Monday 13 July 2015

Analysis of Balda

Balda, a German plastic molding company

Company: Balda

ISIN DE0005215107 | WKN 521510 

Business: A German injection molded plastic company. The group contains three daughters: Balda C. Brewer, Balda Medical and Balda Precision (two were bought in 2012). They have three major field of activities which are: Healthcare, Technical and Eyewear.

Active: Main areas of activity is Europe and the US.

P/E: 24.4

This company was analysed due to a request from Matthias posted on the Analysis Requests page. 

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

The P/E is far, far too high with 24.4 but the P/B is excellent with 0.6 which then gives us a clear buy from Graham. It should be mentioned that they are sitting with more cash than what the market capital of the company is. The earnings to sales are ok with 8%  but the ROE is awful with only 2.4%. The book to debt is crazy high with 11!
In the last five years they have have had a yearly revenue decrease which correspond to -13.6% which is awful and we then get a motivated P/E of 8 which means that Balda is highly overvalued on the market today.
They pay no direct dividend but they have since a couple of years been selling off "parts" and been giving out special dividends that have been large in comparison to the share price. One of the major benefiters of this has been Dr. Thomas van Aubel with his company Elector which is also making consultancy jobs (in the size of hundreds of thousands €) for Balda while owning around 30% of it.
Balda is currently also starting up litigations due to 1. Problems when a company part was sold off too cheaply in Asia and 2. Problems with the two US companies that were taken over and were continuously run by the previous owners that apparently have not been doing that properly for one reason or the other.

Conclusion: Graham says yes and I must admit that the cash is very tempting. My feeling is however that van Aubel have already squeezed out what he wanted and the rest will be used to get the company running but I could be wrong. So the P/E is bad, they no fixed dividend is bad and that they have such a poor ROE is also bad. The only good thing is the P/B and cash (which can maybe disappear in more consultancy jobs for Elector... who knows?). The litigations are to me additional clear indications that business are not clean and if you have that inside and around the company then no one knows where things can end and what is true or not. So this is a very clear no go for me.

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