Arcadis Analysis

Dear readers,

As promised an analysis of Arcadis will follow. I consider this to be a very interesting company, and I will now explain why.
Let's look again at the most important points when investing into a stock:

Good growth of earnings (15-30% a year ideal)
Healthy Balance Sheet
Good dividend payout (not applicable to investment companies)
Stock Price
Room for expansion
Not too much competition
Crisis resistance




Growth net earnings

Let's start with the first point - earnings. From the key figures of the past five years I got the following information:
2008 - 0.95
2007 - 0.90
2006 - 0.74
2005 - 0.55
2004 - 0.37

That's an average growth rate of ±20.7% per year in net earnings per share. That's good.
H1 2009: 0.61

The earnings in the first half year of 2009 are even better. Looks good to me.
Now that the earnings are good let's look at the balance sheet:

Balance sheet
Total non-current Asset -373.4
Total Current Assets -667.8
Total Assets -1,141.2

Equity - 248.9
Total non-Current Liabilities - 303.7
Total Current Liabilities -488.6

Just looking at this I noticed that there are a lot of current liabilities. This is quite dangerous.
However, the company has more than 100 Million in cash and 506.6 in (un)billed receivables.
Therefore I think that the company can handle the debt and will not go out of business anytime soon.
Also the company decreased total debt by 45-50 million dollars in the first half of 2009 compared to 2008.
I think the balance sheet is quite alright, since the company has all the necessary funds to pay for all debt.

I didn't list all balance sheet items here since it would require too much typing. If you want a good look, or have any comments, please have a look at the website of Arcadis and look at the H1 figures.

Dividend

The company pays a dividend of 40-60% of Net Earnings. I consider this to be a good dividend pay-out ratio.

Now the most important part
Stock Price

Currently the stock is priced at ±12.5-13 Euro's. This brings the market capitalization to approximately 800-900 Million. The earnings per share are approx 0.95, which gives it a price to earnings ratio of 13-14. This is not optimal, and I would much rather prefer if it was cheaper. However, keeping in mind the dividend pay-out ratio, and the GROWTH rate, I think this is attractive.

Taking a conservative price-to-earnings ratio of 10, if this company continues to grow at 18% a year for the next five years, that will result in a net earnings per share of € 2.3-3. The stock price would be worth at least €23 - 30 in five years. Also we must not forget the dividend. If the payout will be 40%, and the net earnings in the next five years will average 1.5, then in five years you will get an additional €3** worth of dividend approximately. This would lead to another 20% bonus.

** -> ((1.5*5)*0.4)/13 ± 20

Room for expansion and competition
This company has plenty of room for expansion I think. It operates as a consultant in various industries and has enough cash flow to expand business. Recently Arcadis acquired a water engineering company to strengthen its position in the water industry where there is hardly any real competition compared to other industries.^

^this statement is not based on hard evidence but deducted by perhaps inaccurate reasoning.

Crisis resistance
During the economic recession of 2008 the company has not only not made losses but has increased its profits. Seems alright here :)

All in all, I consider this to be an outstanding company, which is just slightly overpriced to its current value, but undervalued when the future, intrinsic value is considered.

If you have any comments,suggestions, I would be glad to hear them.

Portfolio Update

Hey guys,

I just wanted to give you a short portfolio update.

As of 19-09-09 it consists of:

Accsys PLC - 24.2%
AMG (Advanced Metallurgical Group) = 37.9%
Arcadis = 20%
Suntrust Banks = 17.9%

Shortly an analysis of Arcadis and Suntrust Banks will follow.

Present Guide for the Student

Hey guys/gals,

I suddenly came up with the idea that when my birthday comes near, I usually don't know what to ask for. So while I still have ideas I ought to write 'em down I figured. Anyways, here goes the list for if you want to give me any gifts:

Parker Jotter Pens - You know those simple pens from Parker? I love them, so please - if you buy me a pen, buy one like that. €5-7,-
Gillette Fusion Power razor blades - Razor blades are fricking expensive, so if you really don't know what to buy, buy me a 4 or 8 pack. € 16 or € 28.
Sting, Nothing like the Sun CD - I love Sting, and that's one of his best albums which I still don't have. €20,-
Security Analysis 2008 Edition - A huge book, costs about 50-60 euros. If you really love me, you're gonna get me this book ;)
Sushi at Soho - If you're with a group and don't know what to do, ask me to go eat Sushi with you. I like Sushi. €16,- for Lunch
Mac OSX Snow Leopard - An upgrade to my existing operating system. If you just won the lottery I deserve it. € 30,-
A book with recipes to make cocktails - I love making cocktails, so 1001 cocktails or something similar always works. €10?
A book with recipes for tasty dinners. - I like cooking sometimes, so get me a cheap good book. Preferably something exotic.
A bottle of Tequila (White or Gold) - Tequila is good for making cocktails. I like tequila. €20-25.
(Same goes for Malibu, though preferably tequila.)
The Alchemy of Finance, by George Soros (or any other book by him). - I'm very interested in what he has to say, so if you can get me a book of his I'd be happy. € 10-20
Latin Dance/Guitar CD's - I enjoy listening to Mediterranean/latin music a lot, especially if there's a good acoustic guitar in it. €5-20

If I find something else out, I'll post.

Have a nice day!

Dmitry

University Started!

Hey guys,

Well, university started this year. I love it! I managed to meet so many new people, among which there are a lot of foreign students. I love the subjects (although they are hard, and it's a lot of work) and the campus is great. I'm having a lot of fun studying, and the traveling is do-able. Every day I have to travel like 1h and 10 minutes one-way, so a bit more than 2 hours every day.

The subjects I've had until now are as following: Organisational Behaviour, Accounting and Maths. They're all quite alright subjects, and the teachers are alright, especially for Organisational Behaviour. Actually the Organizational behaviour teacher is pretty nice and with a good sense of humor.

There's more good news: in a couple of months I'll have more capital to invest, meaning that you'll see stock analyses more often since I'll be looking for more good companies to invest in (probably). Lately I haven't been very active posting analyses of companies due to time constraints and such. University is a huge load of work and I have to plan my time very well.

What's also fun is that I started salsa lessons with my girlfriend. It's really fun, though I'm still not good at it, I hope to be good at it in the future. I'll keep you updated on that.

Anyways, stay tuned.

Dmitrij

Another update

Good evening,

It's quite a good night tonight, even though I'm still having a slight cold from a few days ago. So let's start where I left off last time - the MAK camp.

Following the camp there was an introduction week of the university of Tilburg. It was very nice, though I had to stop after two days because I didn't feel quite right anymore. /cough/alcohol/cough/ During the introduction week we did...ehm...We drank beer and partied, and drank more beer.

The days after the introduction week I had some friends come over for some evenings. I really enjoyed it, and among other things I learned how to make a good tequila sunrise cocktail. It's a really tasty drink, the only problem being that it's only a summer drink and not suitable for drinking during fall or winter. Also, a few days ago, I cooked a meal for my girlfriend and myself. It turned out really nice. I'm gonna be cooking more often.



What I also forgot to mention is that during the introduction week at the Tilburg university I was invited to join a student investment club (FAT - Finance Association Tilburg). These are people who come together every week to discuss the stock market and general world markets and have an affinity for investing. Heck, they even got their own fund. So I'll be joining them shortly and I'm really curious as to what it's gonna be like.

Also as you might have noticed there is a file for download in the right column next to my posts. That's the thesis about stock investing I'm working on, and I hope to have it done in a couple of years (preferably by the time I finish my university studies). If you have any contributions, suggestions etc. I'd love to hear them of course. I hope to make it a great piece which will be useful to people.

The stock markets are doing quite well lately, almost too well...I won't be surprised if they'd fall anytime soon. I'm not worrying though, because if they fall I'll be happy to do some more shopping (shit where am I going to get the money from?!). I'll soon probably post another analysis or two, when I find something interesting. Until that time I'm holding all I have.

About today at the university: today I had a study information day, meaning lots of talk and nonsense and listening to things we'd heard already twice before again. The good news is that I picked up my books, and they look really interesting, albeit hard. Can't wait to start the actual studying.

Last thing I want to mention is that I think I'm ready to take on more leverage when it comes to the stock market. What I'll think I'll be doing is slowly increasing the money supply in my portfolio, so that maybe 10-15% of it is leveraged. That's just a side thought.

Stay tuned people!

Dmitry

MAK Camp

Hey guys,

I just came back from a student camp today. From the 13th 'til the 15th of august I went to a camp with all my fellow students from the same course. It was... awesome. The first day we had to gather at the Eindhoven central station at 8.30 in the morning. We then went to the technical university to be sorted into different groups. Each group was assigned two mentors and a country (Yeah great sentence I know). We were Scotland, and most guys found the two mentors -ahem- nice. My group was quite alright. The group consists of 16 people, I believe 7 girls and 9 guys or something along those lines. Haven't counted 'em. Anyway, this group I've been sorted in will remain for the rest of the year, meaning that I'll see them pretty often during the course of this year.

So, after the sorting stuff we did some canoeing. Damn that was cold! We were thrown into the water like 5 times by other students. Even managed to get the canoe smacked against my head. Still a lump on my head right on top. After the canoeing we had lunch and we continued with survival activities. That was some dirty stuff alright, no kidding. We were thrown into pools of water with all green stuff on top and what felt like sh*t underneath our feet. Not much remained of my shoes that day.

After all that a bus brought us to our campsite. It was a nice place, and I remember being there once already in primary school. Immediately after we arrived a queue started to form near the showers. I wasn't very much in the mood for waiting so I ate dinner first and took a shower thereafter. The dinner was good, the smell which lingered around me like a green cloud wasn't.

In the evening we had quite a nice show and a party. I thought the party on the first day wasn't that great. The second day is a totally different story...

On the second day we were woken up at around 8 o'clock, so we slept probably like 3.5-4 hours max. After a lousy breakfast, during which we were all looking at each other like zombies, it was time to play some games. Football with legs tied, piling up crates and the most memorable one of all - mud fight. The point of the mud fight was to crawl a distance while other people were throwing sponges with mud at you. Then the roles were reversed and we were the ones trying to hit our opponents faces. The last part of the mud fight was a free for all, in which everyone tries to make the rest as dirty as possible. Great fun.

A bit later we all took a shower and had a barbeque for dinner. After the barbeque an evening program commenced, followed by a great dance party. Dance, drink and a roof on fire. It was awesome.

Now let's see how I'll survive the TIK-Week, next monday 'til friday. If I ever post a stock analysis between the 17th and the 22nd of August, ignore it. Too many brain cells were killed the night before.

C yall, and make love!

Holiday rest and Sns Reaal

Hey guys,

As you might have noticed I didn't manage to get a post done before I left for my holiday. Sorry for that. From now on I plan to continue writing on a regular basis again. That being said, I think I should start telling you about my holiday.

For 8 days, from the 1st 'til the 8th of August, I was on a holiday to Bergeijk (a place 30 km to the south from here) with friends. It was really lovely - tranquil, pretty and warm, and I had a wonderful rest. The region is filled with filled with fields and forests and it's quite empty, just one of those non-urban areas with nature. There I read books, played poker (which I suck at by the way), slept long hours and well...had nothing on my mind most of the time. No stocks, no school, no internet, no work. Just relaxation at its best.

Yesterday I went to a place called Koblenz, a place in Germany, to visit my parents' friends. It was also really nice and I must say I really enjoyed my stay there. The town is lovely, with hills and visible remains of ancient Roman walls and two rivers running through. I also visited a friend of mine yesterday who I hadn't seen for a few weeks or so. We had a beer or two and some very nice conversations. 't was fun.

Today I went to the university of Tilburg to finalize my registration. I hope this time everything is going to be alright and that no documents go missing or something. We'll see. If something happens I'll of course post it here. That reminds me...I still need to get approx. 300 euros from various persons, and I haven't got it yet. Grmbh.

While I was away it so happened to be that the stock market surged upwards. I didn't catch up with all the news yet, but it never hurts when your stocks go up. Anyway, last time I told you how I changed my portfolio. Today, I added another holding. What I regret is that I don't have more money to put into that company, like double of what I put in now. This'll probably mean that I'll end up buying more shares against a higher price, because I hope to get more of this company.

Anyway, the company which I'm referring to is SNS Reaal. It's a bank/insurer. The stock fell from ±17 to 4.7 (price I bought it at). I looked at the company for quite a while and figured that it should make a good investment. In 2008, and especially the last quarter, the company made a huge loss (±800 Mln). In the first quarter they managed to make that loss a mere 4 million. I think it's safe to assume that the company will eventually get back on track and earn what it earned previously. This leads me to the following point:

In the past five years (excluding the crisis year) the company's earnings have been growing at approximately 7.5% a year compounded. Nothing special, I know. However, the average earnings per share is ± € 1,5. If the company manages to get back on track and gets only earnings of 1.2-1.3, the company's value is still at least 12-13 euros. Now it sells for 4.7. Sounds like a buy signal to me.

Stay tuned,

Dmitrij