Friday 11 April 2014

Analysis of Semapa

A Portuguese paper, pulp & concrete company


Business: A Portuguese holding company with three legs to stand on and those are: Paper and Pulp (production and sales of cellulose pulp and paper, almost 75% of the revenue comes from here), Concretes and Aggregates (manufacture and sale of cement and concrete, almost 25% of revenue) and the third leg is Environment (collection and recovery of animal by-products as well as recycling of cooking oil, <1% of revenue).

Active: Paper and Pulp is active all over Europe and US, Concretes is mainly Portugal and some in Africa and Middle East and Environment is in Portugal and Spain.

P/E: 9.2

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Semapa is very nice with 9.2 and the P/B is so, so with 1.5 which gives us a clear buy from Graham. The earnings to sales I consider to be high based on the business they are in with 7% and the ROE is also not bad with almost 16%! The book to debt is not so nice with a ratio of 0.3. Still in the last five years they have had a yearly growth rate of 6.3% which is excellent considering that their main business is in Portugal. This then gives us a motivated P/E of 16 to 21 which means that Semapa is undervalued on the market today. They pay an ok dividend of 2.6% which however only represents 24% of their earnings so there is room to improve and increase dividends. They have kept the dividend more or less flat since the start of the financial crisis and based on the Q3 report for 2013 they seem to end up with less profit for the total year.

Conclusion: Graham says directly yes to this company even though the P/B is a bit too high. I also consider it to be a very nice company and several of the figures are looking good and falls within my criteria for investment. Semapa will therefore be added to my Stocks of Interest list with the next update.

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