Merry Xmas & happy New Year!
FINANCES.
Inflation remains above 6% and rates ticked up to 10%, so we are paying about 4% in interests.
Still a cheap line of credit in our opinion because the offices we have built are paying a very handsome profit, as you will see next in the income statement.
Anyway, you get an idea of how profitable our office districts are, against the current price of cash, if we refer to the data we provided back in 2008: a 15% year profit over book value (which is higher than over land & construction value, our real costs). That means a 11% year profit after credit costs.
This January 2010 the chairman of the central bank changed to strong dove, so if the price of money gets once again below inflation our new projected residential districts will become really cheap. We´ll keep supplying housing as demand appears and try to make use of the lower financing costs as they become available, as we consider such approach the most sensible route to follow.
Net assets have increased by 18% to 12,2 billion, and we increased our debt overall by 1 billion to 3,6 billion.
Our income from RE firms increased by 50% to 1,4 billion/year.
We´d like to know the rents we´re getting with more detail, but we won´t offer the improved income statement for RE firms yet as preparing it is a bit too time consuming these days.
We also allocated a small monthly income to our CEO so he can now buy mansions from other personalities in strategic places.
- Balance sheet-feb2010.png (589.72 KiB) Viewed 11653 times
- Income statement-feb2010.png (490.5 KiB) Viewed 11653 times
STOCK MARKET.
We have focused our attention to the stock market more than is usual in the interim.
Here´s the long term 20 year chart of Tomahawk Corporation. The price has been tracking very closely the increase in the perceived value of our assets. Right now we have a market capitalization that is 7% higher than our net assets.
- Stock Market-feb2010.png (499.14 KiB) Viewed 11653 times
Here´s our present holding of public stocks. I´ll comment a bit on each:
- Stock Market2-feb2010.png (525.37 KiB) Viewed 11653 times
1- Magnet Corp is a direct competitor of New Falcon Industries Ltd, our electronics subsidiary.
With a market cap. of 219mm it´s the smallest of the public corporations. They currently have no debt, are losing a bit of money, but have built an acceptable brand for their products. Despite their book value being close to 3$/share, if we´d add the money they´ve spent advertising to their net assets we´d get a book value of about 390mm. With 50mm shares outstanding, each one would have then claims over almost 8$ worth of property, be it tangible or not. We don´t mean we´d be ready to pay 8$/share despite that.
So, we plan to acquire them before they start getting into war and debt. That way we could assert our influence over the country´s electro-market.
2- The textile techno-corporates Pur Treasury (leather) and Radiate Star (footwear): They were under our acquire radar a few years earlier. As you might remember we are creating an apparel monster, feeding it with cash so it grows tall & strong, before releasing it fully capable "outside" to become the main player in Sylvania´s fashion market.
We have followed New Cotton Thread´s operations with care and are quite happy with their progress.
So, here´s what we have done:
PUR TREASURY: We are ATM their biggest stockholder and so we can dictate about their technology and financial operations. We´ll increase our ownership if it becomes cheap and sell it if it becomes "very" expensive. Right now they sell their own brand of leather products and their research will keep being sold to New Cotton Thread at market price.
It´s their notable research capabilities what makes them attractive in our opinion.
RADIATE STAR: We succeeded in buying up to 50% of their stock at about 10$/share but they got an almost one-off 50mm profit from technology sales, so the price went to 16$ and so we sold our stack (we were the main "promoters" of that price boost but not the only ones, as they got a breakthrough in sport shoes tech in August 2009). At this moment the price remains too high and we plan to re-purchase the shares in the future if they become cheap again (if we can, because it has merely 50% of total shares in "public stockholder´s" hands). We might have to use New Cotton Thread Ltd as a spearhead to make a dent at their profits, once we get ready to start our purchase campaign later, and so discourage current ownership from helding their property too tightly.
3- The camera-maker Platinum Coil: We were really fast in getting half their stock (we did so in the early spring 2008), but in the last 6 months other corporate players have truncated our chance of making it our subsidiary at a good price and so we´ll have to bribe them for their stack. I did choose Platinum Coil for the Stock Market2 view so you could glance at their market data there.
They have a market cap of just 367mm but are already making 20mm/year selling their products. The company has no debt, a modest brand and no competition. They have been slow in deploying their products, so we might create a new player instead after purchasing all their technology and selling their stock later when it skyrockets (as is always the case after producing a heavy tech sale).
They have the compact and digital cameras already researched, and both products fetch a good price and have a decent market size.
4- The beverage corporate Rising Sun Intl: They are a medium sized player competing against our subsidiary Saratoga Mills through their wines. They have no debt and an average brand, but are having a tough time selling. We purchased their stock as it was offered cheap (about 12$) but we have no plans to hold it long term, as we believe they´ll come under strong pressure in the future.
5- The computer-maker Victory Group: Our plans were to have them under our corporate wing by now, but we didn´t push hard enough for it. The problem was that every time we made a purchase the shares exploded higher, so we focused our attention elsewhere. We won´t be so squeamish this time around and bid generously for their stock... up to 8$/share (?)
How could we justify such price? Our "value" approach dictates a fair price of 4$/share and our "growth" approach a 40cents/share, from the current price of 6,4$/share. Let´s see:
a) Their expenditures in brand building have been higher than their current equity (270mm to 260mm), so if we add both we´d get 530mm of assets backed by 65mm shares. They have a corporate brand with good awareness altough neutral loyalty, so they haven´t had too much success there. I´m sure their brand is worth something altough maybe not all the money they threw at it.
b) They have Southern Lines Corp competing with notebook computers and that´s all, because for some reason the market for desktop computers and printers is being totally neglected by both. We then have a prospect for making sales if we can see the reason these markets have stayed unclaimed.
c) We could direct their operations at gaining market share and integrating their products in our other subsidiary´s electronic stores. We´ll have then 5 players: Magnet, New Falcon Industries, Platinum Coil, Skynet Industries and Victory Group all sharing the same type of retail store.
Our plan then will be to make it our subsidiary and then proceed to swiftly change the directorate.
Now to the Stock Market Triptych:
- Stock Market Triptych-feb2010.png (82.96 KiB) Viewed 11653 times
a) To the left I have included values that the game provides in the Stock Market information to each public corporation and a few composite values.
P: Current price of the stock.
S: Number of total shares. I have highlighted here possible "devaluations" of the stock.
MC: Market Capitalization (stockholder value).
EQ: Equity (bondholder value).
E: Total earnings (yearly).
E/S: How much one share of stock is earning each year.
EQ/S: Claims over property of one share.
MC/EQ: Difference between stockholder and bondholder perceived value (less than 1 meaning stockholders somehow despise the stock).
P/(E/S): Price-to-earnings (where you have how the stock is priced related to current earnings, good values from 0,1 to 20-ish).
b) In the center I have included the free cash, the debt and the money the corporation has used during its life to build its brand.
c) To the right I have included current prices together with two valuations used commonly, to grasp overpriced or underpriced stock:
MC/EQ=1: It´s the bonholder fair value, where the stock is priced according to net assets. Below 1 it´s considered getting cheap.
P/(E/S)=20: It´s the price of the stock equivalent to 20 years of current earnings. I prefer 15 years, but then we´d get much worse "fair" prices.
Besides the "correct" price under these given conditions are the sylvanor($) points it should adjust to get there, and the percentage correction.
As you can then appreciate, we have been through a somewhat cheerful period of valuations by stockholders that still lasts to this day.
d) below: apart from averages, max. and min. values you find:
Total public shares outstanding.
Total market capitalization of Sylvania´s stock market.
Total price of public corporate property.
Total earnings per year, total free cash levels and total debt incurred for all public corporations.
I´ll summarize here something important to keep an eye on, in case we planned to purchase all the country´s market:
Total market capitalization (excl. Tomahawk Corp + subsidiaries) 32,8 billion.
Total market capitalization (excl. Tomahawk Corp subsidiaries) 45,8 billion.
Total market capitalization (all corporations included) 50,55 billion.
Of the total value of the "claimed assets", our corporation owns about 19 billion, or 37,6% of total assets.
