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Sri Lanka Equity Forum » Stock Market Talk » Three Acre Farms PLC - A stock with growing profitability

Three Acre Farms PLC - A stock with growing profitability

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EquityChamp

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Moderator
Principle Business Activities
Selective breeding, hatching and sale of commercial DOCs, grandparent farm operations, import grandparent DOCs, advance technology breeding and commercial broiler farming.

Industry Outlook
The country has seen a rapid expansion in the production of poultry related products on the back of expensive alternative of Fish and the other substitutes of meet such as pork and beef. The cheap nature of poultry products have attracted very high demand and thereby increased the suppliers. This trend has created growing demand for day old chicks; the main product of TAFL.

Financial Performance
The company has experienced continued growth in revenue every quarter recording a compounded quarterly revenue growth of 8.6% since Q4 2014. Its PAT margin has improved from 11.6% in Q4 14 to 33.2% in Q1 16 due to the efforts in increased productivity and decline in key raw material cost continuously.
Rs mnQ4 14Q1 15Q2 15Q3 15Q4 15Q1 16
Revenue414441493558598624
Revenue growth 6.5%11.8%13.2%7.2%4.3%
PAT4879107161203207
PAT margin11.6%17.9%21.7%28.9%33.9%33.2%
The company generates a substantial ROE of 45% in Q1 16 with a 4 quarter trailing EPS of Rs 28.9.

Valuation
An ROE of 45% in an any industry will be a tremendous achievement. At the CMP of Rs125.50 the stock is trading at a 4Q trailing PE of 4.3x. The current prices reflects a huge intrinsic value hence you are advised to collect the stock and hold in the medium term.

Thanks

pfxavier


Senior Equity Analytic
Senior Equity Analytic
Good informative analysis. Another point is now company is debt free. This will increase the next quarter bottom line as well. Nice work EquityChamp !

kassachandi


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
In the short term TAFL price has to be adjusted to 150-160 with this super consistent performance.

EquityChamp

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Moderator
TAFL showing strong BUY signals in all daily, weekly and monthly technical charts. The Bull/Bear power(13) indicator has very high values of 39 for monthly charts and 16.5 for daily chats. These values are very very strong to indicates bullish sentiment of the share.

Brinthan

avatar
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@EquityChamp wrote:TAFL showing strong BUY signals in all daily, weekly and monthly technical charts. The Bull/Bear power(13) indicator has very high values of 39 for monthly charts and 16.5 for daily chats. These values are very very strong to indicates bullish sentiment of the share.
EC sir  what is the Software are u use it for your technical analysis......? I am using investing.com.

EquityChamp

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Moderator
Investing.com is fine with me also. Also metastock is good for me. But investing.com is very easy to use and readily available the info we want.

EquityChamp

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Moderator
Additionally investing.com allows to keep a track of the trend of technical indicators. For example the Bull/Bear Power(13) indicator for daily charts has jumped up today to 21.4 from 16.5 yesterday. This means the bulls are getting stronger and stronger than bears. RSI went up to 79 indicating overbought but the bull trend is very much intact.

kassachandi


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
TAFL is slowly but surely reaching to its target of 150

EquityChamp

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Moderator
Look at the below trading statistics of TAFL since 1st of April to date.
Date Price  Open  High  Low Vol.Change %
May 11, 2016 131.6   129.3  132.9  129.0 61.70K2.02%
May 10, 2016 129.0   127.5  130.0  123.0 128.90K1.57%
May 09, 2016 127.0   126.0  128.0  124.0 48.56K2.42%
May 06, 2016 124.0   124.0  128.0  123.2 129.69K2.56%
May 05, 2016 120.9   120.0  122.3  119.1 40.11K-1.06%
May 04, 2016 122.2   122.0  124.7  118.9 61.10K0.16%
May 03, 2016 122.0   123.4  124.8  120.0 72.65K-0.41%
Apr 29, 2016 122.5   118.0  124.0  118.0 357.32K4.70%
Apr 28, 2016 117.0   113.0  118.0  112.0 165.81K4.00%
Apr 27, 2016 112.5   109.8  113.0  108.5 132.20K4.17%
Apr 26, 2016 108.0   106.0  109.0  105.8 81.94K2.08%
Apr 25, 2016 105.8   106.0  106.0  102.0 107.45K-0.19%
Apr 22, 2016 106.0   104.0  106.0  103.0 37.53K2.91%
Apr 20, 2016 103.0   104.0  105.0  103.0 13.82K-1.90%
Apr 19, 2016 105.0   106.0  106.0  103.0 6.42K0.96%
Apr 18, 2016 104.0   105.1  106.8  103.0 11.69K-2.80%
Apr 15, 2016 107.0   107.9  108.5  106.0 37.80K0.94%
Apr 12, 2016 106.0   103.5  107.0  102.1 83.02K3.92%
Apr 11, 2016 102.0   102.0  103.5    98.0 94.55K2.00%
Apr 08, 2016 100.0   102.9  104.8  100.0 54.63K-2.15%
Apr 07, 2016 102.2   101.0  104.8    99.0 61.20K2.20%
Apr 06, 2016 100.0   101.0  102.0    98.0 125.69K-1.86%
Apr 05, 2016 101.9     92.8  101.9    92.8 231.19K9.81%
Apr 04, 2016  92.8     89.8    92.8    89.8 109.73K4.39%
Apr 01, 2016  88.9     88.5    89.0    86.3 40.51K4.47%
Out of 25 trading days 18days the CMP was up and only 7days it is down. Also you can note that the price range for the entire period was 86.30 - 132.90 and the share has gone up by nearly 50%. Also you could seen that when the share hit 100 level it has came up by very slowly with 2%, 3% 4% daily change +/-. Additionally even with 50% gain so far the stock is still bullish in their daily, weekly as well as monthly charts with strong buy signals.

All these facts indicates that this stock has now entered into a sustainable bull run and the life of the bull is much longer than any one can expect. Further this bull run has material differences with previous bull run where it went up from 30s to 160 with some days of more than 10% growth. The current trading indicates investors buy the stock and realise the profit and then again enter into stock so that unlike the previous time we hardly see people buy low and keep on holding seeing that their unrealised gains sky rocketing by 50%,75%, 100% etc. This should be the reason that we can't see any panic when TAFL ends in red of it CMP in one day but back to green in the other day as well changing only 2%,3%,4% per day.

So my conclusion is this bull run will sustain longer than the previous one and will probably take to 200/- by September this year.

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Current market trend is progressive but moving up at slow phase. TAFL is considered to be the most undervalued stock that brings more profits in the future. Slow demanding pattern is the bottleneck to rising the price of TAFL that takes sometime to overcome. Growth indicators are excellent to think of buying & holding the TAFL.

Beta1

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Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@worthiness wrote:Current market trend is progressive but moving up at slow phase. TAFL is considered to be the most undervalued stock that brings more profits in the future. Slow demanding pattern is the bottleneck to rising the price of TAFL that takes sometime to overcome. Growth indicators are excellent to think of buying & holding the TAFL.
totally agree with you

kassachandi


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Today was a good day to collect this value gem.

EquityChamp

avatar
Moderator
As I said in a previous post TAFL is a buying stock between 120-122 and those who bought so can can expect a decent profit @ 130/- so now price is 131/-. Its a done deal now Very Happy

kassachandi


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
140+ is now a possibility for TAFL before financial reports

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Today TAFL leaped over Rs.130/= level. As EC figured out before, with new market initiative TAFL should pass Rs.140/= hurdle soon. Tricky transactions are purposely done to bring down the share prices of valued stock. 
Observing the transaction movement you could have seen how BFL & GRAN were forcefully hit at low prices. Achievement of operational profit for quarter just ended could pull the trigger on for next level of pricing.

kassachandimal


Manager - Equity Analytics
Manager - Equity Analytics
Buyers are lining up with huge bids

EquityChamp

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Moderator
I sense a major break-up is near. Meaning the long held resistance level is in a threat now. Let's wait and see.

Vacations To Sri Lanka

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Manager - Equity Analytics
Manager - Equity Analytics
What is your target EC?

EquityChamp

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Moderator
A company with a PAT margin of 33% trading at a PE of 4x what should be the intrinsic value. If the price doubles from the current levels still the PE is 8x. Isn't it an amazing stock.

kassachandimal


Manager - Equity Analytics
Manager - Equity Analytics
Yeah EC. This time TAFL seems in for a major run. Might end up 150-160 range. Did u sold ur quantity EC

EquityChamp

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Moderator
No brother. My one is a long term holding. As similar to holding Nestle costing 90+ and CTC costing 30+ I am holding this and GRAN as well but will add little by little when the price comes down. Will not disclose my holding here Very Happy

kassachandimal


Manager - Equity Analytics
Manager - Equity Analytics
What is short term target for TAFL EC ?  I think with the chicken price also increased we can see extraordinary earnings from TAFL. Retail interest will get higher day by day for TAFL

EquityChamp

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Moderator
In short term it can reach 150/- but the price momentum has a link with GRAN price as well. Lets see how GRAN going to move.

EquityChamp

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Moderator
For whom it may concern. Please glance through my newest forecast for TAFL.

























































Rs mnQ1 16 AQ2 16 FFY 14 AFY 15 AFY 16 F
Revenue624       64116772089     2,798
Gross Profit246       256219618     1,131
GP margin39.4%40%13%30%40%
PBT242       250174603     1,105
PBT margin38.8%39%10%29%39%
PAT207       211165551         940
PAT margin33.2%33%10%26%34%
Q2 results were forecasted taking into account the possible impacts caused by floods hence revenue and PAT growth is marginal. However Q3 & Q4 going to be superb once more given that increased demand for day old chicks, increased margins due to higher controlled price and increased consumption of chicken due to reduction in selling prices in non branded chicken stalls due to controlled price.

At CMP of 135/- the stock is trading at a forward PE of 3.4x which is unbelievably low for a company like TAFL whose earnings growth potential is phenomenal while the balance sheet is almost debt-free hence no interest rate risk. Further you can expect a dividend of at least Rs5 for FY 2016.

My valuations stand at Rs205.8 for medium term (two quarters from now) but the stock carries an intrinsic value of Rs290.4 in the longer run (one to two years from now) based on projected earnings.

Thanks

EquityChamp

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Moderator
TAFL is not dragging down to 120 levels as previous instances insteed hs found support arround 135/-. When will be the next move is just a matter of time now. TAFL holders better to awake.

kassachandimal


Manager - Equity Analytics
Manager - Equity Analytics
EC what will be ur target price for TAFL before the release of the quarter reports

EquityChamp

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Moderator
Actually it depends. Mid term target of 205.8 is my valuation. But if all realize that this TAFL is not the previous TAFL (2010-2011) may be only one week is required to reach there.

stockback


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@kassachandimal wrote:EC what will be ur target price for TAFL before the release of the quarter reports


Friday evening they will release Financial report.

maybe before that.

kassachandimal


Manager - Equity Analytics
Manager - Equity Analytics
yeah EC everyone should realize the real value of TAFL because it keep producing great quarter by quarter growth. Seems this will be the king of poultry in the future

kassachandimal


Manager - Equity Analytics
Manager - Equity Analytics
stockback what is the source

EquityChamp

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Moderator
Well Q2 results are out with a revenue of 576 mn and a PAT of 146mn. Revenue shortfall of 65mn compared to my above posted forecast where as PAT was lower by 65mn due to low revenue, increase in costs and higher corporate tax rates.

Below is an analysis of Q2 result.
Rs mnQ1 16Q2 16Q2 15QoQYoY
Rev624576493-8%17%
GP246195135  
GP margin39%34%27%  
PBT242194118-20%64%
TAX354810  
Effective tax rate14%25%8%  
Similar to GRAN both the YoY growth in revenue and profits are superior but QoQ figures declined due abov mentioned factors.

These adverse effects are expected to turn around in the next quarter with renewed demand, improved whether, stabilising exchange rates as well as increase in revenue through new MRP.

Further more the company now invests in its entirety in biological assets by using internally generated funds which gives you a strong signal of company's strength. Further the retained earning now stands at 1.3bn hence something like higher dividend or bonus issues will be highly likely.

Therefore my advise to you all is to keep on buying this fundamentally sound business.

Thanks

stockback


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@kassachandimal wrote:stockback what is the source


experience

stockback


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@EquityChamp wrote:Well Q2 results are out with a revenue of 576 mn and a PAT of 146mn. Revenue shortfall of 65mn compared to my above posted forecast where as PAT was lower by 65mn due to low revenue, increase in costs and higher corporate tax rates.

Below is an analysis of Q2 result.
 
Rs mnQ1 16Q2 16Q2 15QoQYoY
Rev624576493-8%17%
GP246195135  
GP margin39%34%27%  
PBT242194118-20%64%
TAX354810  
Effective tax rate14%25%8%  
Similar to GRAN both the YoY growth in revenue and profits are superior but QoQ figures declined due abov mentioned factors.

These adverse effects are expected to turn around in the next quarter with renewed demand, improved whether, stabilising exchange rates as well as increase in revenue through new MRP.

Further more the company now invests in its entirety in biological assets by using internally generated funds which gives you a strong signal of company's strength. Further the retained earning now stands at 1.3bn hence something like higher dividend or bonus issues will be highly likely.

Therefore my advise to you all is to keep on buying this fundamentally sound business.

Thanks


forget about last quarter.

according to this quarter also this stock is highly undervalue

Guys some people after selling stock they are demoting dont trap on this.

Defiantly next quarter Revenue is growing more 8% and Profit margin is growing more-than 8%

price band increase 8%, that is effect to the business revenue and profit.

today Government authorized import or Corn/Maize

World Market Corn/Maize price are dropping sharply.

Q-Q profit drop for what reason. next quarter that is fixed now. then why worry

EquityChamp

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Moderator
Whoever the person or group of persons kept TAFL at these prices have kept it so long than necessary. I must tell that it is enough and enough for ever. He/They should let it to find its true value without forcefully suppressing it.

chamil1


Manager - Equity Analytics
Manager - Equity Analytics
@EquityChamp wrote:Whoever the person or group of persons kept TAFL at these prices have kept it so long than necessary. I must tell that it is enough and enough for ever. He/They should let it to find its true value without forcefully suppressing it.

Agree with you EC . Maybe to align TAFL and GRAN. 

However no need to worry about TAFL.  The "group" is now in control of TAFL   Very Happy

EquityChamp

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Moderator
As I said without noticing to any one of you TAFL's support level has increased to around 150/- within two months time. Very good. We haven't see much of overall market rally during this period but TAFL is showing a strong sustained trend.
If we look at the charts then we could see a trend reversal happened at around Rs148/-. The reliability of the reversal still at medium level because it is yet to see a three continuous outside ups. Yet the RSI level of 64 and the much better next quarterly report expectation can push the newly establish support level towards 165/-170/- during the next one month or so, so better to keep study the pattern of the stocks next movement.
Thanks

EquityChamp

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Moderator
A summarized PAT forecast for 2016 FY is given below.

Q1 16 - Rs 207Mn
Q2 16 - Rs 146Mn
Q3 16 - Rs210Mn
Q4 16 - Rs225Mn

EPS for 2016 (E) Rs 33.5
PE @ 145 - 4.3x

Expecting the Q3 report by this Friday.

Thanks

EquityChamp

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Moderator
TAFL Q3 actual of 181 Vs my target of 210. The negative gap is due to the shortfall in revenue. Anyway still good performance.

DANIDU


Manager - Equity Analytics
Manager - Equity Analytics
Base on EC's strong recommendation, I bought some TAFL, Thank you for that. Can it be next good share like NEST, CCS?

I remember your Recommendation on CCS few month ago and holding it up to now for L/T.  Very Happy

EquityChamp

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Moderator
I believe on my numbers brother. The thing is that these shares can be available to sell at unbelievable prices due to the things happening aroundd us.

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