Monday 28 October 2013

Analysis of Westag & Getalit

A German wood product and laminate company

Company: Westag & Getalit

Business: A German producer of wood based as well as synthetic products (such as the well known laminates). They are divided into three divisions: Plywood/Formwork (used to stabilize concrete as well as interior floor in vans and delivery trucks etc.), Doors/Frames (exactly like it sounds like) and finally Laminates/Elements (mainly for kitchen and furniture and not floor as maybe one think of at first when hearing laminate)

Active: Mainly in Germany with 80% of their sales and 20% is export to the rest of Europe.

P/E: 13.4

1. I thought it would be possible to compare this company to for instance NCC and Skanska that I have analysed before but the company is not at all something similar to those heavy construction companies.
2. This analysis turned out slightly different from ARD, as well as their own yearly report from 2012. I think I need help here... they have a total of 5.72 million shares. Some are preference and some are ordinary. They had net earnings of 7.465 million €. To me that becomes 1.31 € per share and everywhere they claim 1.35 € per ordinary share and 1.41 € per preference share. I must be stupid because I do not get that which means that I do make my own calculation and put my faith in that instead but just to say it out directly my calculations will deviate from any other page.

This company was analysed due to a request that can be found here.

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Westag & Getalit is slightly too high for my liking with 13.4 but the P/B is fully acceptable with 0.9 which gives a very clear buy according to Graham. The earnings to sales is down at 3% which is not so good and the ROE is only 6.9 so they are not good at using their equity. The book to debt value is however excellent with 2.5. In the last five years they have had a yearly growth of 0.1% which comes to a large extent from that 2008 was an excellent revenue year and they just now managed to increase that slightly again which gives a motivated P/E of 8 to 10 which means that today Westag & Getalit is fairly to overvalued on the market. They pay a very nice dividend (to the preference shares) of 5.7% which unfortunately represents almost 77% of their earnings which is in my opinion far too high (and since the ordinary stocks receive less it is not as dramatic as it looks but it is still too high for my liking).

Conclusion: Graham says that it is a buy and I understand when someone does that. It looks solid, they have had revenue increases the last four years, they pay a nice dividend and have a good book to debt value and P/B. For me however... I personally do not like the P/E, the ROE and I do not like that they pay out such a high %-age in dividends so I would not invest in it today.

If this analysis is outdated then you can request a new one.


Falk said...

Thank you for your analysis, Fredrik.

The difference in EPS seems to be a result of the share repurchase program:

As you said correctly, the ROE is quite low. In this situation it makes a lot of sense to repurchase your own stocks and use most of your earnings for dividends instead of investing them into a mediocre business.

Fredrik von Oberhausen said...

Your welcome Falk!

Hmmm... I honestly do not know. The EPS differs with as much as 7% which is a lot.

But true, with a bad ROE and no vision of where to go and where to expand then it is a good moment to buy back shares.