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Rahl

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Reply #390 on: Jan 21, 2019, 10:52 AM
Sir TSO, bought my SHLPH stocks during it's IPO and held on to it since it is my very first stocks. After two years and almost 30% paper loss, I'm thinking of selling it na and just suck up the losses. Any advice?

Thanks bro. And thank you for all your analysis here on the thread.


TSO

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Reply #391 on: Jan 22, 2019, 12:55 PM
Oooh... you bought a stock during the IPO? Dude, first thing first: if you're gonna buy a stock that's going public for the first time, do not buy it for the long-term, because initial post-IPO prices will be significantly overvalued. You buy companies at IPO prices with the intent of flipping over the stocks within the next few days (or a week at max).

If you're eyeing the company as a long-term investment, you need to wait until at least a few months AFTER the IPO.

As for SHLPH itself... well... if I'm just STRICTLY gonna rely on valuation... I'd argue that the company could generate about 10 billion a year in operating profits. That should be more or less 7 billion after taxes. Assuming it grows at a rate of 4% a year (long-term inflation rate of the Philippines) and a discount rate of, say, 10% (the recent long-term annual returns of the PH stock market), You'd have 121 billion in enterprise value. So... from that... accounting for +2 billion in excess cash, +4 billion in long-term receivables/rentals/investments, and -15.7 billion in debt and deferred tax liabilities... you'll have an adjusted value of PHP 111.3 billion. With current shares outstanding at 1613.44 million, that equates to an average value of PHP 69.

SHLPH right now is trading at 76.23 billion. That translates to 47.25 per share. The implied margin of safety is 31.5%.

ASSUMING you bought your shares right out the gate, that means your average per share price should be around PHP 75 each. Yet the value right now is PHP 69.

Now I don't know the risk level of the company -- and that's pretty important to me because that and the discount rate I selected directly influence the margin of safety I demand --  but let's say you need a minimum margin of safety of, uh, 20% to be satisfied with your position. This means you need to reduce your average price from PHP 75 to PHP 60. I do not know how much money you need to invest to average it down to that level, but if you can (1) afford the averaging down and (2) keep your portfolio exposure to SHLPH below your maximum tolerance (mine is somewhere between 10% - 15%)... then keep SHLPH and average down. If you are unable to do any of those things... just sell it and suck up the losses.
« Last Edit: Jan 22, 2019, 12:57 PM by TSO »


Rahl

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Reply #392 on: Jan 24, 2019, 10:59 AM
if you're gonna buy a stock that's going public for the first time, do not buy it for the long-term, because initial post-IPO prices will be significantly overvalued.

Lesson that will forever be etched in my memory. Thank you very much TSO.


 


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