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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (44879)	10/9/2011 4:19:59 PM
From: E_K_S	Read Replies (1) \| Respond to of 78676

I added Charoen Pokphand Foods Public Co. Ltd. (CPOKY.PK) to my watch list. The company has paid their dividend (twice a year) since 2002. It has been increased and cut during that period. The Key Statistics (from Yahoo) look good: finance.yahoo.com Debit profile is good (LT Debt/annual earnings = 3.3). P/BV=3.10 (This is quite high) PE 12.89 (Both seem a bit high to me). ROA= 11.1% ROE=23.4% w/ typical low AG margins of 7 %. The company operates livestock (Chicken, Duck & Swine) and aquaculture (shrimp & fish) operations. They own a feed operation (creates blended feed from raw materials) and operate food processing & ready meal packaging subsidiaries. The company must purchase the raw materials that go into producing their own feed blends (they use a lot of soybeans) to meet their different growing operations. They are still price sensitive to their raw commodity costs as they have no subsidiary that actually grow these raw materials. Their annual report:can be downloaded here: cpfworldwide.com On a first look, they appear to be a bit expensive (based on their PE) when compared to BG and/or ADM. Both BG & ADM sell at or below their BV. I like to find some type of competitive advantage in their operation(s) when compared to some of the other large scale operators. Do they have certain efficiencies they can implement or currently use that give them an operational edge? These are things that I look for in their annual reports. I do like their European exposure (operations in Sweden, Turkey & United Kingdom). They grow chickens at their Turkey facility which supplies Europe. Therefore, depending what I see in their annual report, they may have some competitive advantages here. This could take the form of favorable distribution channels for their packaged meals and/or integrated efficiencies through developing their own breeding stock (specifically bred for each growing operation) and/or locating their chicken/swine farms close to their end markets. ----------------------------------------------------------------------------------------- My preference is to buy at a 10PE or lower, BV close to 1.0 (unless they have a significant competitive advantage in one or more of their operations) and have shown that management can reduce the wild cyclical spikes in raw materials inputs. EKS