Tuesday 29 April 2014

Analysis of Sollers

A Russian automotive company

Company: Sollers

Business: A Russian automotive company. They are producing cars for UAZ, Ford, SsangYong, Toyota, Mazda and Isuzu. Until 2012 they were also producing cars for Fiat. Besides from these commercial vehicles they are also producing automotive components, assembly kits and diesel engines.

Active: In Russia but the cars they produce for other companies are being sold world wide.

P/E: 4.9

contrarian values of P/E, P/B, ROE as well as dividend

The P/E for Sollers is excellent at 4.9 and the P/B is fully ok at 1.1 which gives a very clear buy according to the formula from Graham. Their earnings to sales are at 6% which is ok in the automotive industry and their ROE is excellent with almost 23%. The book to debt ratio is not so nice with 0.7% and unusual for an eastern company. In the last five years they have had an excellent growth of 12% yearly even though their revenue decreased from 2012 to 2013 (one reason could be the discontinued contract with Fiat but I have not dug into the reason). the motivated P/E then becomes 20 to 30 which means Sollers is undervalued on the market today. In 2012 they paid an excellent dividend of 10%. Back in 2011 they paid almost nothing and in 2013 they will pay out nothing. Sollers is to 54% owned by Vadim Shvetsov and one almost get the feeling that he simply needed money back in 2012 and hence the large dividend.

Conclusion: Graham says yes to this due to the excellent P/E, P/B and ROE for me there are some clouds on this one. I simply do not like that they do not pay a dividend and I do not like that there is no consistence in the dividend payments. So even though the P/E, P'/B and ROE is truly great I simply pass on this company.

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