Intrinsic Value Study
In gist:
Sarine Technologies Ltd stock price on 14 June 2018 is S$0.895. At current price, there is no margin of safety. The above study shows that the intrinsic value is S$0.67.
The earnings of Sarine Technologies will need to improve in the future quarterly/yearly reports to reverse the negative earnings growth trend (and improve the stock’s intrinsic value).
In addition, the above calculation did not factor in the recent 1Q 2018 results (which is a good set of results).
Every so often when I do a new post, people will ask me if I would be buying or selling the shares at the current prices. Actually, on a side note, I don’t really think I should be advising on stock picks (I am not really qualified to do so). The main motive for my posts is for the blog to serve as my personal journal.
I think ultimately one needs to form his/her idea on the intrinsic value of the stock. Doing a calculation above is one method, but I feel for some stocks, it should not be the only method and may not be suitable (esp. for stocks will uncertain historical earnings). Reading about the development of the business and its industry is equally important in forming your own evaluation.
I think the wrong way is to depend on stock prices to form your judgement. Eg. look at the stock price, and try to figure out what is going on. The market is there to serve us not to instruct us.
Well, I’m not as optimistic as other analysts’ reports. Nevertheless, numbers are just one part of the equation.
- Maintain ADD with Unchanged target price of S$1.53 (read here)
- 3Q16 At Low End of Expectations. Still A Buy (S$1.97) (read here)
And I am still long on this company, stock (otherwise I won’t be reading up on it).
Most investors hate uncertainty, and who can blame them. However, businesses are messy by nature. It takes time to study them. And this is one company that is seriously testing my patience.
A Pen Quotes 
Hi,
1. Why don’t you do this calculation before you bought additional shares previously?
2. Same type of “intrinsic value calculation”, but yield totally different values, compared to your previously calculated value. So is it useful to do such calculation in the first place, which influences your purchase?
3. Is 4%+6% your hurdle rate for this stock or your portfolio?
4. Is this co too unpredictable to estimate its value?
5. Is it time to re-assess all the co you are holding now, rather than wait for the share price to tell you to re-assess?
Just some questions for thoughts..
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1. Ideally one should. However, it does not make much sense to keep doing intrinsic value calculations (every time I want to sell or buy stocks)… the company itself doesn’t change that fast.
2. Looked through my previous posts. My previous calculation on Sarine intrinsic value if I am not wrong was in April 2015. And it was using a different calculation method. I tried using that method but it was suited for stocks with positive 5 years growth (not long-term enough). In fact, using that method – the figure came to 0.07… which I felt is far too inaccurate.
Yup – may not be useful to do such calculations, but you have to understand, I treat the blog as my journal or diary. It is just a place for me to store my thoughts. I am curious about the intrinsic value so I did a study. I am not using the blog to influence others to buy or sell etc.
3. No – it is part of the metric used to compare to worse case bond yield.
4. At the moment, I reckon so. Again, numbers only tell part of the whole story. I don’t believe a single post can conclude anything about a company stock. Intrinsic value by itself is an estimate, and best used for companies with consistent earnings trends. Hopefully, Sarine’s earnings trend become more stable.
5. Anytime is a good time to re-assess. I try not to focus too much on short-term share price. But if I think about value, I would tend to assess more if price drops – to see if it is a good time to purchase more (if fundamentally the company did not change much).
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Dear apenquotes,
I have read your analysis with great interest and concur. But the share price downward spiral speaks otherwise. Is there something we don’t know? Based on past experience, this kind of drop and at this level(39c) is “structural.” It foreshadows something ominous about the company? This kind of selling are by insiders?
This could be a good buying opportunity provided the company don’t go bust? From the Balance Sheet, the company financial health is good unless there is fraud ie. the F/S are not “true and fair?” just like some of the Red Chips that went bust in the past?
What is your opinion? Can I accumulate more? I have already bought 350lots at 44c.
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David to be frank I have been thinking long and hard. I think it might be worthwhile to wait and see how the situation pan out.
350 lots is a small position. Don’t take large bets with stocks u are unsure about.
Having said that, I do not think it is selling by insiders and I also do not think there is fraud.
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