SMPH Company Review (FY 2010 & 1Q2011) Part 2



For Part 1, click this link: SMPH Company Review (FY 2010 & 1Q2011) Part 1.

Profitability:
ROE = 13.33%
Average ROE for 5 years = 14.35%
OCF/Equity = 23.60%
Net Profit Margin = 33.13%

SMPH's consistent profitability is exhibited in its ROE. Net Profit Margin is also very high.

Growth:
Annual Net Income Growth Rate (5 Yrs.) = 7.63%

SMPH's growth rate is conservative but consistent. Expect further growth in the future as it unfold its new projects being develop. For 2011, aside from SM City Masinag which was open last May 6, the company plans to open SM City San Fernando (40,000 sqm), SM City Olongapo (30,000 sqm) and SM Suzhuo in China (70,000 sqm). Aside from this other development plans were unveiled like SM Cebu South Road Complex and the SM Tianjin in China, among others.




Debt and Risk:
DE Ratio = 97%
Current Ratio = 2.1

SMPH maintains a moderate leverage level despite its continuous expansion these past few years. DE Ratio above 100% is considered risky as mentioned in the post: Definitive Guide to Stock Picking. Current ratio also show a healthy liquidity level to the company.

Dividend:
Dividend Yield (2010) = 2.20%

In 2010, common shareholders received a total dividend of P0.25 per share. Dividend Yield is computed based on the 2010 year end closing price of P11.38 per share.

Valuation:
PE Ratio = 19.86
PB Ratio = 2.74
Intrinsic Value = P15.00/share
Current Share = P11.60/share
Upside = 28.9%

click to zoom

Using discounted cash flow analysis, intrinsic value is calculated based on 2010 Annual Report. Cash flow are expected to grow at 7.63% which is very conservative since its 1Q2011 result is promising at 12.8% increased. Discount rate used is 12% which is based on highest historical Philippine 91-day T-bills rate(10%) plus 2% margin of safety.

Conclusion:
SMPH is a good stock to buy as shown in its potential to grow and consistent profitability. Buying it at a margin of safety is recommended. 

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