Book value – Medielys http://medielys.com/ Wed, 28 Sep 2022 14:43:44 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://medielys.com/wp-content/uploads/2021/08/favicon-2-150x150.png Book value – Medielys http://medielys.com/ 32 32 Micron Stock: When Book Value Gets A-Knockin’, You Better Start A-Buyin’ (NASDAQ: MU) https://medielys.com/2022/09/27/micron-stock-when-book-value-gets-a-knockin-you-better-start-a-buyin-nasdaq-mu/ Tue, 27 Sep 2022 13:00:00 +0000 https://medielys.com/2022/09/27/micron-stock-when-book-value-gets-a-knockin-you-better-start-a-buyin-nasdaq-mu/ DNY59 Book value. It’s such a simple accounting calculation, but it’s perhaps the most critical Micron (NASDAQ: MU) that investors can do. Over the decades, Micron’s stock has been on a rollercoaster ride, moving almost congruently but upward through stock market cycles. And this roller coaster got on the way to book value. Like clockwork, […]]]>

DNY59

Book value. It’s such a simple accounting calculation, but it’s perhaps the most critical Micron (NASDAQ: MU) that investors can do. Over the decades, Micron’s stock has been on a rollercoaster ride, moving almost congruently but upward through stock market cycles. And this roller coaster got on the way to book value. Like clockwork, an investor can buy Micron at the low end of this valuation metric, relax, and wait for envious CAGR returns. And this week, the stock has plunged as close to book value as it has in the past few years, and Micron investors who have been in the stock for a while, like me, are waiting like a child for Christmas to put their next tranche of investment money for five years to work.

Now, if you’re new to the world of Micron motion sickness, you quickly think, “How could anyone think of getting into Micron when there’s blood on the streets all over the market?” Yes, that sounds scary, but there are a few things to get your feet wet before we jump into an “automatic” purchase at book value.

The valuation measure of the price-to-book ratio is not without surrounding circumstances. The market does not operate in a vacuum when it comes to Micron’s earnings or its medium-term future. The reason Micron is less than 10% of book value is not devoid of the weighing machine that is on the market. But when taken over the years, this swing from book value to a relatively unknown higher P/B value to book value doesn’t mean the stock isn’t at ground zero every cycle on the graphic. On the contrary, growing Micron’s book value from a P/B of one to a P/B of one over the years pays a curiously high return.

In short, an investment in Micron is an investment in the assets of the company.

And because Micron’s modern-day management team has focused on cutting the company’s costs while strengthening its balance sheet, its assets have been on an upward trajectory like never before in Micron’s history. the company.

Chart
Data by Y-Charts

Book value provides the market safety net

You may recall from my last post on Micron, where I discussed their guide down in their pre-announcement for Thursday’s report. In it, I said that the reductions in earnings estimates would start to form a bottom, but that wasn’t there and there, just that the process was well underway. The point of the article was that now was not the time to sell, but now was not the time to buy, at least not yet. However, the bottom was closer than farther, I postulated, as the estimates were greatly reduced, a requirement for finding a bottom in the Micron cycle history.

This turned out to be correct as the book value is now within the range of the limit order.

I expect Thursday’s earnings report to further accelerate this process, aligning analysts with management’s near to medium-term outlook.

But, in the meantime, the market took its usual liberty to drive down Micron’s valuation ahead of the actual bottom. Anyone who reads my articles knows that I frequently mention the two to three quarter outlook the market is looking at, especially for memory players like Micron. This means that it sniffs the low before the actual financial bottom while sniffing the high before the financial top.

So, while earnings estimates are sharply reduced for the coming quarters, the market is already pricing this in, which is how we arrive at the chart below.

Chart
Data by Y-Charts

Now, I agree that using book value is obsolete because the market uses it to indicate what the company is worth if it goes bankrupt. Micron is in no danger of going bankrupt today; these were concerns in the early 2000s and into the mid-2000s, when its technology was generations behind and its balance sheet was not pretty and debt-laden. Today, Micron’s balance sheet is pristine with $5 billion in net cash, a dividend and share buybacks. Micron is also the first to market the latest market node for DRAM and NAND.

Micron has never been in a better position.

That said, it is the old guard of the market when it comes to valuing Micron as it cannot master cyclicality with enough predictability. It’s always about higher and higher estimates when things are going well and lower and lower estimates when things are going badly. For all its flaws, book value helps investors like us see the bottom of the valuation, regardless of earnings.

And, if the market is going to use book value to his advantage, I will use it for my advantage.

So about these book to book returns

Looking at the chart above, you might think that the lows at the end of 2018 mean that the stock is now back to 2018 levels. However, you wouldn’t be more wrong.

Chart
Data by Y-Charts

The stock fell to $28.23 during the low period of 2018, when it very briefly fell below book value, which means that if the company returns to book value of $44 (I’m expect book value to be $45 per share after Thursday’s report), the yield is 56%. That’s a CAGR of over 12.5% ​​between December 2018 and today.

In other words, the worst you would have done would be a 56% gain in less than four years buying at book value. This is the minimum because Micron’s book value looks like this over this period:

Chart
Data by Y-Charts

You might be thinking now, “Joe, you didn’t factor in Micron’s current or future earnings or a decline in book value.” Micron’s assets include the accumulation of its asset portion of its balance sheet and the repayment of debt over time. This is how Micron went from being deeply net debt to being net cash positive.

But on a more practical level, Micron’s earnings allow it to continue to build its balance sheet and therefore its book value over the years. Sure, the book value might slow during low income periods, but I’m talking about a bottom-to-bottom move. By the time the single book value presents itself next time, the peak part of the cycle will have occurred, and this is where the book value increases dramatically.

And for those times when the business isn’t doing well because the memory sector is taking a hit due to supply and demand, the chart above shows pretty clearly that the book value has continued to rise. evolve even during the weakest periods.

Risks and book value calculations

Now, that’s not to say the book value can’t go down, and so the goal post moves, but Micron’s book value hasn’t gone down significantly in the last ten years. And it won’t as long as the business maintains at least positive free cash flow for the year, eliminating any need to use cash on hand to operate the business or go into endless debt.

Even in the face of its worst times over the past decade, book value can barely be seen to decline between 2015 and 2017. This was also when the balance sheet was at its worst with toxic convertible debt instruments. But since 2017, the book value has steadily increased with massive increases during the best times.

Chart
Data by Y-Charts

The beauty of this assessment is that the calculation is simple to do on an ongoing basis – which I will do on Thursday when the report comes out. Just look at the balance sheet and find the line for total assets and the line for total liabilities. Then you subtract the total liabilities line from the total assets line to get the book value of the business. Using the FQ3 revenue report, this equates to $49,281 million ($49.3 billion) ($65,296 million to $16,015 million).

Publication of Micron's FQ3 results

Publication of Micron’s FQ3 results

Then you divide by the total shares outstanding to get the book value per share (meaning share buybacks help here). At FQ3, Micron has 1.121 billion shares outstanding, giving it a book value per share of $44. If Micron increases its book value by $1.2 billion in the current quarter, it will reach $45 per share. It increased by $1.44 billion in FQ3 compared to FQ2. With the painful predictions for FQ4, my estimate of $1.2 billion may not be reached, but it should reach at least $1 billion, depending on the timing of some equipment payments and the current line of debt.

Win, lose or draw

Regardless of the negative outlook for Micron over the next two or three quarters, the valuation that the market has chosen to price the stock has the advantage of giving us a floor for the stock. That doesn’t mean the stock can’t fall below book value, as it has in the past, but it is very fast and minimal. Given the strength of modern-age business, the market has no reason to award it the price of bankruptcy. But when it does, that has proven to be the best time to buy stocks.

It all boils down to the fact that Micron shares are valued just 11% above book value at Wednesday’s close. In other words, there’s only a 10% decline with the worst financials yet to come on Thursday – meaning the market is ahead of the news. Risk versus reward couldn’t be clearer for the stock market cycles Micron experiences.

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Goldman Sachs: A buy at tangible book value (NYSE: GS) https://medielys.com/2022/09/24/goldman-sachs-a-buy-at-tangible-book-value-nyse-gs/ Sat, 24 Sep 2022 12:00:00 +0000 https://medielys.com/2022/09/24/goldman-sachs-a-buy-at-tangible-book-value-nyse-gs/ Chris Hondros Investment banking giant Goldman Sachs (NYSE: GS) has had two eventful years. The stock doubled not too long ago on the back of sharply improving earnings in 2021. Since then, however, the stock has fallen back to near 52-week lows as the near-term earnings outlook has darkened amid a weaker economy: Data by […]]]>

Chris Hondros

Investment banking giant Goldman Sachs (NYSE: GS) has had two eventful years. The stock doubled not too long ago on the back of sharply improving earnings in 2021. Since then, however, the stock has fallen back to near 52-week lows as the near-term earnings outlook has darkened amid a weaker economy:

Chart
Data by Y-Charts

There is no doubt that Goldman Sachs will face a more challenging operating environment in the coming quarters. However, I think traders worry too much about short-term swings. Instead, I would urge investors to consider valuing Goldman Sachs based on book value rather than quarterly results.

GS stock: my favorite chart

My favorite way to look at GS stock is to compare price to tangible book value (P/TBV). It measures the valuation of a bank in relation to the net asset value of its balance sheet. A bank’s profitability is determined by its balance sheet and the level of income it can earn on those assets, so book value ends up being a key part of a bank’s long-term value proposition.

Here is how the GS ratio has changed over time:

Chart
Data by Y-Charts

Before the financial crisis, Goldman Sachs was trading at two or even three times its tangible book value. This made sense because Goldman was constantly and rapidly increasing its tangible book value, regardless of economic conditions or short-term earnings.

In the wake of the 2008 financial crisis, however, GS stock plunged to a low P/TBV of 1s and then spent the past decade plodding around 1.0x the tangible pound more or less a small fork.

I was aggressively buying GS shares in 2019 when the shares were at 1.0x P/TBV, arguing that it was far too cheap for such a high quality bank with consistently strong profitability and operational metrics . At the time of my purchase, I was hoping that GS could rally towards 2x P/TBV in a better interest rate environment and with more positive sentiment for the banking sector.

It was played out partially; Shares of GS are up 50% against the tangible pounds last year. Now, however, it’s back to 1.0x once again. The investment hasn’t been bad by any means, however. Indeed, regardless of how the economy plays out, GS stock continues to increase its tangible book value at a breathtaking rate:

Chart
Data by Y-Charts

In 2019, I was buying the stock around $200 with a tangible book at $200. Now the valuation ratio is the same, but the stock price and book value have reached $300. This is the way things go when you have a classic compositing operation like first thing. Going back a bit, I note that the book value of GS continued to rise steadily even in 2008 and 2009, when the rest of the financial industry was collapsing. Goldman Sachs has a reputation for being the smartest investment bank in the country and there’s a good reason for that.

Rising book value, dividends and multiple expansion

Even if Goldman Sachs’ stock price only followed its tangible book value, it would be a sizable investment, as its tangible book has risen from less than $40/share at the turn of the century to $290 today.

But there’s more to it than just the steady increase in its balance sheet. On the one hand, the company offers a reasonable dividend. After aggressive rises in recent years, GS stock now pays $10/share in annual dividends, which equates to a solid 3.2% return following the stock price sell-off. Add in a starting dividend yield of 3% on top of nearly double-digit annualized growth in TBV, and things are gearing up.

Then there is the multiple. As noted, in recent years GS stock has tended to approach the 1.0x P/TBV level. However, it reached 1.5x in 2021 and was consistently above 2x before the financial crisis. A T/PBV of 1.5x would put the stock near $450 today, and a multiple of 2x would take it to $579.

I’m not the only one who thinks GS stock is worth over $400 per share. Morningstar’s Michael Wong just raised his price target for GS stock to $438 per share in July this year. Wong shares my thought, writing:

“We believe the company should be trading at 1.5 to 1.6 times tangible book value.”

Wong attributes this higher valuation multiple to the bank’s larger and more profitable investment management operation, a growing revenue stream from consumer businesses and better expense control, among other factors.

The profitability of Goldman Sachs

The problem with measuring too-big-to-fail banks on short-term earnings is that there are a ton of moving parts that make up the calculations. You have things like loan loss reserves, mark-to-market accounting, etc., which can greatly impact profitability over a three month or even a year period.

Goldman Sachs currently looks exceptionally profitable on a rolling basis, and many people have been making bullish theories for the stock based on its single-digit P/E ratio. They are not wrong, exactly, but the reflection is incomplete.

To zoom out, consider Goldman’s return on equity “ROE” over the past decade:

Chart
Data by Y-Charts

ROE is a bank’s return on its assets at book value – essentially the profit it can make from every dollar of equity it puts to work. Over time, a bank’s returns depend on how much capital it uses and how profitable it is to deploy. As we saw above, Goldman Sachs has grown in book value incredibly quickly. Now let’s look at return on equity.

Over the past decade, ROE has been very stable, almost always between 8 and 12%. That’s pretty good for a major US bank in a low interest rate environment. An ROE of 8% would be considered pretty average, and a reading of 12% is pretty good, but not best in class.

Since 2020, however, Goldman’s ROE has reached stratospheric levels. This explains the massive profits and the very low P/E ratio. Goldman was suddenly able to get up to twice the return on every dollar invested.

However, this period of excess earnings seems to be coming to an end. The frenetic pace of activity in areas of investment banking such as IPOs and mergers and acquisitions is slowing. Asset management fees go down as the value of the markets goes down. More and more transactions go wrong, leading banks to incur losses in the course of their business. Now Goldman is reportedly laying off workers as it retreats to a less prosperous trading environment.

But, that’s all normal cyclical stuff. Short-term profits go up and they go down. The difference here is institutional. Goldman has superior risk management and capital allocation, and is therefore able to avoid losses and even continue to make money in dismal market conditions like 2008.

While earnings and ROE rise and fall from time to time, the tangible book value of the bank has steadily increased in virtually all market conditions. And with P/TBV back at a low level, the downside is limited from the current entry point. In the meantime, it’s not at all hard to imagine a strong pick-up in sentiment for the banking sector and GS stocks in particular as soon as the Fed pivots and capital starts to flow a little more freely.

I expect Goldman to be able to normalize its ROE at or above 12% once we enter a more normal set of economic conditions and that should support a significantly higher valuation than we are at. are today.

Long story short, I expect GS stock to break above its all-time high of $426 per share over the next 12-24 months. And, thanks to its recent dividend increases, Goldman is now a surprisingly strong income option with a healthy 3.2% yield on offer today.

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5 High Dividend REITs Now Trading Below Book Value – Dynex Cap (NYSE:DX), City Office REIT (NYSE:CIO), Cousins ​​Props (NYSE:CUZ), Annaly Capital Management (NYSE:NLY) , SL Green Realty (NYSE:SLG) https://medielys.com/2022/09/21/5-high-dividend-reits-now-trading-below-book-value-dynex-cap-nysedx-city-office-reit-nysecio-cousins-props-nysecuz-annaly-capital-management-nysenly-sl-green-realt/ Wed, 21 Sep 2022 13:51:34 +0000 https://medielys.com/2022/09/21/5-high-dividend-reits-now-trading-below-book-value-dynex-cap-nysedx-city-office-reit-nysecio-cousins-props-nysecuz-annaly-capital-management-nysenly-sl-green-realt/ The following real estate investment trusts (REITs) are of interest because each carries a track record not too dissimilar to those considered desirable in Benjamin Graham’s classic “The Smart Investor.” Graham, of course, is considered the father of value investing and greatly influenced Warren Buffett, his student at Columbia University. Each of these REITs trades […]]]>

The following real estate investment trusts (REITs) are of interest because each carries a track record not too dissimilar to those considered desirable in Benjamin Graham’s classic “The Smart Investor.” Graham, of course, is considered the father of value investing and greatly influenced Warren Buffett, his student at Columbia University.

Each of these REITs trades at a discount to book value, and each pays some sort of dividend. Obviously, there’s a lot more to consider, but, as a starting point for the serious long-term investor, these below-the-books, dividend-paying REITs may be worth looking into.

Annaly Capital Management Inc. NLY trades at a 1% discount to book value with a price-earnings ratio of just 2.42 and now pays a dividend of 14.57%. It is a mortgage real estate investment trust whose assets consist primarily of agency mortgage-backed securities and debentures.

The daily price chart for Annaly CapitaI am here:

The price from nearly $7.80 at the start of the year to $5.30 in mid-June is quite high. A rally from June to late July took it back to $7, but selling resumed, taking the REIT back to $6 before some buyers showed up again.

Find out: This little-known REIT has produced double-digit annual returns for the past five years

City office FPI inc. CIO trades with a very low price-earnings ratio of 1.13 and pays a dividend of 6.9%. The company buys and operates office properties, primarily in the West and Southwest, including cities such as Denver, Dallas and Phoenix. City Office is trading at just 66% of its book value.

City Office REIT daily price chart looks like this:

Note the drop from $20.50 at the start of the year to the recent price of $11.63 – a drop of 43% in about seven months. The good news for City Office REIT is that so far the June low of under $11 holds.

Cousins ​​Properties Inc. BECAUSE trades with a price/earnings ratio of 14.14 and pays a dividend of 4.76%. The company owns, manages and develops rental real estate primarily in the southern United States, primarily in Texas and Georgia. It is available for purchase at a 13% discount on book value.

The daily price chart for Cousins ​​Properties looks like this:

That’s a drop from $41 to $26.91 in about 5.5 months, a 34% drop in value. The REIT is still flirting with the low of early September, which is also the low of the year.

Dynex Capital Inc. DX trades at 79% of book value with a price/earnings ratio of 3.5 and pays a dividend of 10.5%. The Company invests in residential and commercial mortgage-backed securities, primarily of the agency-backed type.

Dynex Capital’s daily price chart looks like this:

This is a big trading range for a real estate investment trust – from just over $13.80 in mid-June through to $16.80 in late July before dropping to 14, $83 in September.

SL Green Realty Corp. SLG trades with a price/earnings ratio of 10.94 and pays investors a dividend of 7.95%. The company is one of New York’s largest real estate owners and holds interests in approximately 35 million square feet of properties in Manhattan. The REIT is trading at a 33% discount to book value.

This is SL Green’s daily price chart:

Note the significant level of price decline since the beginning of the year until today. The REIT was trading at $81 at the end of March and is now trading at $47.87.

No guarantee exists that any of the dividend yields described in this article will continue as is. Real estate investment trusts can reduce or reduce these payments without much notice.

Looking for high dividend yields without the price volatility?

Real estate is one of the most reliable sources of recurring passive income, but publicly traded REITs are just one option for accessing this income-generating asset class. Check Benzinga’s coverage of private market real estate and find more ways to add cash flow to your portfolio without having to time the market or fall victim to wild price swings.

Latest information on the private market:

  • Homes arrived expanded its offering to include shares in short-term rental properties with a minimum investment of $100. The platform has already funded over 150 single-family rentals valued at over $55 million.

  • The flagship real estate fund through Fund raising is up 7.3% year-to-date and has just added a new rental home community in Charleston, SC to its portfolio.

Find more news, information and offers at Benzinga Alternative Investments

No investment advice. For educational purposes only.

Charts: Courtesy of StockCharts

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Transfer of non-self-generated goodwill to book value; No tax can be levied despite the withdrawal of the tax exemption: ITAT https://medielys.com/2022/09/21/transfer-of-non-self-generated-goodwill-to-book-value-no-tax-can-be-levied-despite-the-withdrawal-of-the-tax-exemption-itat/ Wed, 21 Sep 2022 05:35:43 +0000 https://medielys.com/2022/09/21/transfer-of-non-self-generated-goodwill-to-book-value-no-tax-can-be-levied-despite-the-withdrawal-of-the-tax-exemption-itat/ The Chennai Bench of the Income Tax Appeal Tribunal (ITAT) ruled that where goodwill is acquired by way of expense and transferred at its book value, no tax may be levied on the transfer of goodwill despite the removal of the tax exemption capital gains tax on the conversion of a sole proprietorship into a […]]]>

The Chennai Bench of the Income Tax Appeal Tribunal (ITAT) ruled that where goodwill is acquired by way of expense and transferred at its book value, no tax may be levied on the transfer of goodwill despite the removal of the tax exemption capital gains tax on the conversion of a sole proprietorship into a corporation, for breach of the conditions under section 47(xiv)(b) of the Income Tax Act 1961.

The panel of V. Durga Rao (judicial member) and G. Manjunatha (accounting member) considered that if goodwill is acquired by incurring costs and is not self-generated, and if after reviewing the costs incurred, the plus- disposal values ​​of said goodwill amounts to “nil”, so even after invoking Section 47A(3) of the Income Tax Act, there can be no liability to with respect to capital gains on the conversion of the owner business into a corporation.

Ms. Univercell Telecommunications, a proprietary business, was transformed into a Limited Liability Company (Assessed Company) – M/s. Univercell Telecommunications India Pvt. ltd. and all assets and liabilities of the heritage business have been transferred to said transferee company. During the valuation process, the valuation agent (AO) considered that the transfer of the assets and liabilities of the owner company upon conversion is exempt under section 47 (xiv) of the Income Tax Act. However, the AO noted that the owner of the heritage business had transferred his shares in the appraised company within five years from the date of the transfer of the assets to the appraised company, and therefore there was violation of the conditions prescribed by Article 47(xiv)(b). So the AO invoked Section 47A of the Income Tax Act, assessed the difference between the assets and liabilities of the assessed company as long-term capital gains and made additions to the income of the assessed company.

Against this, the assessed company filed an appeal with the Commissioner of Income Tax (Appeals) (CIT(A)). The CIT(A) noted that after taking into account the cost incurred for the creation of the value of the brand, the capital gain on the sale of the goodwill became “nil” and that there is therefore no there was no capital gain on the sale of said goodwill at book value to the assessed company. Thus, the CIT(A) deleted the additions made by the AO. The tax authorities filed an appeal with the ITAT, challenging the CIT(A) order.

The Revenue Department argued in the High Court that in order to be exempt from capital gains tax when converting from a proprietary business to a limited liability company, the assessed company must meet certain conditions set out in Section 47 (xiv) of the Income Tax Act. .

The department pointed out that, in view of section 47(xiv)(b) of the Income Tax Act, the sole proprietor is required to retain at least 50% of the shares of the successor company for a period five years from the date of transfer of the heritage operation.

The ministry claimed that the owner of the owner company, by transferring his interest in the valued company within five years from the date of the transfer of the owner company, violated the provisions of article 47 (xiv) (b) the Income Tax Act.

Therefore, the Department argued that the provisions of Section 47A(3) of the Income Tax Act would come into force and therefore the conversion gains should be taxed between the hands of the assessed company.

The valued company, while admitting that certain conditions prescribed under Section 47(xiv)(b) of the Income Tax Act have been breached, maintained that all assets and liabilities of the company owner were transferred at book value upon its conversion to a limited liability company. and therefore no capital gain can be said to occur.

Section 47A(3) of the Income Tax Act provides that where any of the conditions set out in the proviso of Section 47(xiv) are breached, the profits or Gains arising from the transfer of fixed assets which are not charged as capital Gains under the exemption provided for in Article 47 (xiv) are taxable as profits and gains of the successor company.

ITA noted that since the conditions referred to in Section 47(xiv)(b) were not met, the exemption granted on the transfer of fixed assets under Section 47(xiv) had to be withdrawn in view of Section 47A(3) of the Income Tax Act.

However, the Tribunal held that even after invoking the provisions of Section 47A(3), there could be no liability for capital gains on the conversion of the owner business to a valued corporation, given the fact that all assets and liabilities of the company owning the company, including goodwill, have been transferred to the company measured at book value.

The ITA considered that the owner company goodwill was not self-generated and was created by the owner company, with some expenses incurred for the generation and creation of the goodwill. goodwill in its accounting books.

“From the foregoing, it is very clear that even if you invoke the provisions of Section 47A(3) of the Act, to remove the exemption granted u/s.47(xiv)(b) of the law, but, in principle, there can be no capital gain on the transfer of goodwill, because said goodwill is not self-generated or created due to the conversion of a company owner in a Pvt. Ltd. Co., but acquired by incurring costs.If you consider the costs incurred by the assessee for the acquisition of the goodwill, then, the capital gains from disposal of said goodwill would amount to a “nil” amount. The Ld.CIT(A) after reviewing the relevant facts correctly deleted the additions made by the AO.”, the Tribunal held.

Therefore, the ITAT rejected the Revenue Department’s appeal.

Case Title: Dy. Commissioner of Income Tax v M/s. Univercell Telecommunications India Pvt. ltd.

Date: 07.09.2022 (ITAT Chennai)

Representative of the Appellant/Tax Department: Mr. AR.V. Sreenivasan, Addl. ICT

Respondent/Assessed Representative: Mr. Shrenik Chordia, CA

Click here to read/download the order

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Southside Bancshares: Rising Interest Rates Destroyed Book Value (NASDAQ:SBSI) https://medielys.com/2022/09/12/southside-bancshares-rising-interest-rates-destroyed-book-value-nasdaqsbsi/ Mon, 12 Sep 2022 15:30:00 +0000 https://medielys.com/2022/09/12/southside-bancshares-rising-interest-rates-destroyed-book-value-nasdaqsbsi/ gguy44/iStock via Getty Images Introduction Back in January, I wasn’t sure what to make of Southside Bancshares (NASDAQ:NASDAQ: SBSI). I could see that the bank offered good balance sheet and investment quality, but the the sharp rise in interest rates also weighed on the value of securities for sale, which must be valued at market […]]]>

gguy44/iStock via Getty Images

Introduction

Back in January, I wasn’t sure what to make of Southside Bancshares (NASDAQ:NASDAQ: SBSI). I could see that the bank offered good balance sheet and investment quality, but the the sharp rise in interest rates also weighed on the value of securities for sale, which must be valued at market price.

Chart
SBSI given by Y-Charts

Strong net interest income helped net income

During the second quarter of the year, the bank saw its net interest income increase as total interest income increased from $54m to $57m compared to the first quarter of the year, while that total interest expense increased from $5 million to $6 million. The result is an increase in net interest income from $49 million to $51 million. A decent result and the bank was able to maintain the extra loan loss provisions pretty. They were effectively non-existent on a net basis, with the bank writing off about $0.6 million of previously recorded provisions. Net interest income after taking into account these provisions for loan losses amounts to $51.7 million.

income statement

SBSI Investor Relations

Net non-interest expense in the second quarter was approximately $23 million, which includes a loss of $2.2 million on available-for-sale securities that were actually sold (I will explain later that AFS securities that have not been sold weigh on the book value per share, but are not included in the income statement). Higher net non-interest expense offset the positive performance in net interest income, and the bank reported total pre-tax income of $28.7 million. Strong increase from $24.2m in Q2 2021 due to $23m difference in loan loss provisions and $5.5m improvement in net interest income partially offset by higher net non-interest expense.

Net income was approximately $25.4 million, resulting in EPS of $0.79. That brings first-half 2022 EPS to $1.56. A decrease from the $1.69 recorded in the first half of last year, but that result included an $8.5m provision reversal that added about $0.25 per share to pretax earnings.

As Southside currently pays a quarterly dividend of $0.34, this dividend is very well covered as the payout ratio is less than 50% based on past quarters earnings.

The loan portfolio remains satisfactory, but the book value has fallen

In my January article, I was actually quite charmed by the bank’s high exposure to cash and securities, but unfortunately it didn’t work out as well as I had expected or hoped. While the balance sheet is certain to be safer when about half of assets are invested in liquid assets such as cash and securities, the bank held nearly $2.8 billion in available-for-sale securities. at the end of last year.

And as interest rates started to rise, the value of those securities went down, and precisely because they were accounted for as an available-for-sale security, Southside has to use market values ​​for those securities.

Asset side of the balance sheet

SBSI Investor Relations

As you can see above, the bank’s management team executed some very significant changes. The total amount of AFS securities fell by almost 40%, while the proceeds from these disposals were used to constitute the portfolio of securities held until maturity. These do not need to be marked down based on market prices and this should result in a more stable book value.

It is important to see that the bank still sticks to its exposure to liquid assets. At the end of 2021, the bank had approximately $3.06 billion in cash and securities, and by the end of June this had decreased slightly to $2.99 ​​billion. This still means that nearly 40% of the total amount of assets on the balance sheet was invested in liquid securities and cash. And around 30% of municipal securities in the portfolio available for sale are now hedged.

Looking at liabilities on the balance sheet, the only reason total equity dropped by $180 million is available-for-sale securities.

Balance sheet liabilities

SBSI Investor Relations

On a pre-tax basis, the bank actually had to take a discount of almost $300 million on securities held for sale. This is very unfortunate as it will be a few years before the bank can bring its book value back to the level of two quarters ago.

Statement of comprehensive income

SBSI Investor Relations

Fortunately, SBSI’s problems remain isolated from the interest rate issue that hits the value of available-for-sale securities. Looking at the bank’s loan portfolio, the total amount of unearned loans and delinquent loans remains very low. At the end of June, only $3.1 million of loans were in non-recognition status, while just under $5.8 million of loans were in default, as you can see below -below.

Lending book quality

SBSI Investor Relations

Since the total provision for loan losses still exceeds $35 million, the bank has a very healthy cushion even in the (unlikely) event that no dollar can be recovered on these loans.

Investment thesis

Given that the bank has decided to add more held-to-maturity securities to the portfolio and has also invested in higher yielding mortgage-backed securities, we should see a substantial increase interest income and net interest income in the third quarter.

While the bank appears to be reasonably priced from an earnings perspective at around 11 times earnings, which isn’t too bad considering the local bank runs a safe balance sheet, the premium to book value tangible has increased considerably.

At the end of 2021, SBSI had net equity (defined as equity less goodwill) of $711 million or approximately $22/share, but due to value destruction in the securities portfolio, the value equity had fallen to just under $732 million by the end of June. After deducting $201 million of goodwill, tangible equity fell to just $531 million, or just $16.5 per share. This means the bank is now trading at more than 2x tangible book value, and while that makes SBSI very attractive if you’re speculating on sudden interest rate cuts, that valuation is just a tad too high for my liking. .

A very well run bank, but I’m not interested in the current valuation.

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Smelly Blue Book Value: Carr, Raiders Stall In Opener https://medielys.com/2022/09/12/smelly-blue-book-value-carr-raiders-stall-in-opener/ Mon, 12 Sep 2022 09:09:21 +0000 https://medielys.com/2022/09/12/smelly-blue-book-value-carr-raiders-stall-in-opener/ The Las Vegas Raiders started their 2022 season with a botched 24-19 loss to the Chargers. Derek Carr endured a Sunday to forget. Usually, when a season starts, you can consider the first week’s results as luck: good or bad. That said, despite what everyone says, the Las Vegas Raiders deserved this loss. By dropping […]]]>

The Las Vegas Raiders started their 2022 season with a botched 24-19 loss to the Chargers. Derek Carr endured a Sunday to forget.

Usually, when a season starts, you can consider the first week’s results as luck: good or bad. That said, despite what everyone says, the Las Vegas Raiders deserved this loss. By dropping the Los Angeles Chargers, the Raiders started their season on an unhappy note. Yet for them, sixteen more chances to erase that early bad taste exist. At the same time, in his ninth season, Derek Carr did not look comfortable.

Compose errors

Without a doubt, Derek Carr has the physical talent to be an elite NFL quarterback. With nimble feet and a powerful arm, he should threaten defenses. In this game, he looked stuck, moving around the crumbling pocket with concrete in his shoes. Overall, with a shaky offensive line, Carr can slip out of the pocket. Still, he doesn’t look comfortable between tackles, especially with an incessant rush. In his defense, the Raiders scored sixteen points in the second half, setting them up for a last-minute victory. Yet between holding the ball too long and hitting charger after charger in stride, Derek Carr suffered through an excruciating day.

The void

On the right side of the offensive line, the Raiders switched tackles three times during the game, hoping to find someone who could block. Who knew we would miss Alex Leatherwood? Well, he wasn’t. However, the Raiders entered the spring draft with a giant right tackle hole. They failed to provide a flicker of any help. Granted, as terrible as the quarterback’s play was, the offensive line did him absolutely no favors. Going forward, Raiders need to fix this, find a solution, not a fix.

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A Tale of Two Wideouts

If you thought that Davante Adams would struggle to find its bearings in its early days, think again. Collecting ten catches for 141 yards and a score, Adams gave the organization and the fanbase a sample of why the Raiders traded high draft capital for him. Adams, mid-season, cut out the Chargers throughout the game. In addition, the seventeen targets talk about the level of confidence. In contrast, Renfrow Hunter didn’t enjoy the typical outing you would respect. Three catches for twenty-one yards looks like a quiet outing for the standout receiver.

An easy Sunday

The Raiders, at all three levels of their defense, couldn’t harass or disrupt Los Angeles. Even with Keenan Allen, leaving the game, the defense did not generate pressure. Also, the secondaries and linebackers fell behind all afternoon. Justin Herbert connected to nine different receivers. The Raiders did not fire Herbert. In return, he dissected them. Patrick Graham will have to find a way to get into the backfield.

glass half full

As horrible as the game is, you can take a bright spot or two. First, the attack, despite porous blocking, came back up with a chance to win later in the game. Then the aggressiveness of Nate Hobbs in coverage and tackles provides a glimpse into the immediate future of the defence. Finally, as mentioned, a game is on and no one should panic or worry. The Raiders, at least in this incarnation, seem built to withstand adversity.

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Analysis of multi-million rand losses and plummeting book value at Seacom https://medielys.com/2022/08/31/analysis-of-multi-million-rand-losses-and-plummeting-book-value-at-seacom/ Wed, 31 Aug 2022 10:08:08 +0000 https://medielys.com/2022/08/31/analysis-of-multi-million-rand-losses-and-plummeting-book-value-at-seacom/ Seacom has suffered large annual losses and its valuation has fallen since its launch in 2009, but the company said its finances go beyond earnings and valuations. Seacom was launched in 2009 and was Africa’s first submarine cable system along the east and south coasts of the continent. It broke Telkom’s monopoly in the submarine […]]]>

Seacom has suffered large annual losses and its valuation has fallen since its launch in 2009, but the company said its finances go beyond earnings and valuations.

Seacom was launched in 2009 and was Africa’s first submarine cable system along the east and south coasts of the continent.

It broke Telkom’s monopoly in the submarine cable market and helped bring affordable, uncapped broadband to South Africans.

Seacom gained tremendous support after its launch, but it didn’t take long for cracks to begin to appear in its business model.

Many competing cable systems, including WACS and EASSy, have been launched, driving international connectivity prices down.

Seacom has been forced to seek new sources of revenue, including launching IP VPN, Internet, IP transit, Ethernet and IPL offerings that compete with its wholesale customers.

The company faced a backlash from its major carrier customers, who signed long-term agreements with the company.

Its customers raised concerns about anti-competitive behavior and there was a growing risk of alienating their existing customers.

Although Seacom recognized that competition with its wholesale customers was a challenge, it continued to move up the value chain with new products.

Today, Seacom offers a full suite of ICT products, including connectivity, cloud and security solutions for small, medium and large businesses.

It even created consumer-grade ISP WonderNet to launch fiber-to-the-home services, competing with Afrihost, Axxess and Mweb.

Seacom’s finances

Seacom is privately held and the initial funding for the $375 came from several sources:

  • $75 million from developers.
  • $150 million from South African private investors.
  • $75 million in the form of a commercial loan from Nedbank.
  • $75 million from Industrial Promotion Services (IPS) – a branch of the Aga Khan Fund for Economic Development.

Over the years, the shareholding has changed. Seacom is currently owned by the Aga Khan Fund (40%), Remgro (30%), Sanlam (15%) and Convergence Partners (15%).

Remgro’s annual reports provide a window into Seacom’s finances and tell the story of a company with mounting losses and a declining valuation.

Over the past eleven years, Seacom has recorded a total net loss of R283 million. It has only been able to generate profit three times since its launch.

The company’s book value, the present value of its assets minus its liabilities, fell from R2.9 billion in 2010 to zero a decade later.

Embedded value, a measure of value based on expected future earnings, fell by R1.4 billion over the same period.

It is unclear why Remgro reduced Seacom’s book value to zero but maintained its intrinsic value at around R3 million.

Remgro may want to maintain a relatively high intrinsic value for a possible future sale by its Seacom share.

The charts below provide an overview of Seacom’s financial performance since inception. All values ​​are in million rand.

Seacom explains

Seacom’s director of sales and marketing, Steve Briggs, told the Daily Investor that the plummeting book value and steep losses are the result of complications arising from technical accounting requirements for a business of Seacom’s nature.

“Poor finances are tied to a decision made at some point not to bear the cost of annual revaluation of major assets, but rather to depreciate them, Briggs said.

It is coupled with the consequence of the transfers of indefectible rights of use (IRU) carried out by the company, which require raising a balance of deferred income.

He said as such, net profit did not reflect the company’s positive annual free cash flow generation, which is the metric tracked by Seacom’s board.

“The book value of assets also does not reflect their market value,” Briggs added.

Significant losses and falling valuations raise questions about whether Seacom shareholders have benefited from investing in the company.

Briggs explained that Seacom’s shareholder returns are a function of valuation plus dividends at the run rate.

“Seacom has been a regular payer of large dividends due to its cash earnings,” he said.

“Shareholders are comfortable with the return on investment (ROI) of their investment.”


This article was first published on daily investor and is republished with permission.

Read now: Competition Commission approves Seacom’s R145m deal to buy Hymax from EOH

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Amedisys stock: ROIC, tangible book value at each sweetening (NASDAQ: AMED) https://medielys.com/2022/08/24/amedisys-stock-roic-tangible-book-value-at-each-sweetening-nasdaq-amed/ Wed, 24 Aug 2022 17:06:00 +0000 https://medielys.com/2022/08/24/amedisys-stock-roic-tangible-book-value-at-each-sweetening-nasdaq-amed/ buzzer Summary of investments Risky assets have been on bid since July and are now rallying to retrace losses incurred in early 2022. Within healthcare, there are many pockets of quality that are crying out for capital allocation. More specifically, the characteristics of free cash flow (“FCF”), tangible ledger value and quality of benefits are […]]]>

buzzer

Summary of investments

Risky assets have been on bid since July and are now rallying to retrace losses incurred in early 2022. Within healthcare, there are many pockets of quality that are crying out for capital allocation. More specifically, the characteristics of free cash flow (“FCF”), tangible ledger value and quality of benefits are paramount.

Table 1. AMED price performance since the beginning of the year

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Data: update data

In this vein, we note that Amedysis, Inc. (NASDAQ: AMED) shows a weak affinity with equity premia to which we seek exposure in H2 FY22. On closer inspection, the balance sheet is skewed towards intangible sources of value that are prone to depreciate and provide no certainty about the predictability of future cash flows. Valuations are also unfavorable. Given these factors, we rate AMED neutral.

Stable Q2 earnings, outlook for FY22 results

Second-quarter revenue fell 100 basis points to $558 million, below consensus estimates and below forecast. Home Health revenue was ~$350 million, with an impact of approximately 400 basis points from second quarter acquisitions. More on that a bit later. Structurally, the home healthcare sector now accounts for 20% of turnover per visit. This equates to ~200K/month of ~600K/quarter. However, management says they are moving towards a mix where more upside revenue is recognized on a case-by-case basis (instead of per visit). This has the potential to unlock scale in the segment as it frees up more clinical capacity for greater patient adoption.

Meanwhile, the palliative care segment printed $198 million for the quarter, supported by a 400 basis point year-over-year increase in net revenue per day, offset by a cost of $2.88 per day. The company also realized a 200 basis point pass-through of the palliative care price increase which has been in effect since October 1 FY21. Moving down the P&L, the company saw ~125 basis points of headwind on the SG&A line thanks to acquisition costs related to Contessa and Home Health. Non-GAAP EBITDA increased 150 basis points year-on-year to $182 million ($5.60/share), while it printed GAAP EBITDA of $42 million ($1.31 /stock).

Additionally, AMED recognized an approximately 200 basis point rise in revenue per episode, helped in part by a similar increase in refunds. There was also a 6% increase in visit cost per visit, supported by higher cost inflation, labor shortages and an increase in salaried employment.

As shown in Appendix 2, quarterly operating performance has begun to slow significantly for the business since fiscal 2019. Despite a slight increase in sales and gross margin in fiscal 2020, this growth has stalled. and even backward. Despite this, the company remains FCF positive and is showing resilience in its earnings profile. It printed $55 million in FCF last quarter, a 5.7% year-over-year gain from $52.3 million. However, total debt also increased 146% year-over-year and approximately 3% sequentially to $442 million. The company also spent $17 million during the year on stock buybacks, and another $83 million under clearance.

Piece 2.

F

Data: HB Insights estimates; Filings with SEC AMED

Further evidence of this separation of fundamentals from top to bottom can be seen in the chart below. As can be seen, FCF margin (based on revenue) and gross profit margin started to bifurcate since mid-2020. Operating margin has followed suit since Q3 FY21′. As shown below, trends have continued to broaden and we believe this is a potential risk to earnings growth going forward. We also recommend that investors pay close attention to the evolution of AMED’s operating margins and FCF margins as a measure of earnings performance.

Piece 3.

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Data: HB Insights, AMED SEC Filings

Additional forensic analyzes of the balance sheet reveal that the value of tangible equity has declined on a quarterly basis since FY2018. As shown in Appendix 4, the company’s asset structure has shifted towards an intangible bias /goodwill, with approximately 70% of the company’s asset base now comprised of intangible sources of value. This has direct implications for valuation and also as a measure of management’s effectiveness in its acquisition strategy. The company continues to expand the scope of its portfolio companies, however, questions arise about the fair value of these purchases given the total goodwill associated with each.

Piece 4.

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Image: HB Insights, AMED SEC Filings

As shown in Appendix 5, taken from AMED’s Q2 FY22 10-Q Earnings Report, goodwill and intangible assets account for more than 130% of the book value of the company’s equity. This means that property, plant and equipment is only 0.89% of the book value. In addition, patient accounts receivable represent more than 77% of the Company’s current assets.

Piece 5.

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Data: AMED 10-Q, July 2022

With a questionable lack of tangible value on offer, return on investment has also shrunk considerably. As seen below, we have looked at NOPAT’s share derived from the invested capital of the previous period. After some growth throughout the pandemic, NOPAT and ROIC have retreated and are now heading south.

Piece 6.

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Data: HB Insights, AMED SEC Filings

Evaluation

Stocks trade at a discount to their peers across all major multiples used in this valuation. As noted, the company trades at approximately 4 times its book value, however, a large portion of its book value is made up of intangible assets and goodwill. AMED actually has a tangible book value of negative $410 million and therefore struggles to justify this discount. Additionally, the stock price is 17.6x the forward P/E, below the GICS industry peer median of 21.4x, suggesting the market is pricing a bottom line result to the sector. of the society.

Exhibit 7. Multiples and comps

F

Data: HB Insights

At 17.6x our FY23 estimate of $5.80, we value the stock at $102, suggesting there is a lack of upside capture available in terms of valuation.

There are also many downside targets established by the daily analysis of the dot and number charts. Our studies reveal downside targets that have not yet been activated at $98, with potential upside at $181, an $83 gap between the two values ​​that does not inspire much confidence in the estimate. the average valuation.

Room 8.

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Data: HB Insights, update data

In short

There’s a lot to like about AMED’s investment debate. However, the case begins to fall apart when looking for measures of tangible value when prescribing business value to the company and its actions. The balance sheet is heavily skewed towards non-tangible sources of value – i.e. goodwill – which arise from a series of acquisitions made by AMED.

Additionally, while FCF was $55 million for the quarter, it was down $11 million from Q2 FY21, and long-term debt also increased alongside a $17 million share buyback. Therefore, FCF and profitability look less attractive and on closer inspection, AMED has realized a decline in ROIC in recent periods. Valuations are also unfavorable. With the culmination of these factors in mind, we rate AMED neutral.

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What is book value? Definition, how to find it, use to invest https://medielys.com/2022/08/22/what-is-book-value-definition-how-to-find-it-use-to-invest/ Mon, 22 Aug 2022 17:05:00 +0000 https://medielys.com/2022/08/22/what-is-book-value-definition-how-to-find-it-use-to-invest/ The book value of a business is the total value of all of its assets less all of its liabilities. Investors compare a company’s book value to its stock price, to determine whether the stock is undervalued or overvalued. Book value works better on durable goods companies than on service providers or companies with intangible […]]]>
  • The book value of a business is the total value of all of its assets less all of its liabilities.
  • Investors compare a company’s book value to its stock price, to determine whether the stock is undervalued or overvalued.
  • Book value works better on durable goods companies than on service providers or companies with intangible assets.

When investigating which stocks to buy, investors often need to take a close look at company finances. One of the big things they look at is book value.

Book value is a calculation that aims to determine the true and complete value of a business, based on its assets. It’s basically breakout value – the amount the business would be worth if it were liquidated.

Investors use book value to help them judge whether a company’s stock is overvalued or undervalued.

Let’s dive deeper into book value, how it’s calculated, and what it means.

Book value actually has two related meanings. In the accounting world, book value refers to the value of a particular asset on a company’s balance sheet – say, a property or equipment. The book value of the asset is its original cost less depreciation (its decreasing value as it ages or wears out). It is mainly used for tax purposes.

In the investment/finance world, the meaning of book value is an expanded and extrapolated version of the first definition. It is the total value of all the company’s assets – the value of all goods, properties, funds and other things it owns – less its liabilities — its expenses and its debts. Usually, the value of any intangible assets, such as intellectual property or patents, is also subtracted.

This sum aims to quantify what a company is really “worth”. This is the amount that theoretically represents the liquidation value of the company. If the company went bankrupt or was broken up and sold, this book value would be used to determine what individual shareholders would receive – basically, the cash value of their individual shares.

How to calculate book value and book value per share

Book value is not often included in stock listings or a company’s online profile. To find its book value, you need to look at its financial statements, and all of the assets and liabilities listed on its balance sheets. Add up all the assets, subtract all the liabilities and the result is the book value.

Book value formula

The book value formula.

Taylor Tyson / Insider


Although you have to calculate book value yourself, most online stock listings include a related metric that’s also helpful to investors: book value per share (BVPS). Book value per share shows how many dollars each share will receive if a company is liquidated and its creditors repaid.

Expressed in dollars, BVPS breaks down the company’s overall book value by dividing it by all of the company’s outstanding shares, to get an amount per share. This amount can be compared to the current stock price.

Some sites also list this as a single number, called the price/book ratio.

book 01

Formulas for book value per share and price-to-book ratio.

Yuqing Liu/Business Insider


For example, in late January 2021, Microsoft Corp. (MSFT) had a book value per share of $24.65 and a price-to-book ratio of 14, compared to a price of $242.

How Investors Use Book Value

Book value, book value per share, and price-to-book ratio are popular measures for value investing. This investment strategy boils down to bargain-hunting: rather than targeting the best-performing stocks, it seeks out low-priced and overlooked stocks in the hope that their price will rise again.

To find their bargains, value investors look at a company’s book value and book value per share. If a stock is trading below its book value, it could be a good buy – an undiscovered gem.

If the book value per share is higher than its market value per share – the current stock price – this may indicate an undervalued stock. If the book value per share is lower than its market value per share, this may indicate an overvalued or overvalued stock.

The reasoning behind this is that book value per share represents the financial strength of a company based on its assets, an objective number, while market value per share represents the attractiveness of a company’s shares in the market, a subjective number.

The limits of book value

Book value is best used with companies that have physical assets, such as plants, machinery, and other equipment, as opposed to companies that don’t have a lot of physical assets, such as technology companies that work primarily on an idea or service provided online, such as Facebook or Netflix.

These companies mainly have intangible assets, such as intellectual property, which make up most of their value. So, when calculating the book value of companies like this and comparing it to their market value, it is essential to understand why the book value figure is what it is.

With these types of companies, if the book value appears too high or too low relative to a company’s market capitalization, this does not necessarily indicate an overvalued or undervalued security, but rather the fact that the majority of its assets are intangible assets.

The bottom line

Book value is used by investors to get an objective estimate of a company’s value. Book value estimates the true value of everything she owns, minus everything she owes. It consists of the total assets of the company after subtracting the liabilities of the company.

From there, value investors compare book value and its permutation, book value per share, to the company’s stock price. In this way, they determine whether its shares are overvalued or undervalued.

It is important to use book value and book value per share in the right context and with the right stocks. As metrics, they work best on industrial or legacy businesses that own, manufacture, or hold tangible assets, as opposed to information technology or online service providers.

Still, it can be a start in determining a company’s fundamental value — and a good buy.

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Capital management boosts Maiden’s book value – The Royal Gazette https://medielys.com/2022/08/11/capital-management-boosts-maidens-book-value-the-royal-gazette/ Thu, 11 Aug 2022 10:48:44 +0000 https://medielys.com/2022/08/11/capital-management-boosts-maidens-book-value-the-royal-gazette/ Created: August 11, 2022 07:48 Bermuda-based Maiden Holdings Ltd reported second-quarter net income available to common shareholders of Maiden of $25.8 million. That compares to a net profit of $26.8 million in the second quarter of 2021. Non-GAAP operating profit was $16.6 million for the second quarter, compared to non-GAAP operating profit of $13.9 million […]]]>

Created: August 11, 2022 07:48

Bermuda-based Maiden Holdings Ltd reported second-quarter net income available to common shareholders of Maiden of $25.8 million.

That compares to a net profit of $26.8 million in the second quarter of 2021.

Non-GAAP operating profit was $16.6 million for the second quarter, compared to non-GAAP operating profit of $13.9 million for the same period in 2021.

Maiden’s book value per common share was $2.62 as of June 30, compared to $2.60 as of December 31, 2021.

Adjusted for the unamortized deferred gain on ceded retroactive reinsurance of $41.4 million as of June 30, the company’s adjusted book value per common share was $3.09 for the six-month period.

Patrick J Haveron and Lawrence F Metz, Co-Chief Executives of Maiden, said: “We were able to opportunistically execute additional capital management measures during the quarter which increased book value per common stock at $2.62 and more than offset the headwinds created by a rising interest rate environment.

“Capital management generated gains of $24.7 million during the period, bringing the total impact of our capital management initiatives to $1.81 per common share since the fourth quarter of 2020.

“Our alternative asset portfolio grew by 11.1% during the first half of 2022 and we continue to identify good opportunities despite more volatile conditions in the financial markets. These markets have resulted in more limited total returns from our portfolio. during the quarter, but aside from investments in hedge funds, our total returns in our alternative portfolio continue to exceed our benchmark cost of debt capital.

“The opportunity pipeline for Genesis Legacy Solutions continues to grow rapidly, which we believe sets the stage for a strong second half of 2022. Our balance sheet as of June 30, 2022 does not reflect $1.27 in tax assets net deferred, which always maintains a full valuation allowance. We believe the necessary performance that will allow us to recognize these tax assets in the future continues to accrue.”

They added: “Operating expenses were down 18.1% year over year as we maintain an efficient operating profile.

“Loss development trends in the quarter were broadly neutral but less favorable compared to the comparable period in 2021.

“The impact on underwriting losses from higher than expected negative premium adjustments in our AmTrust divestiture was significantly more limited during the second quarter, as expected.

“Our book value in the second quarter was also hurt by unrealized losses on our fixed income portfolio of $0.28 per common share as interest rates rose sharply in the second quarter. We were able to offset much of this book value impact through foreign exchange gains as the US dollar continued to appreciate, while maintaining net non-US dollar liabilities.

“With 25.4% of our fixed income investments in floating rate securities, this also helped to mitigate the impact of rising interest rates on our financial statements.”

Patrick Haveron, Co-Chief Executive of Maiden Holdings Ltd (Photograph provided)

Lawrence Metz, Co-Chief Executive of Maiden Holdings Ltd (Photograph provided)

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