TL;DR The financials of the business look quite healthy with an attractive valuation. Depending on the growth profile, Stamford Land's shares could potentially be undervalued.
Business Profile
Source: Stamford Land Corporation Ltd
Stamford Land is Australasia's largest independent owner-operator of luxury hotels with a portfolio of prime hotels and investment properties in Australia's key cities. Moreover, Stamford Hotels & Resorts is the only Australian home-grown operation, that has successfully developed into the largest owner-operator of luxury hotels in Australasia.
Source: The Independent Singapore
Income Statement
For FY18, the firm is quite profitable, with very high-profit margins. Moreover, these margins have also improved over time. Additionally, revenue and earnings have improved over the years as well. For their income statement, this paints a pretty good picture.
Balance Sheet
For FY18, the balance sheet of the firm seems good. The business has quite little debt, especially when compared to the high earnings that the company has. They also have a large amount of operating cash flows relative to current liabilities. Furthermore, the firm has strong short-term liquidity as well. This is evidenced by the high current and quick ratio of the firm. As well as high operating cash flows relative to debt. Over time, these ratios have also improved as well, which is a very positive sign.
Free Cashflow Analysis
For 2018 alone, Stamford Land has quite strong cash flows as well. This is evidenced by a very high FCF margin of more than 60%. This high free cash flow was derived from an increase in earnings, but also from reduction in fixed assets and working capital which had generated cash flows. Moreover, these metrics have improved over time too. With strong cash flows and a low payout ratio of 0.15, we can conclude that Stamford Land will most likely be able to sustain their dividends over time.
Efficiency Metrics
As a whole, the firm is efficient in their use of assets. ROIC could be on the lower end, due to high cash balance. ROE is on the lower end, due to low asset turnover and high equity multiplier. This is most likely due to the high equity balance that the firm has, and relatively low revenues compared to assets. The firm has quite a high return on capital as well. If we hold return on capital constant, the earnings would decrease in the following year due to the reduction in assets.
Valuation
Based on the valuation multiples, there is a chance that the shares could be undervalued. This is due to the low multiples, as well as very healthy companion ratios of these multiples. Moreover, the free cash flow and free cash flow to equity yield are both quite high as well. This suggests that for the current valuation attached to the firm, there were strong earnings relative to those values.
Cost of Capital
Due to a strong debt profile and low beta, the low cost of debt and cost of equity are both lower. This has resulted in an overall cost of capital which is low. This in contrast to the much higher ROIC that the firm has. Overall, this shows that invested capital is generating much more than they cost for Stamford Land.
Closing Thoughts...
In closing, most of all the financial aspects of the firm look good. With such cheap pricing, there is a good chance that the shares might be undervalued.
TL;DR The financials of the business look quite healthy with an attractive valuation. Depending on the growth profile, Stamford Land's shares could potentially be undervalued.
Business Profile
Source: Stamford Land Corporation Ltd
Stamford Land is Australasia's largest independent owner-operator of luxury hotels with a portfolio of prime hotels and investment properties in Australia's key cities. Moreover, Stamford Hotels & Resorts is the only Australian home-grown operation, that has successfully developed into the largest owner-operator of luxury hotels in Australasia.
Source: The Independent Singapore
Income Statement
For FY18, the firm is quite profitable, with very high-profit margins. Moreover, these margins have also improved over time. Additionally, revenue and earnings have improved over the years as well. For their income statement, this paints a pretty good picture.
Balance Sheet
For FY18, the balance sheet of the firm seems good. The business has quite little debt, especially when compared to the high earnings that the company has. They also have a large amount of operating cash flows relative to current liabilities. Furthermore, the firm has strong short-term liquidity as well. This is evidenced by the high current and quick ratio of the firm. As well as high operating cash flows relative to debt. Over time, these ratios have also improved as well, which is a very positive sign.
Free Cashflow Analysis
For 2018 alone, Stamford Land has quite strong cash flows as well. This is evidenced by a very high FCF margin of more than 60%. This high free cash flow was derived from an increase in earnings, but also from reduction in fixed assets and working capital which had generated cash flows. Moreover, these metrics have improved over time too. With strong cash flows and a low payout ratio of 0.15, we can conclude that Stamford Land will most likely be able to sustain their dividends over time.
Efficiency Metrics
As a whole, the firm is efficient in their use of assets. ROIC could be on the lower end, due to high cash balance. ROE is on the lower end, due to low asset turnover and high equity multiplier. This is most likely due to the high equity balance that the firm has, and relatively low revenues compared to assets. The firm has quite a high return on capital as well. If we hold return on capital constant, the earnings would decrease in the following year due to the reduction in assets.
Valuation
Based on the valuation multiples, there is a chance that the shares could be undervalued. This is due to the low multiples, as well as very healthy companion ratios of these multiples. Moreover, the free cash flow and free cash flow to equity yield are both quite high as well. This suggests that for the current valuation attached to the firm, there were strong earnings relative to those values.
Cost of Capital
Due to a strong debt profile and low beta, the low cost of debt and cost of equity are both lower. This has resulted in an overall cost of capital which is low. This in contrast to the much higher ROIC that the firm has. Overall, this shows that invested capital is generating much more than they cost for Stamford Land.
Closing Thoughts...
In closing, most of all the financial aspects of the firm look good. With such cheap pricing, there is a good chance that the shares might be undervalued.