Sunday, 3 August 2014

Analysis of bpost

bpost, a Belgium post distributor

Company: bpost

ISIN BE0974268972 | WKN A1W0FA

Business: A postal company from Belgium. They have some sub segments and those are: Transactional Mail (almost half the revenue), Advertising Mail (around 12% of revenue), Press(around 12% of revenue), Parcels, Value-Added Services, International Mail, Banking & Financial Products(around 12% of revenue) and finally "Other".

Active: Very strong presence in Belgium. Have hubs in UK, China, Singapore, Australia and the US.

P/E: 13.1

Contrarian values of P/E, P/B, ROE as well as dividend for bpost
The P/E is looking semi ok for bpost with 13.1 but the P/B turned out to be horrible with 6.5 which then also gives a no go signal from Graham. The earnings to sales are great with 12% and the ROE is spectacular with 49.5%! The book to debt ratio is low with 0.4 which I do not like so much.
In the last four years they have had a yearly growth rate of 1.3% which is bad but still much better than for for instance Deutsche Post (analysis of Deutsche Post 2014). This then gives us a motivated P/E of 9 to 12 which means that bpost is fairly valued on the market today.
They pay a very nice dividend of 5% but it does correspond to over 65% of their earnings so some bigger problem around the corner and the dividend could be dropped to some degree.

Conclusion: Graham as well as I say no to this one. The screener gave me a company that looked much better than what dropped out in the end. If one would like to collect a nice dividend and believe bpost to be able to keep their almost monopoly position in Belgium with kept earnings then go for it but like I said... I would not.

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Unknown said...

Hi sorry, but what makes the motivated P/E between 9-12? How do you calculate that? If you have an P/E of 15, what is then the motivated growth rate?? :)


Fredrik von Oberhausen said...

Hi Carl,

The motivated P/E comes from Benjamin Grahams formula that 8.5+G*2 where G is the growth in %-age. So a company with 0 growth has a motivated P/E of 8.5.

A motivated P/E of 15, which you wonder about, would then be 15 - 8.5 = 6.5 / 2 = 3.25% of yearly revenue growth in the company.

This is just a rule of thumb but to me it is an important value to get a feeling for how undervalued a company is in comparison to their revenue growth.

The range comes from a very loose translation by me of what Lynch once said that he wants a P/E of 3 years of growth. That value comes from that I write in an expected growth value for the company and make the calculation.

So the motivated P/E provides two things. Approximately how undervalued is the company? With a factor two? three? and also it gives an indication for when one should consider to sell the company.

If you want to know more details about the formula of Graham then you should get hold of his books. They are definitely worth reading.