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Avarga (formerly: UPP Holdings)
01-12-2018, 02:11 PM.
Post: #31
Alternative view of Avarga:

Priced at S$0.2, Avarga has market cap of about S$200M.
Price is what you pay, Value is what you get.
What Values?
1. Myanmar Powerplant business
What were the annual revenue recognised since then (exclude 2014, since it’s not full year):
Note: assuming tax rate is 20%
2015: S$11.9M, PBT: S$7.8M, NP: S$6.2M
2016: S$13.3M, PBT: S$8.1M, NP: S$6.5M
2017: S$11.7M, PBT: S$6.9M, NP: S$5.5M

Estimated based on 2018-9M revenue for future earning:
Revenue: S$10.0M, PBT: S$5.9M, NP: S$4.7M

2. Malaysia Paper Mill business (UPP)
Note: assuming tax rate is 20%
2012: S$48.7M, PBT: S$3.8M, NP: S$3.0M, NP Margin: 6.2%
2013: S$46.8M, PBT: S$3.8M, NP: S$3.0M, NP Margin: 6.5%
2014: S$47.8M, PBT: S$4.9M, NP: S$3.9M, NP Margin: 8.2%
2015: S$49.2M, PBT: S$6.4M, NP: S$5.1M, NP Margin: 10.4%
2016: S$50.0M, PBT: S$7.9M, NP: S$6.3M, NP Margin: 12.6%
2017: S$54.3M, PBT: S$8.3M, NP: S$6.6M, NP Margin: 12.2%

In recent years, the margins were abnormally high due to China’s ban of waste disposal which caused the waste paper price to be low (thence lower UPP cost).
I expect the margin to normalise to 9-10% (average of the last 6 years was 9.5%).

Estimated based on 2018-9M revenue (and average margin) for earning power:
Revenue: S$56.4M, PBT: S$6.7M, NP: S$5.3M
From the above, if the Margin reverting to Mean, the NP will be around S$5.3M.
The yield from this business unit is 2.7%

In total, from the 2 business units, we will get about 5% yield.
which is also about S$0.01 per share(also happened to be the dividend for the recent few years).

If the 1 cent dividend (total about S$10M) is sustainable (which I argue it is), it should provide satisfactory return to me.

My expectation is not high and the bonus should come from the result of Taiga Canada (the 3rd business unit).


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