SATS

[finnfinn]

O. K.
Will buy SAT now?

Disclosure: I have investments in SATS. Acquired at 3.17. Long investment horizon for my retirement

Why I bought it:
- historically stable EBITDA provide added comfort on stability of dividend payout.
- dividend yield looks attractive considering current environment.
- like the business that is in: catering, cargo management etc. and monopoly in some of the areas (pls advice if bros here think otherwise)
- conservative capital structure


On buying now:
-P/tangible book nearing 10 year high. (Think common observation for many counters).
- yesterday NFP looks good, discussion on Fed wind down the QE may give excuse to correct next week.

Conclusion: My strategy is to buy on dip for retirement purpose.

Just my 2 cents worth, value any comments. Thanks!

[pianist]

My net exposure to holding sats the longest ever counter I hold e same quantity todate since 2001 is zero now. No regret after 12 years. Even longer duration than any of my going steady with ex- girlfriends. Time tested diamond.

[Temperament]

Wow! 12 years!
Sad to say, i hold the wrong company for 30 years for DRIP after collecting dividends for some earlier years; Which happened to be better years for DRIP. Of course it's a US company.
i am not sure if i could hold some of my stocks in SGX portfolio for 25 years, will it be better for my ROI?
But i guess it will. As i know some bloggers do that and seems to do so much better.
But i have no complain. i doing not to bad.
Shalom.
Amen.

[pianist]

Wow uncle temp. Now that U said 30 years, it makes my 12 years record look like an ant. Commendable effort. Of course while holding we can always buy low sell high but net net still holding onto same quantity.
What drip?

[Temperament]

DRIP is US company's definition for "Dividends Re-Investment Plan" Some of their DRIP is quite flexible.

[Temperament]

so which is more desirable when wanting to strip SATS and have a good look?

I prefer EBITDA, purely because it is recurring and more stable, FCF can be fluctuating due to CAPEX component + working capital changes.

---

as stated i would rather use free cash flow, but using EBITDA is valuing the cash the business generates regardless of replacement. perhaps replacement problems will surfaced later on but purly from valuation what is acceptable for PE, EV/EBITDA and P/Free Cash flow will be rather different.

i am just stating because thats what is shown on the "balance sheet"

I think the equation are like this:

Free Cash Flow= Cash Flow from Operation - CAPEX
Cash Flow from Operation= EBITDA + Working Capital Changes
EBITDA= measures operating Cash Flows without working capital changes.

I think no one ratio is definite. If an industry is CAPEX intensive, then FCF is appropriate but if an industry is not CAPEX intensive, then my preference is EBITDA.. just my 2 cents worth...and welcome any comments.

Hi there, i seldom find an industry that do not need replacement.In any case I usually value it based on that the business will run on perpetually.

However EV/EBITDA is a really fast way to screen to identify if at this current point, sans the replacement, the assets are undervalued.

if you hit an EV/EBITDA of 4 or less, than you look further.

hope this is sensible and conservative.

Hello,


I think banks/insurance/finance companies may be one of the industry that are not so CAPEX intensive..

Interesting point on EV/EBITDA of 4 or less, any reasons behind the number?

nope just stating some examples.

On the contrary. i think working capital changes is one of the most important area to analyse. Understanding how capital is sourced and is used is very important. If inventory is increased, why increased. Is it good or bad? So is with account payables, account receivables, etc... Sometimes some business is so "complicated' it is really hard to analysed the capital changes. Then don't invest lol.

[finnfinn]

so which is more desirable when wanting to strip SATS and have a good look?

I prefer EBITDA, purely because it is recurring and more stable, FCF can be fluctuating due to CAPEX component + working capital changes.

---

I think the equation are like this:

Free Cash Flow= Cash Flow from Operation - CAPEX
Cash Flow from Operation= EBITDA + Working Capital Changes
EBITDA= measures operating Cash Flows without working capital changes.

I think no one ratio is definite. If an industry is CAPEX intensive, then FCF is appropriate but if an industry is not CAPEX intensive, then my preference is EBITDA.. just my 2 cents worth...and welcome any comments.

Hi there, i seldom find an industry that do not need replacement.In any case I usually value it based on that the business will run on perpetually.

However EV/EBITDA is a really fast way to screen to identify if at this current point, sans the replacement, the assets are undervalued.

if you hit an EV/EBITDA of 4 or less, than you look further.

hope this is sensible and conservative.

Hello,


I think banks/insurance/finance companies may be one of the industry that are not so CAPEX intensive..

Interesting point on EV/EBITDA of 4 or less, any reasons behind the number?

nope just stating some examples.

On the contrary. i think working capital changes is one of the most important area to analyse. Understanding how capital is sourced and is used is very important. If inventory is increased, why increased. Is it good or bad? So is with account payables, account receivables, etc... Sometimes some business is so "complicated' it is really hard to analysed the capital changes. Then don't invest lol.

Agree. Not disputing the importance to analyse working capital changes. My preference is to look at EBITDA and working capital changes independently for a clearer interpretation of the cash flow generating ability of the company...

[pianist]

how to analyse working capital changes? I mean what to look out for in each items..can give some examples..thanks

[finnfinn]

how to analyse working capital changes? I mean what to look out for in each items..can give some examples..thanks

For the ease of discussion, see the link to working capital definition from wiki (I think wiki is the single best contribution to the www ):

http://en.wikipedia.org/wiki/Working_capital

3 major components: (1) receivables, (2) payables and (3) inventories.

So to analyse working capital changes, it is inevitable to have a deeper look into the 3 components. I like to use cash conversion cycle to help me. The definition of cash conversion cycle ('CCC')is capture in the wiki link:

http://en.wikipedia.org/wiki/Cash_conversion_cycle
( thank you wiki again).

Notice 3 components again:

(1) Receivables conversion period, (2) Payables conversion period and (3) Inventory conversion period.

Note that all in days. Generally, rule of thumb is shorter cash conversion cycle the better. But best way is to compare with peers within the industry to have a better sense of where the company stands.

I also look at trend of the individual component of CCC. for eg. if receivable conversion period is longer, must go find out why. typical questions I will ask are (1) any concentration to any single debtor and (2) receivable performance issue etc. Longer inventory conversion may also hint that goods may have some issue (out-dated etc.) but it can also mean inventory strategy that company may take based on their experience in the industry.

Like what brother Temperament says, sometimes we just cannot explain based on publicly available information (but disclosures are generally better for bigger companies). Under such situation, I will loop back to Porter's 5 forces to see if I am missing anything..still no clue... better siam lah.. next better player

Note that working capital and CCC have some "point in time" parameters. Such parameters are subjected to window dressing but we take it for whatever it is worth.

Also note that this process is super time consuming..guess is no pain, no gain...

Hope this clarifies and have a great remaining weekend..

[Temperament]

how to analyse working capital changes? I mean what to look out for in each items..can give some examples..thanks

For the ease of discussion, see the link to working capital definition from wiki (I think wiki is the single best contribution to the www ):

http://en.wikipedia.org/wiki/Working_capital

3 major components: (1) receivables, (2) payables and (3) inventories.

So to analyse working capital changes, it is inevitable to have a deeper look into the 3 components. I like to use cash conversion cycle to help me. The definition of cash conversion cycle ('CCC')is capture in the wiki link:

http://en.wikipedia.org/wiki/Cash_conversion_cycle
( thank you wiki again).

Notice 3 components again:

(1) Receivables conversion period, (2) Payables conversion period and (3) Inventory conversion period.

Note that all in days. Generally, rule of thumb is shorter cash conversion cycle the better. But best way is to compare with peers within the industry to have a better sense of where the company stands.

I also look at trend of the individual component of CCC. for eg. if receivable conversion period is longer, must go find out why. typical questions I will ask are (1) any concentration to any single debtor and (2) receivable performance issue etc. Longer inventory conversion may also hint that goods may have some issue (out-dated etc.) but it can also mean inventory strategy that company may take based on their experience in the industry.

Like what brother Temperament says, sometimes we just cannot explain based on publicly available information (but disclosures are generally better for bigger companies). Under such situation, I will loop back to Porter's 5 forces to see if I am missing anything..still no clue... better siam lah.. next better player

Note that working capital and CCC have some "point in time" parameters. Such parameters are subjected to window dressing but we take it for whatever it is worth.

Also note that this process is super time consuming..guess is no pain, no gain...

Hope this clarifies and have a great remaining weekend..

Well put.
Can't find out why try next one. And after all the hard work, your findings may not accurate anymore especially for those time sensitive items and coy to coy "special arrangement" that only insiders know.
In fact to me only; i always think of qualitative analysis first. Don't like don't go further. Anyway i admit i usually take "short cut". Ha! Ha! (That's only me hoh.)