Jan. 21- LFM 3Q 2012 and on Graham's multiple

*Below presentation is patterned after the format from Immovable as a mountain blog

LFM Q3 2012

assets: 2.822 billion pesos
liabilities: 564.67 million pesos
equity attributable to parent company: 2.258 billion pesos
paid-up capital: 500 million pesos
cash and cash equivalent: 273.47 million pesos
retained earnings: 1.727 billion pesos

Total current asset: 1.829 billion pesos

revenue 9 months 2012: 373.4 million pesos
revenue 9 months 2011: 302.3 million pesos
% change: 23.5 %

Advantage point: Under Company’s Financial Information

Since the Company is dependant on imported materials such as wheat grains, it is very much

affected by global prices of these products and the fluctuation in the exchange rate of the U.S. Dollar (US$)

against the Philippine peso. The appreciation or depreciation of the Philippine peso against the U.S. Dollar (US$) will have a material impact in the company’s future or long-term liquidity.

*Peso is going stronger against Dollar hence will give LFM more purchasing power to buy imported products as mentioned and consequently giving a better margin for profit.

net income 9 months 2012: 215.7 million pesos
net income 9 months 2011: 178.4 million pesos
% change: 20.9%

last closing price (21-01-2013):        48 pesos
earnings per share (annualized):       5.75 pesos
trailing price-earnings ratio:             8.35 x
book value per share:                      45.2 pesos
price/book value:                            1.06x

ROE: 12.7%

ROA: 10%

Net income margin: 57.8 %

current ratio: 5.0

debt-to-equity: 0.25

^{Applying Benjamin Multiple:}

PE= 8.35

B/V= 1.06x

PE X B/V= 8.85

Expensive Multiple as per Graham is 22.5

Now I would like to see a potential profit margin using this multiple

22.5 as expensive

Hence, 8.85 still has a 154% upside before it can reach to an expensive level (Graham’s multiple)

Current price is 48 + 154% is 122 pesos target until proven otherwise by 4Q numbers.

Note:

LFM did not disclose 2Q earnings and I think the cause of the downtrend of the price from July-Aug; from there I started monitoring. I am attracted to LFM despite its liquidity problem mainly for the dividend, and the uncanny trend transpiring last August was suspicious when Christmas season was approaching, peso going strong against the dollar should result to a better ground to increase earnings, yet the price was going down. A certain force may have been shooing away unwanted investors out of LFM. When I check the numbers, the movement does not look right; joining LFM looks right for me.

It was a chance also for me to position that time while other rats are feasting on RFM.

PE15x= 86.25

PE20x= 115 (122 @ 21x)

PE30x= 172.5 (PE of RFM)

Caveat