Gamuda and its Rich Earnings Multiples

I thought I do a simple exercise on Gamuda and its earnings.

Earnings as it is, is complex and can be view and in many forms. There are 4 basic forms for me.

A. Previous Fiscal Year earnings.

Gamuda recorded earnings of only 185 million. Based on 2,002.594 million shares, that's an eps of around 9 sen.

B. Current tweleve month or trailing earnings

Trailing earnings is around 226 million. Based on 2,002.594 million shares, thats an eps of around 11 sen.

C. Annualised earnings.

Using Q1 earnings of 88 million as a guide, then annualised earnings is around 350 million or an eps of 17 sen.

D. Projected earnings.

The projected earnings for Gamuda this year that I have seen from brokerage houses range from 360-390 million. So we are talking about an average projected eps between 17 to 19 sen.

On 14th Jan 2008, Gamuda traded at a price of 5.80.

If you use an trailing eps, Gamuda stock's traded earnings multiples is way up in the sky! 52x mulitples!

If you use projected earnings of 19 sen (I will use the higher eps to give it a benefit of a doubt), Gamuda was trading at a very rich multiple of 30.5x.

* At around a price of 4.60, the 70 million shares were placed out at an earnings multiples of 24 times based on projected earnings or at earnings multiples of 41x based on current earnings! 4.60 ain't a shabby price to place out the shares, eh?

** Do note, considering that Gamuda only made 185 million for its last fiscal year. The projected earnings is at 360-390 million. If one uses 390 million, the market is expecting more than 100% growth in earnings for the company. Some would simply argue as simply too rich!

*** Given the fact that the boss placed out his shares at an extremely attractive price it had such negative implications. Those prices were at a discount to the market price, the size of the placement was rather huge leaving the boss with a rather much smaller holding and ultimately that created an extremely huge float and most importantly, what was the intent of the placement?

** Gamuda had always been a stock that was highly regarded by the market but the placement has clearly created a negative impact on the stock. A sure recipe for a market sell down given the already poor market sentiments.

How?

Gamuda last closed at 3.66.

As an investor, sell downs represents opportunities. Do you reckon that this is an opportunity? Would you want to use earnings valuations to gauge an investing opportunity in this stock? 15x multiples? Or do you reckon that there are simply too much uncertainties? Yes, how could one invest when there's so much unknowns caused by the boss disposal of shares. What's the real intent of the disposal? Is there something really bad in the horizon? Or does the boss really think that the stock was trading at such rich valuations, that he decided to profit from it? How? I do think that the boss needs to instill back market sentiments first by giving a much better explanation on his share disposal.

Or would you want to be a trader and just look for a trading opportunity? The shares rebounded sharply yesterday after hitting an intra-day low of 3.20 before closing at 3.66. Were you in or were you IN the stock? Would yesterday's intra-day technical rebound continue?

How?

Si Lembu do not know but Si Lembu was told that one Mr. Tua has all the answers!

Cheers!




* blogged last year: Looking Back: Gamuda *