Honeywell Flour Mill

[kokoko]

Originally Posted by blanka

Tried Posting the prospectus without success. But please it can be downloaded from the the BGL securities website...I did not really read the entire document, but haven seen the forecast figures, i see no cause for optimism. My personal opinion.

Thank you Blanka, hope other gurus in the house will comment on it.
The prospectus is here: http://www.bglltd.com/downloadable/H...offer_full.pdf

[Michael]

Originally Posted by value_investor

Its important that we cut out hearsay, rumours and fearmongering until we have the hard facts! Just because some of us got burnt it doesnt mean that all the stocks, in particularly initial offers are on fire!

Have a look at the prospectus for youself and you'll see that this company is fundamentally strong and will continue to be... and thats what drives long term value and returns, not speculation! (any more! )

Since you joined the blog in December 2008 and the first thing of interest to you is the Honeywell Public offer and you talk Intelligently about stocks. Forgive me If I am wrong, but you sound like you are here to sell the Public offer.

I have not read the prospectus but I can't imagine anything that will make me buy a public offer in these times. Even the Private Placement I bought last year are afraid of listing in this market.

[hispy99]

Originally Posted by kokoko

Thank you Blanka, hope other gurus in the house will comment on it.
The prospectus is here: http://www.bglltd.com/downloadable/H...offer_full.pdf

Kokoko,

Thank you for this link. I have looked at the memo briefly and it does not look like an attractive IPO to me; I believe that the valuation it is too rich for my blood stream.

First, HFM is not a major player in this industry. According to Dangote Flour Mills (DFL) IPO memo, the 2 major players (DFL and Flour Mills) control around 65% of the market. HFM's memo says that there are 3 dominant players controlling 75%, so it's obvious that their market share is only 10% compared to 30-35% each for DFL and Flour Mills. In a business where margins are thin, the larger you are, the better you will be able to weather any price war that may occur.

Second, HFM's PBT margin from 2005 to 2008 ranged from 2.5% to 6%. They project 7% in 2009 rising to around 18% in 2013. How they intend to achieve that in the kind of business they are in, I have no clue. Granted, they are branching into pasta and noodles which might have better margins (Dangote's pasta division has PBT margins that are 3x or so better than the flour milling divison in 2006). However, I do not see how pasta and noodles will overtake flour milling in terms of contribution to the topline anytime soon. Using the 2008 consolidated revenue for HFM, it seems as if Honeywell Superfine (the company that makes noodles) had a trunover slightly higher than N2B compared to over N18B for the flour biz for FYE March 2008. Furthermore, wheat represents 85% of the cost of flour production, so you can imagine what that is doing to their margins in view of the current devaluation of the Naira.

Third, DFL's valuation is better than HFM if we just go by the forecasts provided by both companies. HFM has a PE forecast of 29, 11 and 7 for FYE March 2009, 2010, 2011 respectively. DFL has PE forecast of 7,5, and 4 for FYE Dec 2009, 2010 and 2011. Dividend Yield for HFM is 1.3%, 3.3% and 8.1%, while it is 10%, 13% and 16% for DFL. It might be helpful to look at other ratios such as Price/Book, Price/Sales, PRice/CashFlow, but my bed is calling

Fourth, with the bloodshed that has occured on the floor of the NSE, why bother with any PP/IPO except the valuation of the offer is so super attractive? You do not have to deal with certificate issues. I can see several banks with 2008/2009 PE multiples < 7x; I can see DSR with PE of 8; Flour Mills at 14x; several insurance companies < 15x; Beta Glass at 12x; Academy Press at 14x; WAPCO at 7x, Red Star at 7x...the list goes on and on. Why buy a company with a multiple of 29?

As for me and my house, we are letting this one pass us by.

[sofesky]

It's not about the time to invest, it's about the value of the Company! Everyone ought to look at the prospectus themselves and be their own judge.
In my opinion, Honeywell Flour Mills is a solid Company and a lot better than many others that are currently on the exchange

(By the way, just because someone is positive about the Company does not necessarily mean they are an employee)

[hispy99]

Originally Posted by sofesky

It's not about the time to invest, it's about the value of the Company! Everyone ought to look at the prospectus themselves and be their own judge.
In my opinion, Honeywell Flour Mills is a solid Company and a lot better than many others that are currently on the exchange

(By the way, just because someone is positive about the Company does not necessarily mean they are an employee)

I agree with you. As they say, beauty is in the eye of the beholder; what I may like, you may not like. So if I conclude that a company is not cheap, someone else may conclude that it is indeed very cheap. It is up to you to determine what is best for you.

[kokoko]

Originally Posted by sofesky

It's not about the time to invest, it's about the value of the Company! Everyone ought to look at the prospectus themselves and be their own judge.
In my opinion, Honeywell Flour Mills is a solid Company and a lot better than many others that are currently on the exchange

(By the way, just because someone is positive about the Company does not necessarily mean they are an employee)

Mmm...its not the time but the value? But how can one separate the time from the investment? I thought the value of something has a lot to do with time? I mean...all those ratios that was bandied about in the offer prospectus have to do with time, don't they? The sociopolitical developments in the country now is also a factor of time I think.

Anyway, look at it this way: why would I buy what is over-priced now (see the ratios mentioned by Hispy99) and with all the odds stacked against it (meaning Dangote and Flour Mills Nigeria, falling naira, the drought in Australia that made wheat prices higher) and hope a bigger fool will buy it off me later when I can buy what is under-priced on the floor of the NSE now and hope that a reasonable person will later pay me the right price for it?
Thank you but I am not buying Honeywell despite my sentimental interest (someone connected with Otudeko was my younger brother's teacher in Ibadan in those days).

[Natty]

Originally Posted by hispy99

Kokoko,

Thank you for this link. I have looked at the memo briefly and it does not look like an attractive IPO to me; I believe that the valuation it is too rich for my blood stream.

First, HFM is not a major player in this industry. According to Dangote Flour Mills (DFL) IPO memo, the 2 major players (DFL and Flour Mills) control around 65% of the market. HFM's memo says that there are 3 dominant players controlling 75%, so it's obvious that their market share is only 10% compared to 30-35% each for DFL and Flour Mills. In a business where margins are thin, the larger you are, the better you will be able to weather any price war that may occur.

Second, HFM's PBT margin from 2005 to 2008 ranged from 2.5% to 6%. They project 7% in 2009 rising to around 18% in 2013. How they intend to achieve that in the kind of business they are in, I have no clue. Granted, they are branching into pasta and noodles which might have better margins (Dangote's pasta division has PBT margins that are 3x or so better than the flour milling divison in 2006). However, I do not see how pasta and noodles will overtake flour milling in terms of contribution to the topline anytime soon. Using the 2008 consolidated revenue for HFM, it seems as if Honeywell Superfine (the company that makes noodles) had a trunover slightly higher than N2B compared to over N18B for the flour biz for FYE March 2008. Furthermore, wheat represents 85% of the cost of flour production, so you can imagine what that is doing to their margins in view of the current devaluation of the Naira.

Third, DFL's valuation is better than HFM if we just go by the forecasts provided by both companies. HFM has a PE forecast of 29, 11 and 7 for FYE March 2009, 2010, 2011 respectively. DFL has PE forecast of 7,5, and 4 for FYE Dec 2009, 2010 and 2011. Dividend Yield for HFM is 1.3%, 3.3% and 8.1%, while it is 10%, 13% and 16% for DFL. It might be helpful to look at other ratios such as Price/Book, Price/Sales, PRice/CashFlow, but my bed is calling

Fourth, with the bloodshed that has occured on the floor of the NSE, why bother with any PP/IPO except the valuation of the offer is so super attractive? You do not have to deal with certificate issues. I can see several banks with 2008/2009 PE multiples < 7x; I can see DSR with PE of 8; Flour Mills at 14x; several insurance companies < 15x; Beta Glass at 12x; Academy Press at 14x; WAPCO at 7x, Red Star at 7x...the list goes on and on. Why buy a company with a multiple of 29?

As for me and my house, we are letting this one pass us by.

Hispy99,
Confess, which of the "rays" did you use on the HFM prospectus? X, Gamma or Beta?
Sentiments apart, you have said it all. I cannot agree less. The executive summary you provided above is self explanatory; even newbie like me understood the intricacies of HFM IPO.

I have worked with the Honeywell group for few months 10 years ago. The guy is truly a guru and has sets of intelligent mind around him (both within and outside the country). He obviously knows what he is doing by floating this IPO at this trying time in the NSE. His aim may however be quite different from what we are all thinking.

Be that as it may, simple intuition and recent trends in the NSE (March 2008 to date) will tell you that "it is easier for the camel, or let us take it lightly - madam NSE, to pass through the eyes of the needle than the HFM IPO to see the light of the day.

No matter how it finally turns out to be, the Oba may surely achieve his goals and objectives on this IPO but a handful of investor’s fingers will be burnt.

I would rather relocate to Jos, Mumbai or even Afghanistan than to get the HFM IPO form.

Above is my personal view; Caveat emptor.

[BLUEMONEY]

It is very clear from the propectus that this one is Highly priced. when I saw that the IPO would also include an offer for sale, I Sensed that it would not come cheap because the original owners would not offload at a low price.

[knightofdelta]

I don't like this public offer. What with double digits PEs for 2009, 2010 and 2011? Nuff respects for all those that want to buy this offer. I'd rather put my money in CDs than buy this offer. The prospectus is in BusinessDay Thursday 4 December 2008 edition.

[Babs_O]

It is greedily overpriced. Price to book about 10 when some stocks are even selling at less than 1 in the ongoing sales sales sales.

I wonder what is in it for the under-writers. Can anyone throw some light on what is in it for them.

I can only imagine it could be okay for under-writers if they are currently the owners. If I am the one selling and and under writing parcels of land I want to sell I can even call it N200,000 per square meter of sand filled land by the Lekki Lagoon. Just get some people to part with their money.

[Michael]

Originally Posted by hispy99

Kokoko,

Thank you for this link. I have looked at the memo briefly and it does not look like an attractive IPO to me; I believe that the valuation it is too rich for my blood stream.

First, HFM is not a major player in this industry. According to Dangote Flour Mills (DFL) IPO memo, the 2 major players (DFL and Flour Mills) control around 65% of the market. HFM's memo says that there are 3 dominant players controlling 75%, so it's obvious that their market share is only 10% compared to 30-35% each for DFL and Flour Mills. In a business where margins are thin, the larger you are, the better you will be able to weather any price war that may occur.

Second, HFM's PBT margin from 2005 to 2008 ranged from 2.5% to 6%. They project 7% in 2009 rising to around 18% in 2013. How they intend to achieve that in the kind of business they are in, I have no clue. Granted, they are branching into pasta and noodles which might have better margins (Dangote's pasta division has PBT margins that are 3x or so better than the flour milling divison in 2006). However, I do not see how pasta and noodles will overtake flour milling in terms of contribution to the topline anytime soon. Using the 2008 consolidated revenue for HFM, it seems as if Honeywell Superfine (the company that makes noodles) had a trunover slightly higher than N2B compared to over N18B for the flour biz for FYE March 2008. Furthermore, wheat represents 85% of the cost of flour production, so you can imagine what that is doing to their margins in view of the current devaluation of the Naira.

Third, DFL's valuation is better than HFM if we just go by the forecasts provided by both companies. HFM has a PE forecast of 29, 11 and 7 for FYE March 2009, 2010, 2011 respectively. DFL has PE forecast of 7,5, and 4 for FYE Dec 2009, 2010 and 2011. Dividend Yield for HFM is 1.3%, 3.3% and 8.1%, while it is 10%, 13% and 16% for DFL. It might be helpful to look at other ratios such as Price/Book, Price/Sales, PRice/CashFlow, but my bed is calling

Fourth, with the bloodshed that has occured on the floor of the NSE, why bother with any PP/IPO except the valuation of the offer is so super attractive? You do not have to deal with certificate issues. I can see several banks with 2008/2009 PE multiples < 7x; I can see DSR with PE of 8; Flour Mills at 14x; several insurance companies < 15x; Beta Glass at 12x; Academy Press at 14x; WAPCO at 7x, Red Star at 7x...the list goes on and on. Why buy a company with a multiple of 29?

As for me and my house, we are letting this one pass us by.

This is just what I expected! Why? Companies do PO's to raise money, not to diversify shareholdings. The only way a company can come to the market with an attractive offering is if it does not need to raise money. Ot If the promoters simply want to sell out their company and leave the business. This is rarely ever the case. A Company with a P/E of 29 I will not even buy on the floor at the moment.

[Michael]

Originally Posted by Natty

Hispy99,
Confess, which of the "rays" did you use on the HFM prospectus? X, Gamma or Beta?
Sentiments apart, you have said it all. I cannot agree less. The executive summary you provided above is self explanatory; even newbie like me understood the intricacies of HFM IPO.

I have worked with the Honeywell group for few months 10 years ago. The guy is truly a guru and has sets of intelligent mind around him (both within and outside the country). He obviously knows what he is doing by floating this IPO at this trying time in the NSE. His aim may however be quite different from what we are all thinking.Be that as it may, simple intuition and recent trends in the NSE (March 2008 to date) will tell you that "it is easier for the camel, or let us take it lightly - madam NSE, to pass through the eyes of the needle than the HFM IPO to see the light of the day.

No matter how it finally turns out to be, the Oba may surely achieve his goals and objectives on this IPO but a handful of investor’s fingers will be burnt.

I would rather relocate to Jos, Mumbai or even Afghanistan than to get the HFM IPO form.
Above is my personal view; Caveat emptor.

Natty, it appears you purposely went out of your way to confuse me personally. You started by disagreeing with Hisspy and ended up explaining why Hisspy was right in his conclusion.

[hispy99]

Originally Posted by Natty

Hispy99,
Confess, which of the "rays" did you use on the HFM prospectus? X, Gamma or Beta?
Sentiments apart, you have said it all. I cannot agree less. The executive summary you provided above is self explanatory; even newbie like me understood the intricacies of HFM IPO.

I have worked with the Honeywell group for few months 10 years ago. The guy is truly a guru and has sets of intelligent mind around him (both within and outside the country). He obviously knows what he is doing by floating this IPO at this trying time in the NSE. His aim may however be quite different from what we are all thinking.

Be that as it may, simple intuition and recent trends in the NSE (March 2008 to date) will tell you that "it is easier for the camel, or let us take it lightly - madam NSE, to pass through the eyes of the needle than the HFM IPO to see the light of the day.

No matter how it finally turns out to be, the Oba may surely achieve his goals and objectives on this IPO but a handful of investor’s fingers will be burnt.

I would rather relocate to Jos, Mumbai or even Afghanistan than to get the HFM IPO form.

Above is my personal view; Caveat emptor.

bros, in these hard times, I used X-Be-Gam rays (a combination of X, Beta and Gamma).

[knightofdelta]

Value_investor should come out and defy all these bashing HFM is receiving... there may be more to the offer than we see. It is better to invest fundamentally especially in these hard times but we know for a fact that value investing go beyond the PEs and PBs. If there is something going on we need to know let us know.

As far as I am concerned this is the wrong time to float a public offer for stocks for any reason whatsoever. If HFM needs money to expand and do all those wonderful things in their prospectus, it would have been a good idea to look the way of floating a fixed income debt issue instead of trying to rip us off our money. I am sure that those investment bankers behind the offer would have considered that before going for equities. They could have floated a convertible or callable bonds, because no one wants to buy shares at this time that will give a dividend yield next to zero.

Ha... these investment bankers sef!

[Michael]

Originally Posted by knightofdelta

Value_investor should come out and defy all these bashing HFM is receiving... there may be more to the offer than we see. It is better to invest fundamentally especially in these hard times but we know for a fact that value investing go beyond the PEs and PBs. If there is something going on we need to know let us know.

As far as I am concerned this is the wrong time to float a public offer for stocks for any reason whatsoever. If HFM needs money to expand and do all those wonderful things in their prospectus, it would have been a good idea to look the way of floating a fixed income debt issue instead of trying to rip us off our money. I am sure that those investment bankers behind the offer would have considered that before going for equities. They could have floated a convertible or callable bonds, because no one wants to buy shares at this time that will give a dividend yield next to zero.

Ha... these investment bankers sef!

They must neeeeeed moneeeeeey desperately!

[hispy99]

Originally Posted by Michael

They must neeeeeed moneeeeeey desperately!

Good luck to them, I neeeeed my moneeeey desperately too. It's staying in my pocket.

[Babs_O]

Originally Posted by hispy99

Good luck to them, I neeeeed my moneeeey desperately to. It's staying in my pocket.

Abi o. (Yes o !). Make them buy am for themself.

[hispy99]

The Punch - News, Fresh and Factual

[Michael]

Originally Posted by hispy99

endorse Honeywell’s N19bn offer
By Udeme Ekwere
Published: Monday, 8 Dec 2008
Investors in the Nigerian capital market have endorsed Honeywell Flour Mills Plc’s Initial Public Offer, saying that with the fundamentals of the company, the offer will be profitable and will ensure maximum returns on their investments.

A statement from the company on Saturday, said that the National Coordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu, said that the company’s track record over the years had made the shares a good buy.

Nwosu, who spoke during the company’s investor’s forum, said that investors would be swayed to the offer because most of the products on the Honeywell stable were always in demand, and that investing in the company was sure to bring consistent and growing returns.

A lot of investors are also attracted to the offer because of the personalities behind the company, and the company’s legacy and track record of consistent growth, according to the statement.

The Chairman, Honeywell, Mr. Oba Otudeko, said that the coming of the company to raise funds when the market was witnessing downward turns, showed that it believed that the market would rebound in no distant time.

“The present ‘sleepy’ nature of the stock exchange is something that will be overcome. The stock exchange needs activity and if nobody puts faith in it, it will not get better. That is why we are continuing in our journey to the capital market,” he said.

Speaking in the same vein, the Managing Director, Honeywell, Mr. Babatunde Odunayo, said that the company had the right fundamentals to bring maximum returns to investors, while providing consumers with high quality products.

Then don't sell shares, buy them!

[mosbe]

Originally Posted by hispy99

Speaking in the same vein, the Managing Director, Honeywell, Mr. Babatunde Odunayo, said that the company had the right fundamentals to bring maximum returns to investors, while providing consumers with high quality products.

Last time i checked...The market has defiled Fundamentals... So right now "SIDON LOOK" is my chosen option.