volatility with CAPEX and Principal Payments
- Semirara's capital expenditures had been extremely volatile, its immense range presenting itself with a coefficient of variation greater than 0.75. Payment of debt principals, which never went below a whopping 1B, normally exceeded each preceding year's current portion of LT debt. The Calaca Acquisition is of great relevance to this due to the sheer amount of debt shouldered by the company.  

Creditworthiness a cause for concern
- Though SCC seems to have a decent margin of safety above interest requirements, this is nothing but deceptive. The Cash Flow Statements and the Balance Sheets combined reveal that the Dividend-CAPEX-Principal PMT triumvirate flanked SCC and left significant damage on its liquidity, leaving it prone to seeking out additional financing from debt and equity.

Unsustainable Dividend Policy
- Dividends are mostly funded by debt. A look into the company's Residual Free Cash Flows corroborate this claim and in addition, there is no consistency whatsoever on the traditional payout ratios. However you look at it, the dividend policy is unsustainable and is kept afloat only by the Board of Directors for reasons only they would know.

-=<[ Consequently, all my DCF valuations are based on a required rate of return of 15%, which I normally apply to investments of medium risk ]>=-


>>> Will be continued on a later post. :)


ddemmon

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Reply #26 on: Jul 15, 2010, 12:21 AM
currently, a 2nd possible flag-pennant in the works with target of 116-120.
i've been on this boat since 25 and living on its cash dividend. :D

"By the time a participant figures out why the market has adopted a particular thesis, it may be too late... It is better to anticipate the fluctuations by studying market patterns. This is what technical analysts do." ~ George Soros


verumuno

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Reply #27 on: Jul 20, 2010, 06:15 PM
Ill sell it once the div drop even a centavo. Calaca should be operational next year in summer where the hydro goes weak and coal power goes full power. Then a P7 divs.


bauer

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Reply #28 on: Jul 23, 2010, 02:22 PM
Coal powered electricity generating plant, even with the presence of hydro power plants, will be needed in the next 2 years due to lack of energy sources.

ang malabo lang sigurong sagot ay kung manatili sa 100 up per share ang SCC in the next 2 years


TSO

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Reply #29 on: Aug 01, 2010, 04:18 PM


 


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