Nintendo $7974
$NTDOY
- the classic on the sidelines?

Kon'nichiwa, min'na!

Bass-T-desu. oppai ga suki.

Honjitsu wa, Nintendo o bunseki shimasu. Ketsuron omoshiroi-desu.

Watashi wa anata ni shirasenakereba (?) narimasen: Kinsen-tekina adobaisu arimasen.

And with that, I'll release you from my rudimentary knowledge of Japanese.

According to the last vote today we are talking about Nintendo. A company with which many of you will associate beautiful experiences. But do investors also burn so much for Nintendo's stock? Are there, besides Super Mario, Bowsette and co. Unique selling propositions for the company and what role does the dividend and stability play in times of rising case numbers to Corona, inflation and so on?

To discuss this, you can see my breakdown of my analysis below.

Beforehand as always my DisclaimerThis is not an investment advice. It is also not an invitation to buy and / or Vekauf of financial products. I describe here only my opinion and assume no liability. You have your own responsibility towards your investments.

I see the following as crucial:

1.Nintendo in numbers, data and facts

1.1Business areas and market environment of the classic - a strong competitor for Sony and co.?

1.2Company strategy and the share - strength through consistency?

2.my opinion on the share of Nintendo

Nintendo in numbers, data and facts 1.1 Business areas of the classic - a strong competitor for Sony?

Worldwide, Nintendo employs 7,136 people of which 2,765 employees belong to Nintendo co. Ltd.

Nintendo... who?

People like to think of Nintendo as the cuddly video game company somewhere at the end of the world in Japan. In fact, Nintendo operates globally as an umbrella company and as of November 2022 has 19 different Business Divisions, as I will call them below, each with its own purpose. There are 11 business divisions in this cluster that are regionally dependent. Here, Nintendo follows an interesting strategy that significant parts of entire continents are partially combined, while sometimes only a fixed point in a single European country is chosen. As an example, we can refer to "Nintendo of America Inc." in comparison to "Nintendo of France S.A.R.L." or also "Nintendo RU LLC.". It becomes obvious that Nintendo is active worldwide, but that this activity differs regionally (see (1)).

That was clear, wasn't it?

Rather not. If one had started at Marketscreener as an example and looked at the sales structure, it would have been noticeable that the sales do not directly match such a regional structure. While the USA, as the main market, achieved sales of JPY 633 billion, Europe was roughly behind with JPY 423.79 billion. In percentage terms, we hereby compare 37.3% of the USA with 25% Europe weighting. This is relatively exciting - although Nintendo as a stock is even listed in the Stoxx Asia Pacific 50 (!), has a market capitalization of 49.313 billion USD and has launched the Nintendo DS, the world's second best-selling console, its sales in the domestic market in Japan are only in third place with 21.2% sales share in 2022. Consequently, we are dealing with a company that is not affected by the home bias in terms of sales and has its two strongest markets in the U.S. and parts of Europe (see (2), (3), (4)).

Why "parts" of Europe?

As mentioned at the beginning, the cluster around the regional split with the 11 sub-companies is heavily focused on Western Germany and Russia in the East, respectively, when looking at the European continent. Nintendo makes no secret of the fact that the main drivers of the corporate structure in Western Europe are in Germany, France, etc. Locations in the Balkan region, i.e. everything that comes east of Germany, so to speak, are not directly encountered until Russia (see (3)).

What is the source of this sales strength?

Essentially, we are already familiar with all of Nintendo's brands and products. 5.1 billion games on 800 consoles sold, with the following brands providing the main impact for this enormous sales potential (cf. (3)):

• Mario
• Donkey Kong
• The Legend of Zelda
• Metroid Pokémon
• Animal Crossing
• ...

Consciously, only 6 brands of Nintendo's broad portfolio are mentioned here. It is these brands that to a certain extent ensure the continued existence of Nintendo. In particular, the aforementioned Nintendo DS with 154.02 million copies sold worldwide or the classic Game Boy with 118.69 million consoles massively outshine major participants in the market like Microsoft with its Xbox 360. The latter's value is only 85.73 million and thus has 55.66 percent of the Game Boy's sales volume. I mention this separately because one could speculate on a falling market from this development (see (5)). Why?

The Gameboy was released in Europe in the fall of 1990 and represented a milestone in video game history. At that time, 6 million copies had already been sold in Japan and the USA. In comparison, only the Playstation 2 with 158.7 million units and the Nintendo DS with 154.02 million copies manage to displace the Gameboy. But where are the newer consoles? The PS5 as the most successful new console stands at 25 million units sold - of the top 10, Nintendo accounts for 5 consoles. Sony accounts for 4 consoles. Microsoft, with its Xbox 360, is far behind in 9th place (see (5), (6), (7)).

So is Nintendo the dominant top dog in a regressive market?

No, for two reasons. On the one hand, the share of gamers e.g. in the Federal Republic is increasing more and more. On the other hand (and this is a bit more complicated when you hear it for the first time), Nintendo benefits from the constant restructuring of the gaming sector.

But games are only for the young and what does Nintendo have to say apart from Super Mario?

From my point of view, Nintendo profits from a development that seems negative at first: According to (8), the average age of gamers is not falling, but rising. Furthermore, the under 30-year-olds make up Nintendo's business exclusively and...

WRONG. This is not true. I deliberately bent the truth twice here. The gaming market is not what most will expect now according to my exaggerated and inaccurate statement. In fact, the average age in 2020 has been 37.6 years and has increased from 37.4 years in previous years. That's very exciting - because let's be honest - who is standing in Saturn, Media Markt, Expert or your trusted electronics retailer most of the time at the games?

That's right - usually under 20-year-olds. The whole thing is characterized by a massive recording and perception bias. How does this high average figure really come about?

The cohort of 50 to 59-year-olds is probably rarely seen by you in relation to gaming - and if so, then rather negatively. However, if you analyze this lifeline, you quickly come across the reason for the following fact:

The 50-59-year-olds are significantly one of the largest cohorts in the gaming scene (see (8)).

Let's go back 59 years from today. Then we are in the year 1963. For my younger readers: Yes, there was already electricity back then - at least that's what recordings from that time claim :). But there were also consoles not much later. If we calculate with 50 years, we come to 1972 - the year of origin of one of the oldest consoles in the world: The MAGNAVOX ODYSSEY. Originally intended as a home trainer for soldiers, it quickly found its way into private households due to their failure. 2 years later in 1974 also the ATARI console came out with the game "Home Pong" - similar to other representatives as a variant for the home TV. Because in former times one often played on the automat in arcades. Titles like "PAC-MAN" (1980), the COMMODORE 64 (1982) and the NES (1985) joined this console structure.

What does that mean now?

We should get away from the idea that gaming is a totally new phenomenon, whose entry was reserved for our Generation Y or Z. In fact, in my opinion, the beginnings of consoles particularly show what entertainment is all about and what many games (even AAA titles) are currently suffering from. With ever-increasing processor power, less attention span, and the slow demise of local multiplayer, the gaming community is taking a path that I tend to view both positively and critically at the same time. Why do gamers lose themselves in games like GTA V, Minecraft, or a farming simulator? Because the games offer a credible setting for immersion in other worlds. You're offered a lot. But why is there a shift away from the classic "I buy one game" to "I lease a subscription for a thousand games"? Why are in-game purchases increasing from €3,252 million to €4,239 million from 2020 to 2021, while classic game purchases are dropping 9% over the same period?

Aren't certain generations losing touch with the gaming community? Why, nevertheless, do revenues increase from €353 million in 2018 to €720 million in 2021 from subscriptions and cloud services? I could also analyze such considerations, but this goes too far away from market analysis and is more of a structural phenomenon that I could analyze on other platforms.

Yes, fine, then the old ones will lose influence on the gaming community. In reality, that's only 2% and they don't play a role in terms of revenue, do they?

Take the number times 10 and you have the share of the 50 generation. It's actually a good fifth of ALL gamers.

Do you also know the 60s generation, who threateningly swing their crutches, when they talk about the gaming sector on TV again? It's exciting - if you combine the 50s and the 60s generation, we come to a share of a THIRD of all gamers.

Ew, gendering.

I reject gendering in texts just as massively, yet looking at another cohort of gamers also shows that you're doing them an injustice. Let's play a little game for this - how many friends from your gaming circles on Teamspeak, Discord and co. are female? 2 out of 20? 5%? None?

The truth for Germany is as amazing as it is irritating - in fact, 48 percent of all gamers are female. FORTY-EIGHT PERCENT!So the typical stereotypical gamer image of the heavily overweight male with a lack of personal hygiene seems to be just that - a prejudice (cf. (8), (9)).

So Nintendo's friendly and alternative game assortment by means of a high percentage of women proves the importance of the 48% female gamers?

Not at all. CEO Kimishima revealed in a presentation to shareholders that 86% of Nintendo Switch owners are male. Interestingly, with a focus on 19 years to 44 years with 60% share. Only 5% are under the age of 12. This is definitely very interesting and raises questions (see (15)).

What do women prefer from Nintendo's lineup of players?

If you take Nintendo as a basis for comparison, you can find differences to the male faction. According to (12) and (13), Animal Crossing is unbeaten in first place, followed by Ring Fit Adventure and Zumba Burn It Up. Rank 4 and 5 are also thematically in the same area as fitness and build-up games, as Dance Game and Fitness Boxing. It can therefore be stated that women place particular emphasis on exercise games and those that require social interaction based on their purchasing behavior. If one skims the descriptions of the products, a social function is evident in almost all games. Whether it's a co-op mode for dancing, interaction with friends who are also residents of one's own city, etc., it's clear that women place a high value on sports. - So basically, women attach importance to sports and interaction. In a survey among female gamers, handheld games are in first place with 69 (höhö 69 höhö) and are closely followed by family and farm simulations in second place (cf. (12), (13), (15)). The results thus support my initial suspicion and show a high divergence to men.

What about the men?

Men show an entirely different selection behavior for your games with respect to the Switch (and from my experience with other gamers). I can't completely absolve myself of this either. Consciously, I researched to see if there were any isolated statistics or surveys that were representative and focused exclusively on men. Although men make up the general majority with 52%, such a value for the Switch could not be found. But a look at the alleged top 10 best games for the Switch already shows a high difference to the ladies. At number 1, Zelda is a game that I would classify somewhere between "atmospheric exploration" and "role-playing game". So what does the top title have in common with women? Relatively little - the categories mentioned are in 4th, 7th and 8th place (as Japanese and Western role-playing games are differentiated). With the exception of Animal Corssing at #2, none of the games from (14) features any of the popular games by ladies at a high ranking. This is not meant to be a criticism, but it does point to differences in emphasis. It is very exciting for me to see that Nintendo has obviously launched a family-friendly and, in parts, female-oriented console, but one that seems to appeal mostly to men. Comparing this to main competitor Sony, 41% of all PS4 and PS5 owners are female. Compared to 18% in the PS1 generation, one could conclude an increasing "feminization" of the gaming sector (see (16)). If you are interested in Sony in comparison, feel free to follow me and leave me an appropriate comment. I like to work with numbers, data and facts and could write a corresponding analysis for Sony besides this presentation of the gaming market with regard to Nintendo. I look forward to your letters :D

How can Nintendo benefit from this now? Why do some parents call every console a "Nintendo"?

If you follow the above mentioned progression, the NES (1985), the Nintendo Game Boy (1989), the SNES (1991) etc. are prominent entry points into the gaming scene. Thinking about it for yourself, at just under 26 years old, you would definitely participate in or at least have heard of such a funny new trend in video games. But was this funny trend affordable at all?

I could go on bugging you with data on the subject of cost, so I'll do so using Nintendo's Game Boy as an example. The Game Boy was far less cheap than many think - it cost a whopping 169 German marks. With the current exchange rate, that would be 86.41€ naked just for the device itself. The average income was 1,832 euros in 1991, so 86.41€ / 1,832€ = 4.72% share of gross income. If we assume 42% tax burden, the share increases to 86,41€ / (1.832€*0,42) = 11,23% share of the monthly average income. Nowadays, according to (11), the average income is around 49,200€. We calculate with the current product of the Nintendo Switch Neon against it, which I found online for 288€.

For simplicity, we calculate with the same tax burden. It follows: 288€ / (49.200€*0,42) = 13,94%. So we can already see that a console from Nintendo is sold at a similar ratio nowadays as it was in 1990. Of course, inflation, lack of components, supply level, etc. still play into this. Nevertheless, against the backdrop of increasing enthusiasm for gaming as described above, a high level of awareness among all strata, growing market potential, and a slight increase in Nintendo's pricing, we could conclude a positive market sentiment (see (9), (10), (11)).

Why does Nintendo apparently manage to appeal to men more than women? Why does Sony with its more "classic" game assortments also attract the 41% of women addressed? When does Bass-T have 700 followers?

These are just a few questions that I have deliberately left open at this point. If you'd like to see more on these or other questions, or a stock performance from Sony, I'd be happy to see you comment.

How does Nintendo's stock stand up to these developments? To break that down, I'll move away from the market and into the specific developments of Nintendo's stock below.

1.2 Corporate Strategy and the Share - Strength through Consistency?

In 1.1, we have now learned about the history of the gaming market, Nintendo's prominent products, Nintendo's target group problem, and excerpts from the main competitor Sony. We now also have a rough understanding of Nintendo's role in the gaming sector. The Japanese language skills were also absolutely convincing. Arigatou Gozaimasu.

Nintendo's stock forms a key factor in assessing the company's strategy. As some of you may have noticed, a so-called stock split was carried out in September of this year. In concrete terms, you received 9 more shares for one share, but in simplified terms you also received the value of the share divided by 10.

Why does Nintendo do this?

In order to make Nintendo's stock look more affordable, at least in terms of price, a company can decide to split its stock in a specially defined ratio. In this way, a 59,700 yen share, i.e. 416.36€ in our currency, becomes a share costing just under 41.64€. Only the ratio changes the value of the share itself (see (18)). In my opinion, this may be an attempt to convince more shareholders to buy the stock, because the distribution of Nintendo's sales is unfortunately all too similar to Apple's in one respect: There is one strong driving force and other smaller ones, which in total have hardly any significance in a relative comparison. While the WII and WII U software generated 1.76 million euros in Europe, the share of Nintendo Switch hardware, its software, and the relevant accessories was significantly higher at 2.698 billion (!) euros. All not directly Switch related products come to 26.68 million euros in Europe. If we calculate the percentage of non-Switch products, we arrive at a share of 0.98% circa. This shows in particular that Nintendo has a strong focus on the current console generation in Europe and that other mainstays are rather weak (see (18)).

Why do I see this critically?

There could hardly be a better statistic on this than (19). It divides the current top 5 products of Nintendo into the sales figures of:

• Nintendo 64
• GameCube
• Wii
• Wii U
• Switch

You don't have to understand much about economics, product marketing, costs, etc. to realize by means of this graphic: Here we play exaggeratedly Russian roulette on product level. If we start with the Nintendo 64, we see a drop from 9.42 to 7.86 million copies sold starting in 1997 until only 2.85 million copies were sold in 2000/2001. I find it very relevant in this regard what then happens in the "transition period" towards the next newer generation. In the case of the Nintendo 64, we see only 500,000 copies sold worldwide compared to 3.8 million consoles. This is quite normal and in my opinion indicates a waning of the old generation towards the next upcoming console. All perfectly understandable and not particularly sensational. A similar picture can be seen in 2007/2008 when comparing the GameCube to the Wii. This has been an absolutely positive bulwark for Nintendo, which sold 5.84 million units in its first year. A very strong performance, which puts the GameCube vs. Nintendo 64 in the shade (see (19)).

But what happens when my fast and vastly superior BMW is getting on in years and slowly needs to be replaced?

Cannibalism in the product segment.

That's basically something you fear the most in product marketing. It doesn't always have to be the competition aka Sony, Microsoft, etc. Sometimes you trip yourself up and that can be illustrated very well and almost textbook in the next cycle change from the Wii to the Wii U. It's almost cruel to look at these numbers if you understand them to some extent.

We see the ultimate embarrassment in the Wii U's early years. While it was long apparent by the 2013/2014 launch date that processor and/or graphics performance would not be able to match the distant competition of the Xbox One or PS4, the following problems resulted, in my opinion, for potential buyers (see (20)):

• Why do I absolutely need a new console now?
• What does the U (= "you") stand for if I hardly have any games? Why is it about me then?
• Why don't I get enough advertising for the supposed advantages of the new console generation?
• The new handheld controller is nice, but won't it scare away my non-experienced friends and acquaintances?

Source (20) even goes one step further and criticizes that Nintendo may not have understood the console in terms of marketing. I interpret this to mean that the accusation particularly concerns marketing, since too little information and games have scared away the clientele. The bottom line is that a simple Google search for "Wii U worse than 360" will bring up a number of comparisons to Microsoft's previous generation.

Quotes like: "We could probably get Metro to run on an iPad if we wanted" shows in this comparison that the Wii U did not fare well in the comparisons and was dependent on a successful game collection including aggressive marketing ((20), (21)).

Thus, another danger of the stock is already clear: the focus on the leading console generation in each case. At the launch of the Wii U, more copies of the Wii were sold than of the new Wii. That in itself is certainly also timing-related, but already hinted at the negative sales in subsequent years. No console included in the statistics has achieved such consistently low sales figures as the Wii U. A maximum of 3.38 million copies worldwide. No more. Compared to the Wii with almost 26 million units or the Switch with 28.83 million consoles, the Wii U's importance is slowly fading away. There are no clear outliers, nor is there anything else happening with this console (see (19)).

What does the stock have to say about that?

If you look at the chart, you can see a massive drop in the share price after the hype surrounding the Wii. At the beginning, the Wii U's share price was still at JPY 2,300 and fell continuously to below JPY 1,000 in some cases. However, the truth is that after the start-up difficulties and the somewhat solid sales figures of the Wii U, a recovery finally set in with the successor in the firmament from around June 2016. Thanks to the Switch, among other things, the price is currently around JPY 5,700 and clearly shows an upward trend (see (22)).

How do I see the price? Could Nintendo have become too expensive under certain circumstances?

Nintendo is currently at 15.2 P/E below the average of the last 11 year of 32. With this, however, it should be noted that the Wii hype is also integrated here in the historical comparison value. Since 2019, the value of the P/E ratio has been around 20 by default. Accordingly, one could possibly consider Nintendo to be reasonably favorably valued from the P/E ratio. However, the analysts' estimates show an expected decline in the company's value by 19.15% in 2023. The further outlook in the direction of 2024 and 2025 also reveals a decrease potential according to analysts of up to 28.93% by 2025. We can therefore state that the market value will probably not develop positively, contrary to our hopes from the flourishing gaming market. The P/E ratio should therefore continue to fall as a result of less enterprise value from possibly lower profits (see (23)).

Unfortunately, the analysts see things somewhat differently: We remain in a corridor of 14.6 to 15.9 for Nintendo's P/E ratio. Thus, the ratio of the valued share price to the company's earnings is the same and does not fall. How does that work?

Relatively simple - if the P/E ratio remains the same but the company value falls, depending on the financial structure of the company, equity may decrease, debt may increase or sales may hardly grow or not grow at all. My shares in the company may therefore become riskier. Even if the book value per share of Nintendo initially increases from JPY 1,764 million to up to JPY 2,315 million, we see an unfavorable combination of several problems:

• Sales show little growth and are flat.
• EBITDA consequently stays almost the same until 2025.
• Return on equity is falling.
• Equity is rising, but together with the falling ROE, this points to a revenue problem.
• Cash flow per share is falling.
• Research and development spending is not constant and is expected to fall in the period to 2025.

So does Nintendo have a revenue problem from the root?

Many of the problems described are directly or indirectly linked to the difficult revenue situation. Corona year sales of JPY 1,758,910 million are expected to drop to as low as JPY 1,634,596 million after 2023. EBITDA also shows a gradual decline of up to 17.12% if we compare 2021 with 2025 (see (23)).

Yes, but the return on sales will remain constant, won't it?

That is certainly nice for Nintendo - however, the return on sales only tells us how much profit our sales return to us. It is calculated via (see (23), (24)):

Return on sales = (Net income (without taxes, interest) *100) / Sales

In order for this return on sales to remain the same, only net income and sales must fall in the same proportion, with the same tax and interest burden. In other words, if less and/or the same quantity is sold at the corresponding conditions, we keep our great return on sales, but do not make any progress in terms of sales. This can also be seen well from this side at Nintendo. As of today, the return on sales remains in the channel of 33.5% to 35%. Thus, it can be said that according to analysts, Nintendo extracts the same profits from less sales (cf. (ibid.)).

So where is the problem?

The profit is quasi unacademically said the cornucopia from which a company can choose its use - because a profit is nothing else than a positive annual surplus. If, on the other hand, the net income is negative, one speaks of an annual loss (cf. (24), (25)). This is important, because if the profit does not increase, either the red pencil has to be applied to the expenses or, if necessary, debts have to be taken up in order to pay the dividend. Anyone who has seen my BAT video with the comparison to Altria will understand that borrowing for dividends is a critical point against the stock for me.

Fortunately, in the case of Nintendo, we do not see a critical debt situation. Specifically, there is a negative debt ratio. In the case of Nintendo, this is because Nintendo's debt is smaller when calculated against existing cash and assets, and therefore there is no active debt. We can also see the positive interplay between the increasing equity and the decreasing debt ratio (see (23), (25), (26)).

The store therefore seems to be able to refinance itself and is not really dependent on taking on debt. This is good. What is less good is that due to the limited turnover, the following facts are inevitable from my point of view:

Nintendo needs new box office hits in regular cycles.

Nintendo may be subject to cannibalism cycles and must separate its products.

To separate the products, massive investment in research and development is necessary.

Expected CAPEX expenses fall in absolute terms and only rise relative to falling sales.

Dividends may already be limited in the foreseeable future.

The current dividend yield of 3.59% at the current entry point is not so high that further dividend increases can be dispensed with in my view. According to (27), the current pay-out free CF is already at 85.4% and indicates that there is not much more to be gained with the stable sales. In any case, without taking on debt, I don't see here how Nintendo wants to finance its freely available funds without the next uber-console. After all, only 44.5% of the profit is distributed, but so far I haven't gotten the image of a dividend stock from the Nintendo stock. It seems to me that Nintendo pays dividends based on performance and therefore does not have a long history of increased dividends. This is backed up by (27) in particular, when you look at the fluctuating amounts from year to year. One should not forget that the Corona year 2021 was a good one for the gaming sector and accordingly carried many boats (see (27)).

So let's calculate the intrinsic value of Nintendo stock according to Benjamin Graham. His formula from "The Intelligent Investor" is related to Nintendo (cf. (28), (29)):

Intrinsic value of Nintendo (IWn) = earnings per share * (8.5+2 * growth rate for the next 7-10 years).

Or as variables: V = G * (8.5 + 2*g)

So we calculate IWn = 405 * (8.5 + 2* 5.32%) = 3,485.59 JPY

Based on the simplified Graham formula, we thus calculate 3,485.59 JPY, which is 63.71% overvalued relative to the current price of 5,684 JPY. Where is the error?

First, the value from (29) does not refer to 7-10 years but to 3 years. So how do we arrive at a reasonably realistic growth value (cf. ibid.)?

I use for this on a higher level what we know for the gaming sector. According to (30), the gaming industry is currently valued at $300 billion worldwide. That's already more than the music and film industries. After some research, I was also able to see a semi-credible source that sees the video game market at $583.69 billion in 2039. That would be almost a doubling of the existing capitalization over a period of about 7-8 years, measured against the current value. This would correspond to an annual interest rate of 11.82% and would thus be better off than the MSCI World in recent decades (see (30), (31), (32), (33)).

What does this mean now?

We now calculate with the stated 11.82% instead of 5.32%. We get:

IWn= 405*(805+2*11.82%) = 32,6120.742

That sounds almost too paradisiacal, doesn't it? A 5,684 JPY company becomes one of 32,6120.74 JPY. A decent return with a manageable risk?

Not quite - as shown, there is a lower price target of the 3,485.59 JPY and a market-linked upper limit of 32,6120.74 JPY. There's a lot in between and it's not so easy to assess this market reasonably. Especially against the background of the metaverse, it is very complex whether the trend will prevail. I have deliberately not integrated too euphoric metaverse estimates and want to stay in reasonably scalable framework with my calculation.

Only now the essential problem of our calculation already shows up:

Nintendo currently has hardly rising, rather falling sales, and it is questionable whether the next console is capable of overhype, so that Nintendo performs according to this possibly booming market.

Nevertheless, let's assume that the limits apply. If we do, (34) offers us a simplified calculation of the fair value according to our return expectations. We only specify the existing share price, the earnings per share per year, the earnings growth over 10 years and our personal return expectations.

I set Nintendo as identical to the market over the long term by setting our return expectation at 8%, which I think is more likely not to be the case from the current numbers. We take 11.82% as the upper bound. Before I bore you with more formulas on my part, I'll get straight to the results.

41.57% undervaluation at a discounted fair price of the share of JPY 8,046.58 circa. Let's hold that as the upper bound for now. How does it look now on the contrary? Does this mean: Only 5.32% growth in 3 years and then complete constancy?

MINUS 22.21% undervaluation with a discounted fair price of 4421.06 JPY.

Yes, both are great numbers, aren't they?

No not necessarily - Negative undervaluation, similar to negative debt, means the opposite if applicable. In this case -22.21% undervaluation means the same as 22.21% overvaluation. This would make the stock too expensive and currently rather unaffordable.

Why doesn't the P/E ratio show this correctly?

Essentially, the P/E ratio of the retrospective can only indicate how expensive a stock was priced compared to its market value at the time. It makes only a very limited statement about whether a company is also fairly valued in the future. As soon as we look into the future, a reference price is determined. This reference price, together with the EXPECTED earnings, determines how high the P/E ratio turns out to be. In fact, an interesting circular argument can be observed here: If the profit expectations fall, the share price or the reference price for the future usually falls as well. Thus, we see that the P/E ratio is only one factor among many different ones that provides essential insights into the inflation of financial products (see (35)).

In order not to remain in this typical one-dimensional "P/E ratio thinking trap", I like to use stock valuation systematics and try to reasonably classify an overly optimistic market or their analysts.

Because it was so funny, we now calculate the annualized growth rate.

The...what?

The CAGR (Compound Annual Growth Rate) uses earnings per share instead of an estimated value and is calculated as follows (see (35), (36)):

CAGR(zn,z1) = ((Xzn / Xz1)^1/N)-1

For Nintendo, based on the available data, this would be:

405 = Xz1; 359 = Xzn with n=2025-2022= 3 periods.

It calculates:

CAGR(zn, z1) = ((359/405)^1/3)-1 = (0.89^1/3)-1 = 0.297 -1 = - 0.703

We have thus determined a negative annual growth rate from the earnings per share- This tends not to be a good sign, since one had an average increase of circa. 11.44% within 10 years with a long-term dividend growth, such as with Sony, and currently even a dividend increase of 10.94% is expected. This is not meant to be a hymn of praise for Sony, but it shows that Sony currently pays out only 9.3% of the profit and if necessary, the picture is different. If you would like to see a Sony analysis, I would be happy to receive feedback (see (37)).

2. my opinion about the Nintendo share

Now we come to my opinion. In the end, I have shown by means of simpler methods that Nintendo does not justify an investment for me in purely mathematical terms. The current valuation is somewhat high, the dividend cannot be increased sufficiently as of today, and I fear for its consistency.

Fundamentally, however, it must also be said: The gaming sector is quite exciting and I have tried to justify by means of various facets that there can be great trends here in the future. Against the background that I mainly do dividend and value investing on Getquin, I put consistency and security above possible trends in the future. This is the price I have to pay for dividends and a largely defensive portfolio. It is quite possible that perhaps big innovations like the Metaverse, VR glasses in widespread use and possibly other innovations will show up here. I will continue to keep an eye on the market and, if necessary, look in depth at individual market participants. For my dividend portfolio, Nintendo is not yet an option, even though it is difficult to judge whether there is still a killer console in the pipeline. However, it is precisely this business model with the "WUMS - new console - price flips" that is difficult to calculate for dividend increases. The cyclical influence is certainly given and also fundamentally rules out an investment for my dividend portfolio.

Otsukaresama!

I hope you enjoyed my analysis of Nintendo and that you were able to take some things away with you. Feel free to discuss individual points. Feel free to follow me for more stock analysis!

Are you invested in Nintendo? If yes, why? I'm always interested in the opposing side as well, so hit the keys :)

I've uploaded a more "typical" dividend company for you on YouTube. Feel free to follow me there for more Bass-T Finance :D:

https://www.youtube.com/watch?v=n8QbYnlJRjs

Your Bass-T

#aktien
#aktienanalyse
#nintendo
#dividende
#dividendencheck

Sources:

(1) https://www.nintendo.co.jp/corporate/en/outline/index.html

(2) https://de.marketscreener.com/kurs/aktie/NINTENDO-CO-LTD-438279/unternehmen/

(3) https://www.nintendo.de/Unternehmen/Karriere/Uber-Nintendo/Uber-Nintendo-825979.html

(4) https://www.tvmovie.de/news/meistverkaufte-konsole-121256

(5) https://de.statista.com/statistik/daten/studie/160549/umfrage/anzahl-der-weltweit-verkauften-spielkonsolen-nach-konsolentypen/

(6) https://www.spiegel.de/netzwelt/games/25-jahre-game-boy-in-deutschland-a-1056277.html

(7) https://winfuture.de/news,132749.html

(8) https://www.game.de/wp-content/uploads/2022/08/Jahresreport-der-deutschen-Games-Branche-2022.pdf

(9) https://blog.wiwo.de/look-at-it/2018/07/27/die-geschichte-der-spielkonsolen-von-atari-pong-1972-bis-nintendo-switch-2017/

(10) https://dewiki.de/Lexikon/Game_Boy

(11) https://oeffentlicher-dienst-news.de/durchschnittsgehalt-deutschland/

(12) https://gaming-is-magic.de/nintendo-switch-spiele-fuer-frauen/

(13) https://hiptoys.de/nintendo-switch-spiele-fuer-frauen/

(14) https://www.techstage.de/bestenliste/top-10-die-besten-spiele-fuer-nintendo-switch/8lysqf9

(15) https://mag.shock2.info/kolumne-wieso-frauen-nintendo-switch-vom-erfolg-zum-phaenomen-machen-koennen/

(16) https://www.pcgames.de/Playstation-5-Konsolen-265878/News/Sony-stellt-Geschlechteranteil-der-Konsole-vor-1372899/

(17) https://de.statista.com/statistik/daten/studie/158779/umfrage/umsatzerloese-von-nintendo-of-europe-nach-produktgruppen/

(18) https://www.it-times.de/news/nintendo-will-mit-durchgefuehrten-1-10-aktiensplit-neue-aktionaere-locken-145209/

(19) https://de.statista.com/statistik/daten/studie/261806/umfrage/vergleich-der-verkaufszahlen-von-verschiedenen-nintendo-spielkonsolen/

(20) https://www.lifewire.com/nintendos-seven-biggest-wii-u-marketing-mistakes-2498706

(21) https://www.eurogamer.net/thq-clarifies-wii-u-horrible-slow-cpu-claim-but-developer-concern-remains

(22) https://de.marketscreener.com/kurs/aktie/NINTENDO-CO-LTD-6491906/charts-comparison/

(23) https://de.marketscreener.com/kurs/aktie/NINTENDO-CO-LTD-6491906/fundamentals/

(24) https://wirtschaftslexikon.gabler.de/definition/umsatzrentabilitaet-48066

(25) https://sevdesk.de/lexikon/jahresueberschuss/

(26) https://de.tradingview.com/symbols/OTC-NTDOY/financials-balance-sheet/net-debt/

(27) https://aktienfinder.net/dividenden-profil/Nintendo-Dividende#:~:text=Innerhalb%20der%20letzten%2012%20Monate%20lag%20die%20durchschnittliche%20Dividendenrendite%20von,eine%20fair%20bewertete%20Aktie%20hin.

(28) https://www.value-akademie.com/benjamin-graham-value-investing/#:~:text=Die%20Graham%20Formel%20ist%20aus,%2DGewinn%2DVerh%C3%A4ltnis%20niederschlagen%20sollte.

(29) https://www.finanzen.net/fundamentalanalyse/nintendo

(30) https://www.derstandard.de/story/2000126339126/300-mrd-dollar-gaming-industrie-offenbar-mehr-wert-als-musik

(31) https://www.grandviewresearch.com/press-release/global-video-game-market

(32) https://www.finanzfluss.de/rechner/zinssatz-berechnen/

(33) https://www.finanztip.de/indexfonds-etf/msci-world/

(34) https://aktien-system.de/fairvalue-calculator/

(35) https://www.boerse.de/boersenlexikon/Kurs-Gewinn-Verhaeltnis

(36) https://aktien-mit-strategie.de/eine-einfache-berechnung-des-inneren-wertes-nach-benjamin-graham/

(37) https://aktienfinder.net/dividenden-profil/Sony-Dividende

UPDATE: 0️⃣ BASIS POINTS! BUT FURTHER INTEREST RATE HIKE NOT RULED OUT. UNANIMOUS DECISION, NO WORD ON INTEREST RATE CUT 🤔💸

British American Tobacco $BTI
$BATS BAT after -20% share price crash: what is management doing?📉

Hello friends of the blue smoke!🚬

As you requested, today I'm going to talk about British American Tobacco - a company that also appears very often in my Getquin as well as Youtube posts. I know what you're thinking now: why should I read through this when I already know your video?

Good point. Just like it and I'll see you next time...all kidding aside.

Today, in addition, for all my non-subscribers on YT, I'll recap the info and then aim for a brief comparison with Philip Morris (PM) to show the different ways two corporations in the same industry can go. The focus will also be on a Youtube comment that I want to use as a hook for this post. So if you also want to get indirect popularity (anonymously of course), feel free to subscribe to me on Getquin and Youtube!

First, as always, my disclaimer: This is not investment advice. It is also not an invitation to buy/sell financial products. I only describe my opinion here and you have your own responsibility towards your investments. So I also assume no liability.

We start with the following questions:

1. BAT in price fire: Why is BAT being punished? How does this affect BAT's stock valuation?

2. how is Philip Morris (PM) trading?

1. BAT in price fire - what happened and what will become of BAT's share valuation?

Many of my subscribers will have seen that my current BAT video has met with a very great response and continues to generate decent traffic including likes. However, the opinions are not always positive, because often I get dislikes for criticizing the favorite stocks of some users despite hours of research and video editing. This is also everyday life and enriches. This would normally not be worth mentioning to me.

BUT:

A user, whose comment is meanwhile no longer displayed, wrote meaningfully:

"I am glad that BAT does not act as you imagine or wish. BAT is a tobacco company and sells cigarettes and that's that.." Zack Dislike.

This stance is essentially based on the notion that BAT should leave the focus on cigarettes in the future and highlights a lack of importance of the trend towards less tobacco products and more tobacco heaters. I imagine I see a fear here that is driving many investors around right now:

"If BAT makes a shift toward more tobacco heaters and possibly cannabis products in the future - what will be left of the cigarette cash cow?"

BAT itself is already clearly in the midst of this upheaval, and not without reason has clear wording à la "Change," "A better tomorrow," and, by implication, protection against smoking-induced risks in almost every one of its annual reports.

Unfortunately, this "better tomorrow" has recently been overshadowed by illegal sales of tobacco products to North Korea, which in turn have fallen under US criminal law for corporations. As a consequence, BAT was kindly allowed to pay 629 million USD to the government authorities and also resulted in a change of leadership within the highest level (see (1), (2)).

So instead of Jack Bowles as CEO of BAT, we now welcome Tadeau Marroco in his new role. He is no stranger to this - in fact, he has been with the company since 1992, almost 31 years, and knows the challenges and goals of the Group. I write this not without reason, because his two specifically defined goals seem at first glance to contradict each other:

1) To compensate for increasing smoking bans and

2) To promote the trend toward smoke-free alternatives.

For one thing, these goals are very broad - how to compensate? How to solve the problem of cross-funding both goals with each other? What is the reinforcement of the trend?

So did that go down well when he stood before the audience with it after taking over on 15.5.2023 and called up these points?

So semi - if you look at the insider transactions that have to be disclosed regularly according to US law, we currently see 30.1 million shares in insider hands. In addition, 665 institutional investors currently own shares in BAT, which, together with the insiders, amounts to about 8.2% of non-private investors. These investors include well-known names such as Goldman Sachs, the American Mutual Fund, as well as Blackrock and Invesco. In the last 3 months, more of these professional investors have divested from BAT than have bought new shares. The result is (see (4), (5)):

86,346 shares sold in the last 3 months.

Vs.

1,648 shares bought last.

In longer-term periods of 3 months and more, we quickly see that more shares have been bought here on average. Thus, we can speak of a short-term flight of institutional investors from this financial product (cf. (5)).

Does this necessarily have to be bad?

Not necessarily, because this type of investor does not necessarily have a long investment focus, but occasionally also engages in medium-term trading. The focus here is quite different from time to time and is similarly volatile as some stock recommendations, because the shareholder does not currently recommend buying the BAT share either (see (6)).

Can we already cut short here and put BAT on file?

I don't think so, as we received a brief trading update on 06/06/2013 on what BTI plans to do going forward and how the second quarter has started so far. We learn that constant currency revenue growth is expected to be 3% - 5% in subsequent quarters and that mid-single digit growth is planned to be finalized for EPS. It is particularly highlighted that EPS (i.e. earnings per share) grew by 4% in the first half, but that seems to reduce the full year performance to -1% considering the FX impact in the second half. I would like to translate Tadeau Marroco himself directly at this point:

"We are also making good progress in reducing our balance sheet positions and will pass on excess liquidity (meaning monetary working capital away from capex or operating expense planning, note from me) to shareholders." - Tadeau Marroco (translated)

Why am I quoting this?

The statement is close to the existing dividend focus and comments very positively on the previous dividend policy. The focus is on reducing cash holdings or redistributing them to shareholders. This is of course gold in the ears of shareholders and a very positive advertisement of the share price so far. The analyst house Jefferies was less impressed by this and left the price target at 4,100 pence (or 41 pounds sterling😊). Based on the current price, that would be about 36.7% upside potential. So much for the highly promoted content on the part of Tadeau Marroco and the brief summary of his points raised.

But wait - there's more!

If you read the trade report crosswise, you can see the coverage of these statements with the forced targets from page 2 upwards. One does NOT want a shift away from the "A Better Tomorrow" campaign that began in 2019. One wants to stick with the mantra that current smokers will switch 1:1 to replacement products and just as one does not want to extend the diversification idea any further.

Means in German mMn: The present product categories VUSE, GLO and VELO are to remain further exclusive product categories and it is not to be established definitely still another mark. Original statements such as (see (7)):

• "We have winning brands. We have a strong pipeline ahead of us"
• "The strategy is right"

Almost seems like a swearing-in to the existing "A Better Tomorrow" strategy.

Strictly speaking, nothing at all is actually happening now, but this nothing at all must be established positively, because the figures from Q1 actually showed a gain in non-combustion products of 900,000 new customers. This is exciting, because here is argued with absolute numbers that seem huge for consumers. In fact, you just have to compare the original statements: apparently BAT has "reached" the 23 million consumers of non-combustion products - there is an increase of almost one million approx:

0.9 million / (23 million - 0.9 million) = 4.07% growth rate.

That doesn't sound very spectacular at first. The target agreement is more exciting: the company wants to achieve profitability in 2024 with the replacement products. At present, these are still loss-making and cost BAT more money than they bring in. Given BAT's internal structure, this is a difficult situation, because the cash conversion rate is supposed to be over 90% at the same time.

The...what?

The Cash Conversion Rate describes how much money I free with my main business. In other words, what I can convert from net income into free cash flow. It is considered an important measure of the financial health of a group and is easily calculated via (8):

CCR = cash flow / net income

A simple fraction with high informative value about the effectiveness of the capital employed, its turnover and what growth is necessary to become profitable.

BAT itself is unsurprisingly dependent on the cigarette business and would achieve a negative result if viewed individually via substitute products. Therefore, no added value could be created on the basis of the CCR and that would also be the end of the dividend. However, as the company aims to achieve sales of £5 billion with non-combustion products in 2025 and is profitable, the value here would be over 0 and would therefore be suitable for a dividend payout.

But how much market volume is really there?

A look at VUSE shows us: The brand is slowly taking off. We are at 2.8% share growth in the replacement product market and thus at 38.8% total share. It makes you one of the biggest players in this market and is now available in over 40 markets. Colombia and Peru in particular stood out positively in their start-up phase, so we can talk about a reasonably stable and growing replacement product market here.

In GLO, however, we are seeing the first impediments to growth. Specifically, the GLO share in target markets has fallen by 1.1%, so that we now have a share of 18.2% in target markets. Italy and Japan may be a future proxy here, as both markets are currently highly competitive and BAT's GLO brand is struggling here. As a result, the positive growth of the other countries could not be maintained and we observe a setback for BAT here.

In VELO, we see a replacement product that is active in 15 EU countries and whose share in the Modern Oral category has unfortunately also fallen by 1.8%. This leaves only 28.5% share, with high hopes in Pakistan and Kenya.

So much in short words about the respective substitute products. Let's take a brief look at the key KPIs:

The P/E ratio is currently 8.7 times earnings per share. So we are pricing in about 8-9 times the annual payout per share. Compared to Japan Tobacco, Altria Group as well as Philip Morris, this is a relatively cheap value, with the top 5 tobacco companies including BAT priced at 18 times. This means that BAT is currently cheaper than its competitors (see (7), (8)).

But is this also justified?

A look at the chart reveals a decline of 21.41% in the share price over the last 6 months and is attributable to the following factors (see (8), (9)):

- BAT's North Korea sales

- The relatively sudden replacement of management

- Lack of new or rescue impulses from the crisis

- Declining importance as an inflation hedge

If we look in parallel at the growth forecast from the analysts, we get on average, depending on the source:

Growth (profit): 3-4,5%

Growth company: 7.7%

The S&P 500 currently stands at annual returns of 8%-10% depending on the entry point, so I personally see BTI (without performing a complex calculation here) as a defensive stock despite the announcements. In my opinion, it is more about maintaining the existing dividend culture and less about outperforming the broad market in the long term.

This is also in line with the 200-day average of 36.75 USD, which is currently massively undercut by the price of 32.31 USD. Due to the higher discounting of future profits via the key interest rate plus the first growth setbacks in future products, we quickly recognize that this sector in particular must deliver. The future enterprise value (EV), i.e. the calculated value of the company based on future cash flows, has fallen to 97.24 billion pounds sterling compared with EBITDA. Together with EBITDA, this results in a parameter of 7.7, which shows a significant decline in previous company valuations. This has also led to a significant drop in market capitalization and, at first glance, interesting dividend yields of up to 8.2% at a historically low P/E ratio (see (9), (10)).

All in all, BAT is currently caught in the crossfire between management changes, image rebuilding, the declining growth rates of replacement products, etc. in the important emerging markets and must now reposition itself in the market. I am curious to see what innovations will be announced in future meetings. If you ever want to see a detailed stock analysis, feel free to write it to me in the comments.

2. what does Philip Morris do?

I'll drop the bombshell right at the beginning: Today, June 14, 2023, Philip Morris made a very clear statement via management about the future of the Marlboro cigarette:

There is none.

Yes, that's right - Philip Morris is now planning in much more concrete terms to end the mainstay of sales, the classic cigarette, and is now taking a much more precise approach to a burner-free product policy than expected. Only tobacco heaters and electronic cigarettes are to find place in the assortment of PM. One refers here clearly to the 95% less pollutant load by heating and would like however further nicotine products to drive out. At least one way is going in a healthier direction.

PM's argumentation is relatively close to my own: The cigarette market cannot be sustained in the industrialized countries in the long term and needs disruption via substitute products. Every year, 3% fewer cigarettes are already sold per year, which is a benchmark for total sales. So you want to push this cash cow to the end before you lose out to competitors like VUSE, GLO and VELO.

This is exciting as it is a far more radical approach and I personally am now still waiting from meeting to meeting for the announcement of the completely cigarette-free future. I found the call for a ban on single-use e-cigarettes particularly positive, although I am normatively critical of bans. It remains to be seen how governments will react to this demand.

Can this change work to such a radical extent?

If we could say that with certainty, all of our lives would be much easier. Philip Morris itself reports a 35% sales share of non-combustion products and emphasizes that it does not want to create a product image that is too strongly geared to children and young adults. In particular, the in-house IQOS brand is performing well, achieving relatively good sales in terms of new customer growth and their sales figures.

Specifically, net sales increased by 3.2% in Q1, resulting in plus 4.4% sales growth per product. Constant currency EPS was also +4.4%, reaching $1.38. In particular, the following fact is emphasized (see (11)):

IQOS increased its sales by +14% (cf. (11)).

BUT: This does not include currency adjustments.

So where did we end up in this "short" (about 2,500 words) update?

We have realized that the current annual reports and the successes & challenges stated therein have not punished BAT for nothing. You don't get anything for free on the stock market and that is a fact. BAT must answer the following questions:

- How can VUSE & Co. Regain market share from low-cost suppliers with disposable products?

- Is brand focus the right way or do we need more openness here?

- Is the market for substitute products really as big as the tobacco market?

- How long will the cigarette boom in the emerging markets last and how do you reduce the currency risk?

For Philip Morris, my thoughts are as follows:

- At what point do you drop the glow stick?

- Will the position as an inflation hedge be threatened by the substitute products?

- How will PM support Altria after the JUUL disaster?

I hope you enjoyed my brief update on what I consider to be the most interesting points. If you feel like more tobacco now, feel free to check out my mentioned BAT video - every subscriber helps!

https://youtu.be/4TtxKUA1q0k

Thanks

Your Bass-T

#dividend #dividenden
#dividendencheck
#bat
#bti
#tabak

Sources

(1) https://www.sueddeutsche.de/wirtschaft/nordkorea-zigaretten-1.5827632

(2) https://www.deraktionaer.de/artikel/aktien/bat-neuer-chef-zeit-fuer-ein-comeback-der-aktie-20332341.html

(3) https://finance.yahoo.com/quote/BTI/insider-transactions/

(4) https://finance.yahoo.com/quote/BTI/holders?p=BTI

(5) https://simplywall.st/stocks/za/food-beverage-tobacco/jse-bti/british-american-tobacco-shares/ownership

(6) https://www.deraktionaer.de/artikel/aktien/bat-neuer-chef-zeit-fuer-ein-comeback-der-aktie-20332341.html

(7) https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6FKEVZ/$FILE/medMDCSLK4P.pdf?openelement

(8) https://en.ryte.com/wiki/Cash_Conversion_Rate

(9) https://finance.yahoo.com/quote/BTI/

(10) https://ch.marketscreener.com/kurs/aktie/BRITISH-AMERICAN-TOBACCO-54264463/

(11) https://philipmorrisinternational.gcs-web.com/

++Linde and other industrial gas producers in comparison++

1. business model of $LIN
1]

Linde PLC is an industrial gases and engineering company. The company's business consists of two core product lines: Industrial Gases and Engineering. The main products of the industrial gases business are atmospheric gases such as oxygen, nitrogen, argon and noble gases, and process gases such as carbon dioxide, helium, hydrogen, electronic gases, specialty gases and acetylene.

The company designs, engineers and builds industrial gas production plants and provides customers with a range of gas production and processing services, such as olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants and other types of plants.

Employee Satisfaction: [2]

Average rating:

According to the review portal kunuu, workers are satisfied with their employer on average. The company scores a 3.4 out of 5, and has a 50% recommendation rate. The biggest problem of the German workers stands out more clearly: the aggressive company culture. Many layoffs and poor chances of being hired.

Salary:

The majority of workers are happy with salaries at Linde. And rightly so. Rich starting salaries attract qualified employees to the company. Key positions at the company would include:

Engineer: 80,500€ / Buyer: 85,300€ / Project Manager: 97,900€.

General:

It should be noted that I underestimated Linde quite a bit. I was aware that Linde is a big player in the gas business, but the fact that Linde is the world market leader in industrial gases [3], besides AirLiquid, surprised me quite a bit. The chart alone in comparison to Airproducts and Shin-Etsu is a real treat... (picture is attached/ By the way, I would appreciate it if you could finally insert pictures between text, this would help the reading flow significantly)

Is Linde "too big to fail"?

Modern industrial gases are one of the components that make up the engine of modern industry. Without industrial gases, many "normal" products such as plastics or fertilizers would no longer be able to be manufactured. Industrial gases are accordingly indispensable! For example, without chlorine and ethylene, plastic could no longer be produced, or without nitrogen and ammonia, ammonia could no longer be produced. It is also interesting to note that without argon and helium, the semiconductor industry would no longer be able to produce (all products of Linde).

Prospects for industrial gases: [4]

Political and societal pressures, at least here in Germany, are increasing demand for alternatives to conventional oil, benefiting low-CO2 technologies such as hydrogen. In addition, more efficient mechanisms are being invented to improve the efficiency of industrial gases. Whether hydrogen propulsion will become widely accepted as a replacement for the internal combustion engine is questionable - industrial gases already seem to be more attractive for large means of transportation such as trucks or even airplanes. As already mentioned above, industrial gases are indispensable for chemical/medical and some technological industries.

2. key figures in comparison (Linde(DE) vs. Airproducts(USA) $APD
vs. Shin-Etsu $4063
(JPN)) [5]

a. Sales and profit growth (EBIT)

Sales growth over the last 5 years:

Linde: 23.88% / Airproducts 9.17% / Shin-Etsu 3.18%

EBIT growth over the last 5 years:

Linde:

- 2018-2019: (-42%)

- 2019-2020: (15,61%)

- 2020-2021: (50,68%)

- 2021-2022: (8,71%)

- Average growth rate: 6.6%

Airproducts:

- 2018-2019: (13,62%)

- 2019-2020: (5,87%)

- 2020-2021: (3,45%)

- 2021-2022: (9,86%)

- Average growth rate: 6.56%

Shin-Etsu:

- 2018-2019: (22,4%)

- 2019-2020: (2,58%)

- 2020-2021: (-5,6%)

- 2021-2022: (73,11%)

- Average growth rate: 18.5%

Average 5-year EBIT growth trend:

Linde: 6.6% / Airproducts: 6.56%/ Shin-Etsu 18.5%.

b. All about the dividend

When it comes to dividends, my focus is on sustainable growth. I avoid companies that already have too high a payout ratio, or which barely increases the dividend. Interesting ratios for this are:

- Current dividend yield

- Dividend continuity

- Dividend growth

- Payout ratio

Linde:

- Current dividend yield: 1.30%

- Dividend continuity: 30 years

- Dividend growth: (5 years: 8.27%); (10 years: 7.84%)

- Payout ratio: approx. 60%

Airproducts:

- Current dividend yield: 2.2%

- Dividend continuity: 35 years

- Dividend growth: (5 years: 11%); (10 years: 9.5%)

- Payout ratio: approx. 60%

Shin-Etsu:

- Current dividend yield: 2.13%

- Dividend continuity: 25 years

- Dividend growth: (5 years: 10%); (10 years: 9%)

- Payout ratio: approx. 55

c. Low debt

In order for a company to be flexible even in high-interest phases, it should have low debt. I personally equate a high equity ratio with security.

Equity ratio:

Linde: 50.25%

Airproducts: 48.34

Shin-Etsu: 82.4%

3. outlook

I expect my investment to grow steadily in the future and to pay me a nice dividend. Admittedly, none of the companies offers a high dividend yield, and to be honest, I don't have a clear favorite among the three stocks. Linde and Airproducts are the bigger companies, but they have already had their big growth spurts. Shin-Etsu is a small but interesting company, but can it really compete with the big top dogs. According to the current market distribution, Airproducts and Linde are ahead - Linde even a bit more. However, Linde has already done very very well, and has almost three times the market capitalization of Air Products. I will decide in the coming weeks whether to bet on Linde or Air Products, and then open a position for my dividend portfolio.

I will publish the purchase again in GQ.

Final question: Which stock would you buy?

By the way, the outline of this post is inspired by the post of @RealMichaelScott (How to analyze a dividend stock). And on the topic of hydrogen I was inspired by the post of @Hannes_SK (Bye-Bye $PLUG )

Sources:

[1]: https://de.marketscreener.com/kurs/aktie/LINDE-PLC-46923083/unternehmen/

[2]: Linde Erfahrungen: 711 Bewertungen von Mitarbeitern | kununu

[3]: Industriegase: Marktanteile größter Hersteller weltweit 2018 | Statista

[4]: Industriegase: Hersteller, Produktion und Anwendungen - Gasido.de

[5]: TraderFoxx; marketscreener; finanzen.net

#wasserstoff
#linde
#zukunft
#stockanalysis
#etfs
#aktien
#dividenden
#dividendencheck
#dividendenaktie
#geldanlage

KEYENCE PART 2 - Outlook for 2023

Konbanwa mina,

Honjitsu wa KEYENCE kabu o bunseki shimasu.

First of all, of course, I wish you to have had a nice Christmas and to have gained a little distance from everyday life. Contrary to other "philosophies" I think it is important to have a balance to the daily stress and therefore I was not very active on Getquin the last days.

Nevertheless, I am very satisfied with the progress of my Getquin - and YouTube channel and thank you at this point for the open cohesion of my community and look cautiously optimistic on the new year 2023. I will continue to tackle stock analysis, market assessments and possibly also political topics. The latter are sometimes like boiling oil, which is why I will continue to stick to community voting. In the future, GIFs will only accentuate and be topic-bound in themselves. In this example: KEYENCE as a Japanese company - hence the Japan GIF. In the future, however, I will not justify my "toned down" GIF choice.

At this point, I hope that more Getquin users will follow my example, since I have recently also noticed exposing GIFs in other posts negatively. Willful aesthetics is one thing - embarrassing shots out of pure bullying desire is another.

Disclaimer: This is not investment advice. It is also not a solicitation to buy/sell financial products. I am merely stating my opinion here. You have your own responsibility towards your investments. No liability.

Now we come to today's topic: KEYENCE - but this time the share of the TOP 5 company from Japan. I recommend to read my first part about KEYENCE before this analysis, otherwise you might not be able to follow it. After all, KEYENCE is a big number of the NIKKEI and not without reason.

Therefore here is the link to part 1:

https://app.getquin.com/activity/dvMDuOjKAc?lang=de&utm_source=sharing

We are now thematically in part 2 of my analysis:

PART 1

• Keyence in facts, figures and data
• Keyence's business areas, products and fundamental situation

PART 2

• The Keyence share - a Japanese giant?

PART 3

• Keyence in Japan
• Japan - a nightmare for ETF investors?
• Opportunities and risks of Keyence's industry

Keyence's share - a Japanese giant?

In order to be able to correctly classify KEYENCE's share and its significance, a structural approach is useful, which can also be applied to other related companies. In the following, I will analyze these parameters and approach from the small-step to the large-step. A typical micro to macro approach that will examine the following metrics:

• P/E RATIO, KBV, KUV
• Sales performance
• Fair value calculation using Graham formulas
• Comparison by chart technique using Nikkei

KEYENCE's current P/E ratio is approximately more than 40 times earnings in 2022. A P/E ratio basically tells us how the market prices a stock relative to its earnings. So we divide the price of the stock by the earnings per share. It's a relatively simple calculation that ignores a lot of things, yet is growing in popularity. In the case of Keyence, we would calculate (cf. (1), (2)):

51340 JPY / 1251 JPY = 41.04x

According to the data from (1), KEYENCE stock is priced by the market at 41x earnings. Using the following equation, this would mean that the current market capitalization would be equal to the company's profit if KEYENCE were to earn 41 times its profit. One arrives at this simple conclusion by simply rearranging the above equation by earnings. But what does this tell us?

Normally, my YouTube subscribers probably now have my standard mantra of the P/E ratio of the S&P 500 in their ears, which is based on a geographically quite different area of the US, yet will now come to most people's minds. The known cross-section of the 500 US companies with the highest market capitalization is at a P/E ratio of 19.90 as of 12/28/2022, so we know that the S&P 500 from the US is valued cheaper at 19.90 than KEYENCE at 41.04 above (see (2), (3)).

What does this comparison bring us?

First of all, not much - we are just comparing the marko level of the USA with a single stock of the Nikkei. In concrete terms, KEYENCE as a Japanese company is logically not part of the S&P 500 but of the Nikkei 225. This may seem trivial according to the motto: "So what?" - however, the Nikkei 225 as a stock market barometer of Japanese companies is currently at only 14.3 times earnings, which is below average in the 3-year cycle. In the last 3 years, the P/E ratio of the Nikkei 225 was 21.2 times earnings. This results in (see (6), (7)):

14.3 /21.2 = 67.45% of the historical 3-year P/E ratio.

Thus, it can be argued that on average Japanese stocks from the Nikkei 225 are historically undervalued by 32.55% vs. the last 3 years. However, this is a dangerous hypothesis, as a look at the period June 2020 to April 2021 of the P/E ratio in the channel of 26.5 times to 31.4 times opens. So we see that the Nikkei is just coming out of a high phase and is now getting closer to its 10-year average of 17.9 times. In January 2013, the Nikkei was pretty much at its market average of those 17.9 times.

So why is the 3-year P/E ratio so high?

Essentially, it's because of the breakout in Japanese equities over the period described. The market capitalization of the Nikkei rose by up to 15% at its peak and is still currently plus 9%. The earnings trend was even consistently negative until February 2022 - the Nikkei 225 companies thus reported lower total earnings on average from the reporting date of January 4, 2020 to February 2022 than on the reporting date in question (see (6), (7)).

If we add the 1-year cycle, we see earnings up 13% but market capitalization down 7%. How does this fit together (cf. ibid.)?

In my opinion, the solution lies in the sector breakdown. Unsurprisingly, the energy and utilities sectors in Japan gained 18.49% and 7.16%, respectively, in one year. The biggest loser was the KEYENCE subsector, although it is relatively irrelevant how KEYENCE is allocated. If we look at Tech, minus 22.12% has been achieved, in the case of Industrial Supplies we are at minus 6.38% and Material Supplies is also negative at minus 8.8%. So it is a richly gloomy picture in terms of sector gains (see (7)).

Going one level deeper and analyzing the Japanese market by sector, we find a very diverse set of sector P/E ratios. While tech from the Nikkei is at 16.4 times, industrial supplies at 9.6 times does not even have a double-digit P/E ratio. In general, according to the current state of the Japanese economy and the world economic situation, valuation growth is expected to affect almost all sectors. Only the energy sector is expected to fall by 8.1% and is thus the only sector in the entire Japanese economy that will fall according to analysts (see ibid.).

Why is this important for KEYENCE?

In order to value a stock, I want to understand its fixed point of the index barometer in terms of valuation, sector breakdown and volatility. We all have an understanding of the S&P 500, the Frech DAX or the MSCI World. In Japan, things are a bit different. It is not for nothing that part 3 will be called "Japan - a nightmare for ETF investors?". Up to this point, the explanations on the Nikkei 225 as well as the general Japanese market, its sector breakdown and its historical development should suffice for now. We now take the following into the stock analysis (cf. ibid.):

• The Nikkei tends to behave relatively stable since 2012 in the channel from the 13-fold to the 32-fold.
• The breakout of the Nikkei has occurred only recently
• The market capitalization has increased by 144% in the last 10 years
• There is a large disparity of the individual sectors of the Japanese market

As we now know, KEYENCE's 41.04 P/E ratio is more than double the Japanese market's 14.03, outperforming the Nikkei at its current valuation even if we choose the Nikkei's 12/31/2020 high of just under 32 (see (7)). Specifically, this calculates a multiple of:

41.04 / 14.03 = approx. 2.93

So we know that we pay 2.93 times the corresponding index standard per KEYENCE share. This tends to indicate a possible overvaluation. If we include the tech sector, the picture does not change, because tech in Japan is currently valued with a P/E ratio of 16.4. It is calculated as follows:

41.04 / 16.4 = approx. 2.502

This means that we have to spend 2.502 times the sector-related index standard for a KEYENCE share. To put it bluntly: Japan's tech sector is valued at just under 39% of KEYENCE's valuation, because:

16.04 / 41.04 = approx. 39.08%.

In general, KEYENCE seems to be relatively highly valued in terms of the P/E ratio - both in relation to the overall Japanese market and the Japanese tech sector. This is at least something to take note of for the time being. But what now?

As many of you know, tech stocks are often highly valued. The sector breakdown of (6) also shows that the tech sector is by no means valued lower than many other sectors in comparison. But what can save KEYENCE's valuation now?

A simple calculation of value investing helps us here. If we convert the average expected growth to the P/E ratio, we get a comparison parameter. This tells us whether, simply put, a P/E ratio matches its growth expectations (see (7),(8)). To do this, we first need to know how much KEYENCE can grow and where the limits are. For this purpose, different parameters can be used - I will use the general market value of KEYENCE. It is important to note that the market value is only a statement on the question "What is the market paying for KEYENCE right now?" and ultimately does not have to say anything about the real value (see (10)). According to (2) and (9), the market value was and is JPY 12,829,669 million in 2021 and is expected to be JPY 12,451,289 million in 2023. This corresponds to a trend growth of the enterprise value of...

STOP! Because we still have to annualize! That is: calculate the average annual growth. Therefore we calculate:

((12451289/12829669)^(1/2))-1 = -1,49%

So we see that KEYENCE will currently lose 1.49% in market value per year until 2023, which tends not to be good for the calculation and shows a decline.

If we use sales instead, we get:

((1073539/551843)^(1/5))-1 = 14.24% growth in sales per year.

In the next step, we calculate the ratio of this growth to the P/E ratio:

FACTOR growth in sales per year / P/E ratio

14,24 / 41,04 = 0,35

So what does this 0.35 tell us? In essence, a value of 0.9 and higher is considered a "discount" for growth. The formula is based on the idea of paying for growth. Meaning: I want to put in a minimum of my money for the maximum growth of the company. With regard to KEYENCE, we have thus received just about one third of the ideal limit. This means that KEYENCE's growth does not seem to be really favorable.

But if the sales increase so strongly, will the P/E ratio eventually fall?

Nobody knows exactly - as a result, analysts calculate various methods for this. If you believe them, KEYENCE's P/E ratio will fall to 28.6 times in 2025 and would thus be cheapest in the period 2020-2025. However, this is a purely speculative thesis and does not have to be correct (see (2), (8)).

Let us additionally calculate with Benjamin Graham's formula what the intrinsic value of the KEYENCE share might be. We already have a lot of information for this. According to (11), the intrinsic value of a share is calculated in a simplified way by means of (cf. (11), (12), (13)):

Intrinsic value = Earnings per share * (8.5+2*annual growth rate)

We obtain for KEYENCE:

Intrinsic value (KEYENCE) = JPY 1,251 * (8.5+2*14.24) = JPY 46,261.98

Thus, according to Graham's simplified method, the stock would be overvalued by:

1-(46.261,98/51.270,00) = 10,83%

10.83% overvaluation is not the same as the multiple from the P/E calculation in percentage terms, but it still indicates a too high share price. If we use the Graham number to calculate what we should pay as a maximum, the following follows:

(22.5*earnings per share * book value per share)^(1/2)

(22.5*745*8962)^(1/2) = 15,882.63 JPY

So we notice that according to earnings per share and its book value, almost a quarter of the existing value has been calculated. This is unsurprising. As we have already noticed from the P/E calculation and the first Graham formula on intrinsic value, KEYENCE tends not to come out so well in the rational justification, as expensive and a lot of revenue hope priced in.

Finally, let's try to calculate what a) KEYENCE could be worth according to market development and b) KEYENCE would be able to achieve according to previous sales increases. For this, I extend the Graham formula by the risk-free interest rate of currently 0.366%. We get for a) the recognized market growth of 9.3% from (6) (cf. (6), (13)):

(1251*(8.5+2*6)*4.4)/0.4 = 282100.5 JPY

For case b) of growth, our future expectations are as follows

(1251*(8.5+2*14.24)*4.4)/0.4 = 508881.78 JPY

Why are these values dangerous? On the one hand, they assume constancy in the development and, on the other hand, they are values that may be reached in the future. However, as we should know by now, nothing can be taken for granted.

What does the whole thing tell me now?

For the time being, I will remain on the sidelines and wait for a more favorable valuation of the KEYENCE share. On the one hand, this is due to my focus on dividend stocks and, on the other hand, the current P/E ratio seems to me to be clearly too high. Growth forecast in sales is there - but whether the rather stagnant market value will follow, seems unclear to me at the moment. Certainly an interesting company - I will keep it in mind.

I hope you enjoyed my little excursion into the world of the Nikkei and maybe you were able to discover something of the stock valuation tools for yourself. My next analysis will be Sony.

Feel free to follow me for more stock market content and support me in my goal for 2023 of 900 subscribers on Getquin and 200 followers on Youtube.

Your Bass-T

#aktie
#aktien
#aktienanalyse
#dividende
#dividendencheck
#keyence
#japan
#nikkei
#tech

Sources:

(1) https://www.boerse.de/boersenlexikon/Kurs-Gewinn-Verhaeltnis

(2) https://de.marketscreener.com/kurs/aktie/KEYENCE-CORPORATION-6492212/fundamentals/

(3) https://www.boerse.de/kgvs/KGV-SundP-500

(4) https://www.boersen-zeitung.de/personen/keyence-gruender-takizaki-wird-reichster-japaner-1a4afcec-1a18-11ec-842f-73562a0ee452

(5) https://boerse-muenchen.de/suedseiten/9759/Der-Nikkei-koennte-deutlich-ueber-30.000-steigen

(6) https://simplywall.st/markets/jp

(7) https://siblisresearch.com/data/japan-nikkei-pe-cape/

(8) https://www.valuejump.de/den-inneren-wert-einer-aktie-berechnen/

(9) https://www-keyence-co-jp.translate.goog/company/financial-info/?_x_tr_sl=auto&_x_tr_tl=de&_x_tr_hl=de&_x_tr_pto=wapp#finance-highlight

(10) https://investment-tussi.de/unternehmenswert-%E2%89%A0-marktwert/

(11) https://www.value-akademie.com/benjamin-graham-value-investing/

(12) https://www.kleeberg.de/blog/2022/04/01/basiszinssatz-nach-idw-s-1-steigt-zum-01-04-2022-weiter-auf-gerundet-040/#:~:text=Zum%2001.04.2022%20und%20auch,.2022%3A%200%2C183%20%25).

(13) https://www.fairvalue-calculator.com/de/rechner/graham-zahl-rechner/

Today times $PG at #Dividendencheck

In the drugstore, there is hardly any way around the products and so there is probably no one here who does not have at least one of these at home. With 67 years of dividend increases, P&G is also a real dividend king.

How secure is the dividend?

The payout ratio of earnings and FCF is currently 63.3% and 69.3%, respectively. In combination with the King status, this speaks for a very sustainable and reliable dividend. Moreover, an increase is expected again in Q2.

Classification of the current dividend yield

The current divi. yield of 2.4% is higher than the bottom 25% of dividend payers in the U.S. market (up to 1.52%) and lower than the top 25% of payers in the U.S. market (4.24% and above).

In an industry comparison (average 2.4%), it is on average

P&G in my portfolio

Savings plan: 60€/month

Buy In: 108,63€

Net dividend since 2018: 86,86€

YoC: 3.16%

Note: A purchase decision should never be made solely on the basis of a dividend. It is important to get an overall picture of the company. The dividend is only one aspect, which I would like to discuss in more detail in this article.

PKN ORLEN S.A.: The STAR gas station as a Polish dividend star 🇵🇱 with 5.6% div. yield? (PART 1) $PKN

Czesc przyjaciele,

After my last article on e-mobility in Germany made waves and the discussion was largely objective, today we are dealing with a gas station network operator called PKN ORLEN - better known as the operator of the STAR gas stations. Thematically, therefore, we remain on the subject of mobility - only now from the point of view of the fuel suppliers.

You are welcome to read my first part on e-mobility at the following link. Please also tell me there if you would like to read a second part. I'm always happy when the contributions meet with a great deal of interest from the community:

https://app.getquin.com/activity/LsVmdGDGGm?lang=de&utm_source=sharing

Before we start as always my disclaimer:

Disclaimer: This is not investment advice. It is also not an invitation to buy/sell financial products. I am merely stating my opinion here. You have your own responsibility towards your investments. So I do not take any liability.

So that we start from the same page, I foresee the following outline:

PART 1

1. PKN ORLEN S.A in figures, data and facts - an unknown dividend star? Comparison with industry, sector and continent

PART 2

2. fundamental analysis of the share via BASS-T analysis and Graham extrapolation

PART 3

3. cross-check of PKN Orlen S.A. via Piotroski Score and concluding remarks on the topic

PKN ORLEN S.A., headquartered in Plock, Poland, is a refiner of mineral oil and is known primarily to you by a specific brand name: STAR. This is because, in addition to its role as a refiner of mineral oil, PKN ORLEN S.A. performs an important function as the operator of a network of service stations (see (1), (2)).

600 STAR and ORLEN service stations in Germany are accounted for by the German subsidiary ORLEN Deutschland GmbH alone (cf. (3)).

29 billion euros in annual sales and the addition of a service station network of OMV Deutschland GmbH, which consisted of 56 service stations after all, are decisive for the expansion course of this energy group (cf. ibid.).

These points, among others, make PKN ORLEN S.A., the umbrella company of ORLEN Deutschland GmbH, the largest company in Central Eastern Europe (cf. ibid.).

But where can I find PKN ORLEN S.A.? Where does their money come from?

Basically, PKN ORLEN S.A. can be found in Poland, Germany and various Eastern European countries. A look at the regions tells us that the domestic market in Poland contributed to 55.9% of sales in 2020 and 54.6% in 2021. No other country achieves such high values, because if we look at the remaining countries, we see that Germany is far behind in second place with just 13.1% of sales in 2021. With the exception of the category "Other countries", the focus markets are isolated at country level in the following countries (see (2)):

- Poland (54.6%)

- Germany (13.1%)

- Czech Republic and Slovakia (11.6%)

The 4th place goes to the group of Lithuania, Latvia and Estonia. TOGETHER, these account for just 6% of sales. A look at the shareholder portfolio reveals, unsurprisingly, that the Polish government has a 49.9% stake in this utility. The remaining shares are all below 5.3% each and therefore relatively insignificant compared to the share of the Polish government (cf. ibid.).

The company is listed in a relatively niche-like manner in specific markets and indices, which include, for example, the STOXX Europe in its expansion with 600 companies. The more regionally specific STOXX Eastern Europe requires only 50 companies to include PKN ORLEN S.A. (cf. ibid.).

Upon closer examination, it is hard to argue away PKN ORLEN S.A.'s influence on the STOXX Europe 50 Index. While the top sector is NOT the energy sector, but banks with a 27.5% share, the energy sector follows in second place with a large gap to consumer staples, services, etc. A similar picture emerges in the weighting by country. Although Turkey has the largest share of the index with a weighting of 32.4%, it is followed by Poland with 32.2%. Only then come Greece, Hungary, the Czech Republic, etc., with a majority weighting of less than 10% (see (2), (4)).

Why is this so? Why is this king of the Central Eastern European energy sector so unknown? What does it offer investors, among other things?

If you look at the performance of the STOXX Europe 50, its negative return of -11.1% per annum over the last 5 years in a 5-year cycle is strikingly negative. If this is related to a single year only, it is even a proud 52.5%....IM MINUS (see (4)).

If one wants to exclude major external effects, most index operators offer a benchmark in the form of an additional index. In the case of the STOXX Europe 50, the STOXX Europe Total Market Index is used. I will go into why I find this somewhat unfortunate later.

So while the STOXX Eastern Europe 50 with PKN Orlen has lost an annualized 11.1% over the last 5 years, the STOXX Europe Total Market Index (SETM) "shines" with a return of 1.8% after all (see (4)).

What does this tell us about PKN Orlen S.A.?

Nothing to not much. Even though PKN Orlen S.A. is the largest position in the index at 6.1%. Here are my 3 thoughts on why this sector comparison is too macro and can only provide a rough overview of PKN Orlen S.A. (see (3), (4), (5)):

1) The industry structure of the SETM is unequal - The related index of the STOXX Europe Total Market Index is logically much broader in terms of its overall industry structure and includes markets in which PKN Orlen S.A. is not active.

2) The energy sector is only a minor sub-factor with just 6.6% in 5th place.

3) At most, Germany in 4th place in the index weighting represents a main market for PKN Orlen S.A..

Why do you explain this?

In fundamental analyses, you can start from the small (i.e. the group), approach the medium (i.e. the energy sector of Central Europe) to the macro level (the associated index - in this case: the STOXX Europe Total Market Index). I always choose this approach when I want to analyze a single company on its own.

We now know that PKN Orlen S.A. is part of an index that has performed 11.1%+1.8% = 12.9% worse than the broad European market over the last 5 years (see (4), (5)).

Is that it already? Can we go home already?

No - because we are comparing sector bets here (STOXX Europe 50 Total Market Index) with the broad European market (STOXX Europe Total Market Index). We now have to do two things according to the previous explanations:

1) How does PKN Orlen S.A. perform in isolation compared to the benchmark index?

2) How does PKN Orlen S.A. perform compared to the energy sector?

3) How does PKN Orlen S.A. perform compared to "common" dividend stocks from the energy sector?

We start with 1) the benchmark index. Using (6), I compare the largest position of the index with itself and find relatively significant differences. Year-on-year, the index underperforms PKN Orlen S.A. very significantly. We recognize:

PKN Orlen S.A. has lost about 26.10% in value, but the benchmark index has been MINIMUM 20% weaker than PKN Orlen S.A. since February 2022. In fact, the largest difference was reported in July 22: PKN Orlen S.A. at 90% (i.e. 10% loss) and the benchmark index more than 58% worse in comparison with just over 38% value retention since one year. The 200-day moving average is almost at a 45° angle, approaching the -48% mark from almost 0% divergence in January 2022. The 50-day average shows the decline of the index all the more, but it has been below the real price since the end of October (see (6)).

What does this tell us?

It is relatively simple: In the long term (200-day average), the index has performed much stronger and is far from reaching its original potential. In the short term (50-day average), it seems that a first recovery has already started in relative terms since the end of October and the price is approaching its long-term trend again. If one were in an unknown market, one could thus conclude a sudden and devastating event, whereas first recovery tendencies are visible (see (6)).

If we extend the chart analysis to the 3-year cycle, we get a surprising picture. PKN Orlen S.A. underperformed the market and this by an average of about 10% up to the described 1-year period. The long-term trend, shown here via 200-day moving average, illustrates the immense volatility potential of the STOXX Europe 50. However, against the background of the lack of diversification of only 50 companies by market capitalization, this is hardly surprising and highlights a typical sector betting problem. Contrary to popular belief, there is NO "free lunch" on the stock market - the more diversification the less potential return (cf. (6), (7)).

The present sector development underpins my opinion more than clearly at this point: If I want more return, I have to turn the risk screw. In the following, I call this the risk-return tradeoff. I would like to dwell in particular on the key opinion (3) of source 8. Translated into German, this states:

"Investors use the risk-money tradeoff to make decisions about individual investments [here that would be PKN Orlen S.A., author's note] and entire portfolios [that is done by the respective investor for himself, author's note]" (source (8)).

The STOXX Eastern Europe 50 Index failed as a sector bet against the investment in PKN Orlen S.A.. It must therefore be stated here that in this comparison no conclusion can yet be drawn against PKN Orlen S.A.. We now know:

• In the 1-year cycle, the forecast for PKN Orlen S.A. seems positive, if necessary.
• In the 3-year cycle, there is a risk of underperformance against the corresponding European market index.

Let's now look specifically at the energy sector and put PKN Orlen S.A. in relation to the iShares MSCI Europe Energy Sector UCITS ETF. This ETF includes only energy companies from Europe and focuses on high and mid cap positions. It was launched in November 2020, consists exclusively of equities, and as many as 99.98% of the companies included are ESG screened. So there is data available for these companies, which shows that the data quality on the companies is high quality.

If we look at the top positions, we notice an absence of PKN Orlen S.A.. Instead, Shell, Total, BP are in positions 1-3 and occupy 68.03% of the index (see (9)).

Why then is the ETF optimal for comparison?

All companies are directly or indirectly compared to PKN Orlen S.A. via their service station network or their petroleum exposure, so we can see an isolated difference to PKN Orlen S.A. in the composition here.

If we compare PKN Orlen S.A. with this sector in a 1-year comparison, the difference between the two financial products is 25.02% in favor of the ETF. However, the truth is also that PKN Orlen S.A. outperformed the market from December 2020 up to and including January 2022, and at its peak it did so by up to 50.51% in October 2021. Due to the particularly short-term trend in the 3-month comparison, we notice an alignment, so that the current difference between the market and PKN Orlen S.A. is approximately 8.71%. It can therefore be stated that PKN Orlen S.A.:

• For a long time outperformed the overall market with stars like Shell, BP and co.
• The year 2022 was a trend reversal and not a good year for PKN Orlen S.A.
• The stock might just have an interesting entry point purely based on chart analysis.

Just to clarify the latter, I will follow with a quantitative stock analysis in a moment. I use charts only to visualize a result.

Let's take a look at a very mean comparison of a) the energy sector ETF and b) PKN Orlen S.A. with the Überkings Shell, Total and ExxonMobil.

Year-on-year, Shell's performance towards the end resembles that of the market, with a relatively strong outperformance visible initially. In May, this was as high as +23.15%. In this time horizon, Shell has thus adjusted to the market. Total, on the other hand, shows a rather clear underperformance of the market potential, which is particularly evident throughout the chart. It is irrelevant whether I refer to April (-20% in comparison), May (-10% in comparison) or even November (approx. -10%). This energy giant is clearly underperforming the market here.

ExxonMobil, on the other hand, is well above the market with a 37% difference and has consistently outperformed year over year. So what happens if I take PKN Orlen S.A. into the comparison with these giants and take out the sector ETF?

In the 3-month comparison we see a surprising result: PKN Orlen S.A. is the clear winner purely driven by performance, with a value gain of approx. 24%. Even ExxonMobil achieves only 1 percentage point more and finishes in 4th place. It is followed by Shell in 3rd place and Total in 2nd place (see (11)).

In a year-on-year comparison, however, PKN Orlen S.A. does not stand a chance and finishes with a difference of approx. 25%+15% = 40% to the third-place finisher in the form of Total Energies S.A.. Shell's difference is only insignificantly above at approx. 43% more return than PKN Orlen S.A., while ExxonMobil makes the rocket and closes relatively with approx. 80% more return (see (12)).

A devastating result.

Is that it for the Polish champion?

I don't think so - in my opinion, the current situation points to a competitive hidden champion, which is not without reason considered the largest Central Eastern European energy company and is essentially a sector leader in ETFs. Moreover, we have been talking exclusively on a fundamental-chart level so far.

What we have not done is to analyze PKN Orlen S.A. stock too quantitatively.

This will happen in the following second part! You will find it here for reasons of clarity and CCF competition:

PART 2:

https://app.getquin.com/activity/PuJDIhaiZQ?lang=de&utm_source=sharing

If you are also interested in the ASAHI Group, the Gladstone family and general market views and exciting topics, I encourage you to follow me on Getquin and Youtube 😊

Both are my homebases and I do best with my more in-depth content there.

My next ambitious goal on Getquin are the 900 subscribers subscribers by June 2023 and on Youtube I would like to reach the from currently 205 subscribers to reach the 300 mark by then as well.

But for that I also need your feedback! Did you like it? Do you feel ready for the stock analysis now? Every constructive opinion counts 😊

If you are more interested in PepsiCo as a seasoned and better known company, you can find my latest analysis attached.

https://youtu.be/vGCzY5DWDVs

Thanks a lot!

Your Bass-T

#dividende
#dividendencheck
#aktien
#aktienanalyse
#etfs
#etf
#orlen

Sources:

(1) https://www.onvista.de/aktien/POLSKI-KONCERN-NAFTOWY-ORLEN-SA-Aktie-PLPKN0000018?referrer=https%3A%2F%2Fwww.google.com%2F

(2) https://www.marketscreener.com/quote/stock/POLSKI-KONCERN-NAFTOWY-OR-1413342/financials/

(3) https://www.orlen-deutschland.de/DE/UberORLEN/Ueber-Orlen/Seiten/UeberOrleninDeutschland.aspx

(4) https://www.stoxx.com/document/Bookmarks/CurrentFactsheets/EEBCV.pdf

(5) https://www.stoxx.com/document/Bookmarks/CurrentFactsheets/BKXGV.pdf

(6) https://www.wallstreet-online.de/indizes/stoxx-eastern-europe-50-eur-net-return/chart#t:3m||s:lines||a:abs||v:day||b:246192,929424%20%7C%20Polski%20Koncern%20Naftowy%20ORLEN%20(Aktie)||ads:null

(7) https://magazin.comdirect.de/finanzwissen/anlegen-und-investieren/was-sind-branchen-etfs-und-wie-koennen-anleger-diese-nutzen

(8) https://www.investopedia.com/terms/r/riskreturntradeoff.asp

(9) https://www.ishares.com/de/privatanleger/de/produkte/315824/ishares-msci-europe-energy-sector-ucits-etf?switchLocale=y&siteEntryPassthrough=true

(10) https://www.wallstreet-online.de/etf/a2qbz1-ishares-msci-europe-energy-sector-ucits-etf-eur-acc/chart#t:3m||s:lines||a:abs||v:day||b:246192,929424%20%7C%20Polski%20Koncern%20Naftowy%20ORLEN%20(Aktie)||ads:null

(11) https://www.wallstreet-online.de/etf/a2qbz1-ishares-msci-europe-energy-sector-ucits-etf-eur-acc/chart#t:1y||s:lines||a:abs||v:day||b:15225,850727%20%7C%20TotalEnergies%20(Aktie);13060,A3C99G%20%7C%20Shell%20(Aktie);17153,852549%20%7C%20Exxon%20Mobil%20(Aktie)||ads:null

(12) https://www.wallstreet-online.de/aktien/polski-koncern-naftowy-orlen-aktie/chart#t:3m||s:lines||a:abs||v:day||b:13060,A3C99G%20%7C%20Shell%20(Aktie);15225,850727%20%7C%20TotalEnergies%20(Aktie);17153,852549%20%7C%20Exxon%20Mobil%20(Aktie)||ads:null

Today a share in the #dividendencheck that most of you probably have in your portfolio.

Coca-Cola, the largest producer of soft drinks in Germany in terms of sales, has been increasing its dividend for 61 years and is therefore one of the dividend kings.

How safe is the dividend?

The payout% of profit and FCF is 77% and 76%, respectively. With these values in combination with the status as div. king, it is highly probable that the dividend will also be increased in the coming year in order to maintain the king status.

$KO in my portfolio

Savings plan: 60€/month

Buy In: 49,69€

Net dividend received (since 2018): 113.68€.

YoC: 3.46%

Today times the alliance in the #dividendencheck

It is one of the largest insurers in the world, but also active in asset management. The dividend has not been reduced for 13 years.

How safe is the dividend?

The payout ratio from FCF is currently 18.7%. In 2022 there was an increase despite the lawsuit in the USA. In addition, an increase of at least 5%/year is promised in the future. I am therefore optimistic about the dividend.

Allianz in my portfolio:

Allianz is one of two German stocks in my portfolio.

- Savings plan: 60€/month

- Buy In: 200,65€

- Net dividends received (since 2021): 92,87€.

Diageo in the #Dividendencheck

The world's largest spirits producer (by sales) and dividend aristocrat has now been paying an annually increasing dividend for 35 years and has a portfolio of over 150 brands that are virtually unmissable for drinking pleasure

How secure is the dividend?

The payout ratio of profit and FCF is 54% and 62%. Nothing is certain on the stock market, but these values in combination with 35 years of continuity strongly suggest that a (rising) dividend can be expected in the future.

Diageo in my portfolio:

Diageo is already since 2018 in my portfolio and free according to the motto booze is always one of my forever investments:

-Savings Plan 60€/Month

- Buy In: 40,73€

- Net dividends received: 84,67€

without any withholding tax as there is no such thing in U.K. :D

2️⃣5️⃣ BASIC POINTS

INDIA WINS THE VOTE🇮🇳🇮🇳🇮🇳

7x Indien🇮🇳 vs. 4x Walmart🛒. The community has spoken!

With that, the next topic will be the introduction of Indien🇮🇳

Also feel free to check out my new GLADSTONE LAND video 😃 $LAND

https://youtu.be/UbKe6TRCj2I

Your Bass-T

#reit
#dividende
#dividendenaktie
#dividendencheck