Kernel annual report 2016

There has been some major share price movements in Kernel lately since the Polish retirements funds and what have you seem to have discovered Kernel. These are the moments when you regret that you sold off parts of the company but even so I must keep my head on straight and realise the risk of owning companies that are pretty much operating in a war zone. 

The report in full can be found here and all material is taken from it. For the previous annual report please see Kernel annual report 2015 and to find out more concerning Kernel please visit analysis of Kernel 2015.

The revenue dropped dramatically, from my point of view, however the earnings are in the end very decent due to increased dollar valuation in which they sell many of their crops while many of their costs are in Ukraine Hryvnia.

There are some annoying question marks in the company... Compared to 2015 they significantly increased the valuation of their crops. To my knowledge the valuation of many crops have not increased significantly from July 2015 to July 2016 so why do they decide to push up the valuation of that? Yes, their costs to recover those assets will be less... I can agree on that but that should not influence the value of the biological asset.

They have have give them selves stock options in the size of 3.8% of the total shares. Is the CEO and founder planning to retake the company via stock options to himself?

They have now hired a BA guy that will most likely fool around with currency and crops hedging. I do not really see how that will end well.

Conclusion: Kernel is doing well on the paper which to a very large extent comes a very strong dollar and crops having world market prices in USD. The managers seems to want to create a cosy little environment for themselves and the amount of stock options are, in my opinion an outrage. This is a company that pretends to make money and it is not a little start-up that needs to tie extremely skilled people to them via the hand out of shares because the salaries are so bad. For this reason I am currently cautious. I will remain shareholder for now but it might change quickly.

Analysis of ABF 2017

Company: ABF

ISIN GB0006731235 | WKN 920876 

Business: A British conglomerate with agriculture, agricultural products as well as retail. Currently they have five business segments: Sugar, Agriculture, Retail, Grocery and Ingredients. To find out more about their grocery brands then please click here and to find out about their businesses in general then please click here.

Active: Europe, Africa, USA and Australia. Heaviest in the UK and Ireland.

P/E: 24.1

Here you can find the previous analysis of ABF 2015. 

Since the last analysis the share price have dropped by over -30% which means that the P/E is at a more reasonable level today with its 24.1 however this is still a high value. The P/B have also improved significantly and is now at 2.8 which still gives a very clear no go from Graham. And I realise while writing this how insane it was of me not to sell ABF when it was up at a P/E of over 50.

The earnings to sales have improved slightly and is now at 6% as has the ROE that is up at 11.6. It is still not good but it is ok. The book to debt ratio is great with 1.7.

The yearly revenue growth rate is at a low 1.8% so more or less inflation considering their global presence. From this we get a motivated P/E of 10 to 13 which means that ABF is overvalued on the market today.

The pay a silly dividend of 1.5% however it only corresponds to 36% of their earnings so they should be able to keep it up for a while.

Conclusion: Graham has always said no to this one. I, on the other hand, decided not that long ago to increase my position in ABF. The P/E is down as a more reasonable level, the P/B is ok, the ROE will hopefully keep improving and more importantly for me Primark keep increasing the store area and sales. I will continue as a shareholder in ABF.

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

ABF annual report 2016

When I saw the front page of the report I must admit that I got slightly disturbed. It directly brought back memories of Asian Bamboo and my massively failed investment that I ended up doing. 

There is one reason and one alone for why I own ABF and that is due to Primark. Living here in the UK now it is very clear that they have saturated the market here because the amount of visitors are more similar to in an H&M store than the insane amount of people that entered the Primark stores in Germany.

For the report in full please go here and for the previous report from ABF please visit ABF annual report 2015 and to find out more regarding ABF please click on analysis of ABF 2015.

Looking at the statement below we can see that ABF did indeed increase their sales slightly. They are a global company which means that they have profited massively from a decreased valuation of the GBP. They have claimed since a long time to be working on and decreasing their costs... I do not really see that here. The profits are up by over 50% and yet they only increase the dividend by 5% so they know that the year was good.

If one takes a look at the different segments of this odd conglomerate then one can really see all the issues with Sugar. It used to bring in the big bucks and these days they are hardly even worth mentioning with their 34 million in profits.

Conclusion: Due to the decreased valuation of the pound sterling ABF profited immensely and will continue to do so as long as it remains pushed down. I still wait for the day when they will break Primark loose from the rest of the conglomerate. I will remain as a shareholder in ABF.

Summary of January 2017

January was an interesting month since it contained salary increase, bonus, stock options and back payment due to salary "error" for a six months period. I have since a long time been against bonuses but I must say that receiving share options was very enjoyable.

During January I also ended up travelling to the far east on business and stayed for a week rolling my thumbs. The trip was however highly important and with a successful outcome my team will be kept busy for months to come. I strongly dislike when I need to travel somewhere for support and to bring in some well selected words and sentences at the correct moment but I do not think that there is a way around it. I was hit very hard with jet-lag and slept maximum three hours per night. Very exhausting.

In the next couple of weeks I might even end up travelling back home to Sweden on business. I hope that I will be able to combine it with some holiday but we shall see if that can be done... I doubt it...

I have not yet managed to take up sports but I have decided to go, every now and then, for walks during my lunch break also here in the UK as I did every day in Germany. It is a start.

I managed to finish the Business Administration course of Organisation and Leadership. It was interesting but afterwards I must admit that I do not remember much of what I read. However me and my course mate managed to get the highest grade on the essay which was probably only possible because the third member of our group decided to leave us. Amazing how useless and annoying some people can be when you need to anonymously work with them online.

For the previous summary please visit Summary of December 2016 and here you can see my stock portfolio as it is.

The total invested value is now up at: 86,715 € (the decrease comes from me selling Adidas and not investing the full amount yet) including a realised loss of -356 €. I bought Hugo Boss as well as Nike.

The value of the portfolio is today: 89,469 € and spread out I now have around 7,700 € in cash on the account. The combined unrealised and realised loss is now at: 2,754 € (3%) which is not as good as one would have liked.

DAX have more or less been standing still during January 2017 and went down to 11,543 points which means a decrease of -0.5% which is worse than the +1.0% that my portfolio managed to accomplish.

Conclusion: DAX did bad and I did better. I sold Adidas at an ok moment. The two stocks that I bought instead can be discussed.... My assumptions are a 30% gain for Nike and a 30-50% gain for Hugo Boss in share price during the coming 2-3 years. The fact that I make such a specific gain increase within a specific time frame added to it makes warning bells go off all over the place. Horrible! I hope that my statements will become utterly wrong to prove the point that such statements should never be given because they should never come true.

Stocks bought January 2017: Nike and Hugo Boss

Nike is one of those American giants that are present and making sales pretty much world wide. Today Adidas is being valued at a P/E of 33-35 while Nike is valued at a P/E of 21-23. I do not consider Nike to be cheap today but neither is it very expensive. Back in December 2015 the board gave the management the right to buy back shares to a value of around 12 billion USD during the next four years. We are now in Q1 2017 so two years later and the managers of Nike have still around 9 billion USD to buy back shares for during the next two years. I do not expect to own Nike more than two to three years.

I bought 40 shares of Nike to the total cost, including fees, of 2,018.30 €.

To find out more about Nike please see this very old analysis of Nike.

The share price for Hugo Boss have taken a serious nose dive since Q1 2015. Not that long ago the managers went out with the statement of decreasing the price for their garments with around 30%. From my personal point of view the quality of Hugo Boss is poor. Back in the days when I was not keeping as good track of my finances as today I bought a Hugo Boss suit for around 450 €. I have never worn suits daily and for this reason I was slow to discover it but within wearing it for maybe ten times the garment has already started to fall apart. For me this meant never ever buying another suit from Hugo Boss even though I find their design very beautiful. 45 € per wear is simply too much for me. I additionally do not like to pay for a name and here I ended up paying far too much for the name Hugo Boss on the garment. With the new strategy of the managers the price for the Hugo Boss garments are getting closer to their level of quality. Like I said... they make beautiful things and with a 30% reduction in price I make the assumption that more people will buy their garments as well as people spending more money in the store. I look upon this as being a temporary effect especially if they have not done any changes to their quality / quality control. I therefore do not expect to own Hugo Boss for more than two to three years.

I bought 35 shares of Hugo Boss to the total cost of 2,136.44 € (including fees).

To find out more concerning Hugo Boss please see this old analysis of Hugo Boss.

I will try to remember to update the Stock Portfolio with the next monthly report that is actually already due.