Seeking Alpha: Very Little Seems Expected Of Lianhua Supermarket

How to value publicly-traded companies is a question where you will get multiple answers. I am generally a big fan of discounted cash flow models, while others prefer to look at EBITDA, book value, or PE ratios. I mention this because I think how you approach the valuation question will go a long way toward determining whether you see opportunity in China's Lianhua Supermarket (0980.HK) (OTC:LHUAY).

I don't think anybody will argue that Lianhua is a particularly outstanding retailer, particularly as the market reacted quite favorably to some recent changes in the company's management. I'm not sold on the franchise model for supermarkets over the long run, and the company is going to have to deal with quite a lot of competition in its core markets of Shanghai, Zhejiang, and Jiangsu. If you value Lianhua by its earnings per share, I can agree that there wouldn't seem to be much potential here, but if you look at the cash flow the picture changes quite significantly and Lianhua could yet be undervalued.

Continue reading here:
Very Little Seems Expected Of Lianhua Supermarket

Seeking Alpha: CRE Playing The Long Game In China, And Looks Significantly Undervalued

Investors know all too well how challenging it can be to generate long-term gains from Chinese equities. Leaving aside those companies that play fast and loose with accounting or pin their hopes on favored relationships with government officials, there are the rapidly-changing economic trends that may make long-term forecasting even more challenging.

All of that said, I think investors should give serious consideration to China Resources Enterprise (CRHKY.PK). While CRE carries the black mark against it of being a state-owned enterprise, the company has emerged as a leading retailer and brewer in this fast-growing economy, and is looking to invest more in its food processing and beverage businesses.

What's more, the company plays the long game - using JVs and foregoing quick near-term profits to build a larger, more profitable business down the road. All told, I believe a case can be made that CRE shares should appreciate 40% to 50% over the next 12 to 18 months as China recovers and investors return to names leveraged to Chinese consumer spending.

Please continue here:
CRE Playing The Long Game In China, And Looks Significantly Undervalued

Investopedia: Conglomerates With A Dividend Angle

Conglomerates are not often the most popular companies on Wall Street. Most true conglomerates straddle many markets and lines of business, and that complicates life for analysts and investors. What's more, it is difficult to effectively allocate capital among businesses with very different dynamics, and that has led many conglomerates to underperform in the past. As a result of all this and more, many of these stocks historically carry a so-called "conglomerate discount," a discount to fair value that implies it is worse for shareholders for a company to do many things at once. 


All of that said, there are exceptions to every rule. Some conglomerates allocate capital very effectively and use their portfolio of businesses to tamp down cyclicality and to channel cash flow from mature industries into new growth industries. Moreover, many of these conglomerates generate substantial cash flow and pay healthy dividends.
That makes some of these names worth a look for income-oriented investors.

General Electric - The Return of the King? 
General Electric (NYSE:GE) used to be a no-brainer on any list of top-notch dividend stocks and any writer questioning its quality was usually shouted down quickly. Well, then along came the credit crisis and GE Finance turned from superstar to albatross. Nevertheless, GE still has a very attractive portfolio of companies and a solid dividend. While the company will still need time to regain its prior composure, higher returns on capital and better payouts seem likely in the years to come. 



To read the full piece, click below:
http://stocks.investopedia.com/stock-analysis/2011/Conglomerates-With-A-Dividend-Angle-GE-JNJ-PHG-SI-DD0606.aspx

Positive Volume Update From SABMiller

A little good news this morning from another portfolio holding - SABMiller (Nasdaq: SBMRY; LSE: SAB).

SABMiller reported that third quarter volumes increased 3%. That's about double the consensus expectation (+1.6%) and a decent result. SABMiller also reported that net organic sales increased about 6% for the same period. So, assuming that the company did okay on its margins (which isn't always the case), it was a pretty solid third quarter.

Looking at the numbers in a little more depth...

-Asia and Africa were both up 12% (in volume). That's great growth and a validation of SABMiller's emerging markets strategy, but the base to those numbers is low and the price points are still low.

- LatAm down 1%. A little disappointing, but SABMiller has always been challenged in this region. Hopefully Heinken will do a bit better, as my stake in FEMSA (NYSE: FMX) gives me a rooting interest there. More likely, though, Anheuser-Busch InBev (NYSE: BUD) is still doing pretty well...

- South Africa up 3% - good to see the company doing alright in its core market.

- Europe flat. I'd call that a surprisingly strong result given all of the negative chatter about Europe.

- U.S. down 2.5%. Still a tough market, and one that I don't think SABMiller likes all that much. I'm keeping my fingers crossed that SABMiller is smart enough not to double-down and acquire Molson Coors (NYSE: TAP) or any other U.S. asset. SABMiller did very well through this recession by focusing on emerging markets, and they'd be very wise to continue investing accordingly. I just wish there was a way they could increase their ownership in the beer JV they have in China w/ China Resources Enterprises (0291.HK).

As for the stock, SABMiller is another high-quality name in my portfolio that is depressing close to my fair value target. I'd really rather not sell, but it's foolish to ignore other great companies with cheaper stocks.

So, for now, HOLD SABMiller, but I'm looking to slowly shuffle towards the exit.

Disclosure: I own shares of SABMilller and FEMSA