Investing Forum - Warren Buffett and Value Investing
The Current Market Conditions
Anybody got any truly deep value picks at the moment?
The Current Market Conditions
I'm looking at:
Electricite de France
All below book...
SHOS is a net net
OSG is well below book generating good free cash flow.
I like the look of that EDF other then that debt ratio. CCJ looks passable as well. I'll give them more of a look tomorrow.
I have one very solid value stock trading at half its book value. It's non you mention but take a look at CIBT Education. It trades as MBAIF in the US and is a Canadian student housing REIT and education company that owns multiple universities in Canada, as well as a few other education related assets.
On a recent trip to Canada, it was hard to not notice the burgeoning foreign student population (particularly of Chinese origen) and a generally vibrant and welcoming immigration climate unlike the climate currently in the US. When researching further into the education market, it became clear that CIBT education is perfectly positioned for growth backed up by actual earnings.
The Net Current Asset Value per share, or the fair value that the company should receive if it was to be liquidated today, is hovering at .71 - .79 cents per share, compared to the stock which is currently trading at .47 cents per share indicating that this stock is a great bargain!
The trailing PE value is just under 5 compared to the PE value of comparable student housing stocks like ACC (PE of 64) or EDR (PE of 139). ACC and EDR are US student housing companies, and the only comparable companies that we can use to compare to MBAIF, because there are no comparative publicly traded student housing stocks in Canada. This is important to note because this shows MBAIF won't be facing much competition as it scales. There are private student housing companies in Canada but not publicly trades ones, only MBAIF.
CIBT Education debt is high, but that's typical of a REIT, and their debt is in line with ACC, its comparable competitor in the US. Compared to other industries, their debt would be high, but for the student housing sector, it's in line with its very profitable US counterpart, ACC and also in line to other REITs. REITs are just fundamentally debt heavy.
History and Company Growth
There is tons of room for growth with this company over the next 5 years because they plan to add $1 billion in assets by 2020 with 9 new housing properties whereas they currently have only about $150M in assets. They plan to take 10-30% equity in each of their projects and also have 20 year management rights on each one solidifying a constant stream of income. If they grow to 5k beds at current rental rates of about $12k per year for a studio, that's $60M a year under management, and that's just their student housing sector under management, not including their other income streams from their education assets and also appreciation of their real estate assets in the in demand Vancouver real estate market. To compare, their last quarterly reported revenue was about $30M, so tons of room for growth.
As a developer of student housing, they have a competitive advantage over their competitors (again none are public like MBAIF) because they have a unique system in place to funnel students from their universities and schools into their housing.
The vacancy rate in Vancouver is extremely low, at .5%, and rental rates are skyrocketing.
The US is no longer seen as a friendly place for immigration with the Trump administration's agenda on immigration. Just over the border in Canada, Justin Trudeau's administration is very welcoming to immigrants, making it a point of his administration to bring in more international students (state visits to China and the opening of 7 new visa offices in China), his administration reducing barriers to entry, and an agenda to make an easier pathway to citizenship. Canada has set a goal of an 88% increase in foreign students from 240k in 2012 to 450k in 2022. As Canada is opening its arms, the US is going in the complete opposite direction. This is a good article about the US change in immigration policies and how Canada is treating immigration:
Vancouver is very accessible to Chinese as there are direct flights to Vancouver from China, and their is a huge Chinese population already in Vancouver.
Canada's defense minister is a Sikh with very deep Indian roots and an expanding great relationship with India, which is set to overtake China in population in a few years. As India grows and becomes wealthier, more of its students will seek higher education in places like Canada.
This is my analysis of the stock and for full disclosure I have invested in MBAIF, but you can also view a professional analyst's breakdown from Fundamental Research Group here:
Let me know what you think? Thanks!
Not sure how you calculated that NCAV on the most recent quarterly report has
Current assets - Total liabilities at
17..4- 77.8 = -60.4
So this wouldn't actually be a net net. Its liquidity in the current year is negative as well with a current ratio of .7.
I would say less then canada taking u.s students that what you said about india is correct. They are going to be growing economically for years to come. Many students at my school in the mba program are from India.
In other words, school has never been more important to societies, and the demand for school is yet to drop even with ridiculous price increases.
I think the price still looks cheap though. Also how do you say its trading at half its book value? Do you mean half its fair value that you estimated?
I think the price still looks cheap. I'll read the rest of your analysis report it looks well done. How did you find them?
edited March 8
Thanks for looking into this analysis Tim and thanks for catching my mistake - I cant edit it at this point but I simply made the mistake of writing NCAV instead of NAV (net asset value). Your calculation of NCAV is correct, however, using the NCAV wouldn't be appropriate for an REIT like this bc it does not take into account the fixed /intangible assets (student housing buildings in this case), inherent to an REIT - that's why I went with NAV, aka Book Value.
I should be more clear when using those two terms, but I use book value and NAV (net asset value) interchangeably. So yes, I mean to say that the stock is currently trading at half its book value or NAV, and it shows a considerable bargain at the moment.
Regarding their working capital, your are correct it's negative at around .7 but I believe that should go away soon with forecasted growth and this negative can be rationalized bc of the intense investments they are currently making.
Re: finding them, it's a long story but I'll make it short. On a recent trip to Vancouver, it was obvious to me that Canada is now the
destination in North America for foreign students (particularly Chinese, Indians and Australians and I assume a much more diverse group of nationalities if I had more time to spend in Vancouver). I then researched "online education companies in Canada" and ultimately found CIBT. The information I found on them is presented above, the macro regarding Trump immigration policies is a catalyst to an already growing foreign student industry, and it's fundamentals backed up my iclination upon first visiting Vancouver, so I invested.
Ok, net asset value would be 30 cents a share so how is the stock at half book value?
Total assets (144M) - total liabilities ($77M) = NAV aka Book Value ($67M) divided by 71M outstanding shares is $.94 per share
How did you calculate it to get 30 cents?
Your right morning star had it at .31 so I didn't calculate it. When I did I got the same thing, It is $.94 as of the most recent. Also the research report has the price the book at 1.8? Market watch and Morningstar also have this or around 1.5. Would you know why that is?
I am not sure how those other sites calculate it but I am going off the most recent quarterly report from the CIBT website. I would need those other sites to break down their calculations. I do know that in the analysts report they are including the recently reported debt of KGIC schools so that adjusts the book value.
Also, I forgot (but I did this in this in my original analysis to this forum) to convert the .94 to American dollars. That then comes out to .69 (I had it at .71 a week ago). I think it has to be converted bc I think the market price of the stock at .47 is in American dollars - must have apples to apples comparison.
You are right, I should adjust my title "trading at half its book value" because it's not - I should have wrote a different title, as "trading at an amazing bargain". Bc no matter how you look at it, it's trading at a great bargain with strong catalysts.
I took at look at SHOS, and from my point of view it looks interesting. It trades way below NCAV, and Eddie Lampert (apperently an activist investor) has bought a lot on the way down and owns more than 50% of the company. Last purchase was in December.
However, is it a Net-net? From what I can tell the NNWC is about .86 cents, and it trades at 3.4$. However, maybe the 0.5*inventory is too low for a store?
CIBT is up 8% today due to a successful acquisition adding nearly $25M of revenue to their portfolio on a $12M purchase. This catalyst is small potatoes compared to the value this company is adding due to the development of their student housing portfolio as I mentioned in the above analysis.
This company trades as MBAIF in the US and will mirror its Canadian security MBA.TO's 8% pop. Time to buy, MBAIF if you are in US or MBA.TO if you are in Canada.
edited March 17
A net-net is trading below (current assets-liabilities) ... so yes.
PetroChina Co Ltd ADR
CNOOC Ltd ADR
I know oil prices are low, but what are your thoughts?
In addition to looking for a great deep value, MBAIF is a great hedge against the speculative US stock market as we saw today with the DOW dropping more than 200, and MBAIF being less affected than the DOW overall. As we saw today, and likely more over the next months, The market can quickly turn for the worse if Trump's policies aren't getting implemented. And if the political wrangling in DC is any indication of how it will be over the next months, than Trumps big stimulus agenda of cutting taxes and infrastructure spending, are going to be pushed back for a while. Therefore MBAIF represents a great hedge bc the more chaotic and unwelcoming toward immigrants the US appears to be, then the more foreign students will be attracted to Canada for higher education.
In summary, use MBAIF as a hedge as well as a great net-net deep value play.
Just came across this thread and feel that a couple of risks with this stock were missed. I haven't looked at this company at all but if they are a student housing REIT in Vancouver be cautious, you are right that the real estate market in Van. is in demand, as a result, real estate prices are really inflated, so much so that the government has changed it's taxation laws on foreign owned real estate in Canada in attempt to cool the market. If this REIT is looking to aggressively acquire property, they are doing so at a premium and that's dangerous if it's all leveraged. Second, I wouldn't play this as a hedge against us stocks. Depending on the catalyst that drives down the price of U.S. Equities, Canada's economy will go down with it. Canada is very dependant on the US economy, and mimics us markets. Canada didn't have a sub prime mortgage crisis in 2008, our banks were sheltered from such practices because our lending laws were tighter, but banks in Canada still tightened up on lending, house prices still dropped. If the US equity market takes a hit, Canadian equities will too, and the first thing to cool will be our hot housing markets in TO and Van. Could leave MBAIF with debt servicing and debt covenant issues.
I'll take your risks in to mind. But yesterday when the DOW dropped nearly 1%, MBAIF beat the market by half, dropping only .04%. I do agree with you though, the Canadian and US markets are linked. But what I was really expressing as a hedge was that the more chaotic and unwelcoming the US continues to appear then the more foreign students will be attracted to Canada for higher education. So the hedge is 1) Canadian stocks will plummet less than US stocks and 2) the more unwelcoming Trumps policies appear to immigrants the more Canada student housing stocks will benefit.