Saturday, November 15, 2014

SembCorp Industries - My CNAV Analysis

SembCorp Industries
Triggered from a post by B in his blog, A Path To Forever Financial Freedom, I am tasked to do a CNAV (Conservative Net Asset Value) analysis on of the stock of his interest, SembCorp Industries (U96). Hence this post on the early Saturday (as later part in the afternoon, I will be heading down to Hong Lim Park to get painted purple, click here to see what's happening there). 

As per my comment in B's blog, I more or less knew the answer (where SembCorp Industries is not "conservative" enough to be in the radar of CNAV method), but it will be interesting to know the exact numbers anyway (coupled with the cheeky tease from CW8888), so here we go...

Stock In Evaluation : SembCorp Industries (U96) 

The Key Quantitative Indicators of CNAV Strategy (basing on 2013 Annual Report figures):

Net Asset Value (NAV)                             = $3.65
Conservative Net Asset Value (CNAV2)  = $0.44
Current Price                                              = $4.60
Discount For CNAV2                                = -950%

Conclusion : Since it is a negative "Discount for CNAV2", it means that the stock is traded at premium (from CNAV perspective). Also, it is traded at a 26% premium when compared with the less conservative indicator, NAV. 

The P.O.F Scores of CNAV Strategy: 
Profitability Score         = 1 (With the PE ratio of 10.7)

Operational Efficiency = 1 (with three consecutive years of positive operating cash flow)

Financial Efficiency     = 0 (Debt To Equity Ratio of 111%)

Conclusion : An average P.O.F Scoring but the Financial Efficiency could be a concern.

Final Conclusion : Don't foresee this stock will fall under the CNAV basket!

Are you vested in SembCorp Industries? What is your take on this stock?


  1. My take?

    Richard is our best investing pal!


  2. Wondering what are the stocks cnav graduates have bought?

    Any examples?

    1. CW8888 : I think name that doesn't sounds familiar to you will potentially fit well under CNAV basket. Will let you know if I've uncovered any potential ones .. ;-)

    2. I think Hongkong Land falls very close to the cnav example.

    3. B : Wah, you like that say means I need to do another CNAV analysis liao! Wahahaha

    4. CW8888 : Don't like that say lar, I malu lor... wahahaha... looks like there is no way out for me now (for another CNAV) lol

  3. Hi Richard

    Thanks for taking the time to do this.

    Omg I wasnt expecting such a low cnav2. I guess it will never falls there. Otherwise Uncle CW would unleash all his warchest for the next round 55 to round 100 :D

    1. On a more serious note, EV/Ebitda would be a good gauge to defining their net equity less their leverage over ebitda and I thought they have been well leveraged at the moment.

    2. B : Yup! I guess there are so many indicators that we can focus on, there is no one size fit all ;-)

  4. If you do a CNAV analysis for all 30 STI blue chips, the majority will fail too, since many of them trade at a multiple of their book value.

    I think CNAV is more for valuing asset heavy companies, such as those in industries such as property, manufacturing and shipping/airlines.

    By anaylyzing towards CNAV you must understand that you are going down the Benjamin Grahnam path and not the Warren Buffett style.

  5. If you do CNAV analysis for defensive stocks such as
    SIA Engineering
    ST Engineering
    All of them will fail too

    Like I mentioned in your previous CNAV post on OCBC before
    Different companies in different industries requires investors to look at different financial ratios

    If you did a CNAV for all listed stock on sgx
    you will probably end up with a basket of stocks that consist of S-Chips, Value traps (Low ROE assets, thus trading at a big discount to book value) and probably a few Gems

  6. Its good that one knows how to do CNAV analysis but it shouldn't be used blindly

    Example a highly geared and low CNAV stock like Starhub is actually safer than
    a net cash high CNAV stock like SIA operating in a highly cyclical environment with low/negative returns

    1. Felix : can't agree more with you! That's why there is still a POF score to complement it. Also, you are right that ultimately only small amount of stocks fall within the CNAV basket.. Any strategy also has its pro and cons, there is no SURE WIN!

    2. Yeah, thanks for your warm reply. Have a good weekend ahead.

    3. Felix : you too have a great Sunday ahead of your!

  7. Hi Richard,

    Don't grade a goldfish on their ability to climb a tree ;)

    1. LP : yup! I know what you meant! This analysis is not meant for vesting decision, it is more like for fun since it was requested by my 2 beloved peer bloggers! Hahaha

  8. Hi Richard, I've bought a small position in Sembcorp Industries early this month after much thought. You may want to have a look at my post on the company's analysis when you're free. If it really falls into your CNAV category, I think many value investors (including myself) will all-in! Don;t you agree?

    1. secret investors : Will check out your post in awhile! Thanks for dropping by..
      CW8888 : I think you are the camp leader is it? lol

      Merry X'mas and Happy new year to you two!

    2. Thanks for the blessings and same to you!

  9. All the best CW888! Was actually hoping that it'll go down further so that I slowly accumulate. Lets see how it goes :-)

  10. Maybe u can try these
    1. Power matic data systems
    2. Metro holdings
    3. Starhill global
    4. Heeton holdings
    5. Fortune reits
    6. Fraser commercial trust


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