tag:blogger.com,1999:blog-7004453.post6287206464173287199..comments2023-09-02T19:53:06.144+05:30Comments on Understanding and applying value investing principles: Margin of safety and banksRohit Chauhanhttp://www.blogger.com/profile/00356455735241398199noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7004453.post-45906213567503563502007-06-26T03:09:00.000+05:302007-06-26T03:09:00.000+05:30Hi Ravi, RohitThanks again for useful observations...Hi Ravi, Rohit<BR/><BR/>Thanks again for useful observations. I have stopped at the current holdings & waiting for Q1 2007 results to come. <BR/><BR/>In the meanwhile, just saw the below news today. Not excited by the Rs. 225 target that Management has for fresh equity issue neither today's 9% appreciation makes me any different in my outlook on this stock. YB seems to have revised downwards their targets on Branch expansion compared to what they announced earlier in Analysts calls, to best of my memory. Anyways...<BR/><BR/>http://deadpresident.blogspot.com/2007/06/interview-rana-kapoor-yes-bank.html<BR/><BR/>Cheers<BR/>Rohit ShahAnonymoushttps://www.blogger.com/profile/04719777488242802899noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-42183738239334715672007-06-26T01:53:00.000+05:302007-06-26T01:53:00.000+05:30i agree with ravi's analysis. The CAR for the bank...i agree with ravi's analysis. The CAR for the bank seems to be around 15-16%, NIM is around 3 % and the rest is through non interest income. The ROA is 2.2% which is also good.<BR/>The valuations seem to discounting atleast 7-8 years of 15%+ growth. also everything said and done, the bank is new and does not have a very long operating history. so if i was investing, i would watch the bank , but not invest at these valuations.<BR/>if am really looking at investing in a bank at these valuations, hdfc may be a better choiceRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-13530043514889797152007-06-25T21:39:00.000+05:302007-06-25T21:39:00.000+05:30Rohit,I should thank you for highlighting an inter...Rohit,<BR/><BR/>I should thank you for highlighting an interesting company.<BR/><BR/>I browsed through their site and investor preso's etc.<BR/><BR/>Really liked the following:<BR/>1) Owner - managers. It is a strong positive sign that promoters own a significant (above 30%) portion. This is rare in banking sector.<BR/><BR/>2) Fee based income is about 50% and they intend to maintain it that way. Fee income does not tie as much capital and there is not as much seasonality in it.<BR/><BR/>3) Focused on corporate sector. Retail portfolio (where the fear of bad loans aka NPA is highest) is in single digits and they intend to keep it that way.<BR/><BR/>4) Aggressive growth plans as you have mentioned. At the same time, credit policy/ acquisition policy seems to be conservative - which is a good thing.<BR/><BR/>In short, lot of things to like about.<BR/><BR/>The only part I don't like is price :( Market seems to know how good a business Yes Bank is.<BR/><BR/>P/E of 40+ and P/B of 5+ is nose-bleed valuations and all good news seems to be priced in at least for the moment. Current NPAs are at 0% i.e. a squeaky clean record. This worries me a bit as if/when the bad news comes out market is not going to like it.<BR/><BR/>I guess I will wait on the sidelines for some time and monitor.<BR/><BR/>Cheers,<BR/>RaviRavi Arankehttps://www.blogger.com/profile/08706098376170260290noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-35569922778253054722007-06-23T20:03:00.000+05:302007-06-23T20:03:00.000+05:30Hi Ravi,Thanks. Very useful suggestions. Fully agr...Hi Ravi,<BR/><BR/>Thanks. Very useful suggestions. <BR/><BR/>Fully agree on Wells Fargo observation. I actually picked up the thought from the book "The Essays on Warren Buffett - Lessons for Corporate America". This is a collection of WB's Letters to Shareholders from 1979 to 2000 & the compilation is arranged, edited & introduced by Lawrence Cunningham. But yes, it's not appropriate to conclude that WB will never invest in a Banking stock. <BR/><BR/>On Niches, I think YB is recognized for its expertise in Food & Agri business, Life Science, IT Telecom & Media. The analysts expect that this will provide YB the edge over peer banks. <BR/><BR/>YB Adj. PBV (FY 2009 E) is 3.5 compared to <BR/>HDFC Bank & 3.5<BR/>UTI Bank & 3.0<BR/>ICICI Bank 3.0<BR/>Kotak Bank 3.9<BR/>Centurion BoP 3.2<BR/>(All figures above are FY 2009 E - Source - Angel Broking)<BR/><BR/>Your suggestion on Banking focussed BT issue is excellent. I will keep an eye. <BR/><BR/>Sorry, I could not be prompt in replying. <BR/><BR/>Regards,<BR/>Rohit ShahAnonymoushttps://www.blogger.com/profile/04719777488242802899noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-24593166511587955632007-06-21T18:14:00.000+05:302007-06-21T18:14:00.000+05:30Rohit (shah),It is not strictly true that WB does ...Rohit (shah),<BR/><BR/>It is not strictly true that WB does not invest in Banks. He has held a large position in Wells Fargo for a number of years - the latest numbers show 13.91% in Wells Fargo - which is in top 5 of his holdings.<BR/>http://www.gurufocus.com/<BR/><BR/>Rohit C. has indicated a number of factors in assessing banks such as ROE, ROA, NIM etc.<BR/><BR/>If you are satisfied on the above grounds (and I think for Yes bank there is every reason to be satisfied) then the only 2 questions remain:<BR/>1) How long can their competitive advantage be sustained? Since you have some insight into the field, you are better equipped to answer this question. From what I have read, Yes Bank is focusing on innovation and knowledge added products for corporate segment. So this sounds possible.<BR/><BR/>I prefer niches which a company strongly occupies e.g. Shriram Truck finance. Does Yes bank dominate any specific area?<BR/><BR/>2) Valuation<BR/>I have no idea about adjusted P/B If you could post your calculations, maybe others could take a look.<BR/><BR/>BTW, there is an yearly (I think) issue of Business Topday magazine that focuses on banks. It has loads of stats on each bank in an easy to compare format. Unfortunately, I didn't save that issue. I purchased 'Federal Bank' based on the info. in the issue and it has worked out OK so far.<BR/><BR/>All the best,<BR/>RaviRavi Arankehttps://www.blogger.com/profile/08706098376170260290noreply@blogger.com