Evergreen’s bizarre valuation of one-time price-to-earnings ratio made stranded shareholders want to cry without tears. Evergreen should be open and transparent, and rationally allocate huge abnormal profits, which is the way of responsible corporate governance.
Text/Guo Tingyu
According to the “Financial News” report, Evergreen Shipping, which is the sixth largest shipping company in the world in terms of shipping capacity, not only has influence in the industry, but in the history of Taiwan’s stock, whether it is increases of stock prices , valuation calculations or shareholder rights protection, there is a special existence. At present, it only has a 1x price/earnings ratio, and the bizarre valuation has been leaked under the sun. The only possibility for change is for shareholders to take action to protect their rights and require Evergreen to reasonably distribute the ” manna manna” that flew from the sky during the three years of the epidemic. “—This is the profit due to the shareholders.
Evergreen started to climb from 11 yuan in July 2020, rose to a high of 233 yuan in July 2021, a 20-fold increase in a year, and then reached 80 yuan before the capital reduction in September 2022, a decline up 65%, and the share price increased significantly. Subsequently, the EPS (net earnings per share after tax) for the first three quarters calculated on the basis of the capital reduction of 21.1 billion yuan was 143.8 yuan. Assuming the annual profit is 150 yuan, the current stock price is nearly 150 yuan, and the price-earnings ratio is only 1. The price is strong.
The company has the final say on how the money is distributed
“Financial News” reported that Evergreen’s net value per share reached 254 yuan, with a share price-to-book value ratio of 0.6. Cash and cash equivalents at the end of the third quarter reached the 391.8 billion yuan, equivalent to 185 yuan per Share.
Why is Evergreen’s stock price so “cheap”? One is the pessimistic expectation of the economy, the other is that although there is a lot of cash in the account, will it be distributed to shareholders next year? Or is the company slowly spending? The market is unclear. “The rights and interests of the shareholders are in the company, and the cash decision-making power is in their hands. If you distribute it to the employees, everyone will thank you, but if you distribute it to the shareholders, you will have nothing.” chairman of a listed company revealed the truth about him privately.
It is difficult for small shareholders to share in the emerging epidemic
However, Caixun analyzed that “the rights and interests of shareholders have different meanings for large and small shareholders.” A senior investor who was once a director of a publicly traded company and has hands-on experience in corporate governance said that taking Evergreen as an example, he has made a whopping 5,000 profit over the past three years. A large amount of cash remains in the company and traders can dispose of it at will, while small shareholders can see it but not eat it, which is the main reason for the drop in share price, therefore, traders are willing to use this windfall with shareholder sharing being a key factor for the performance of the share price. Taiwan’s corporate governance has always been “only seeking to prevent disadvantages, not seeking profit.” It avoids discussing the rational use of shareholder rights and allows companies to maintain great discretion, which really hurts shareholder rights.
Evergreen’s high profits during the outbreak were abnormal. If we take the EPS of the 10 years before the epidemic and from 2010 to 2019, the maximum was 4.94 yuan in 2010 (the main cause of the financial tsunami was the loss of 3.22 yuan in 2009), the low was negative 1.88 yuan in 2016, and the average was 0.24 yuan. Simple restoration The average EPS after the capital reduction was 0.6 yuan; the annual cash dividend payment rate was only by 6.3% during the same period; the average annual cash dividend per share was 0.13 yuan during the same period, and was 0.325 yuan after the reinstatement of the capital reduction. The bottom line is that if you look at Evergreen’s normal 10-year average profit, it can be said to be a small profit, at least not losing money, but the cash dividend payout rate is very low.
Second, according to a report by Caixun, even if Evergreen returns to its original form by 2023, it will neither gain nor lose in the next 10 years. However, earning after-tax 24.3 billion yuan in 2020, 239 billion yuan in 2021, and 316.5 billion yuan in 2022 (EPS 143.8 yuan in the previous three quarters, estimated EPS 150 yuan for the entire year) and 579.8 billion yuan in three years , can be regarded as Windfall should be shared with shareholders.
For example, if the dividend payout rates in 2020 and 2021 are 49% and 39%, respectively, if the EPS is estimated at 150 yuan in 2022, at least 50 yuan in cash should be allocated per share and should be awarded 10 yuan each year for the next 9 years. After all, there are many delays in Evergreen’s share price, and after the capital reduction, only 40% of the shares remain. As mentioned above, even if Evergreen does not gain or lose in the next 10 years, it will allocate 50 yuan this year, 10 yuan annually over the next 9 years, and only 150 yuan in cash per share over the next 10 years. The current net worth is 254 yuan, and there will be more in 6 years. 104 yuan is definitely enough for the company to respond to the situation.
He promises that future dividend policy should be transparent
The “Financial News” service pointed out that, what’s more, Evergreen has huge share capital, but only makes small profits. The ROE (return on equity) is not even 1%, and this kind of company has no value of investment. After all, equity refers to the realized value of the company’s liquidation. The company did nothing and was not liquidated. Net worth is just a reference. Even if it is Jinshan, you can see it but don’t eat it.
From a 10-year perspective, making no profits and no losses is an unlikely pessimistic situation. If, as Evergreen put it, buying new vessels in a low-end economy is both environmentally that efficient and their performance is better than that of their peers, we will definitely wait for the economy to recover in the future to make better profits than the industry. If Evergreen can make its dividend policy transparent now, it will be a powerful reassurance for shareholders.
The “Financial News” report pointed out that senior accountants also believe that from the point of view of a balanced dividend policy, even if the capital buffer is not much, they can retain a large amount of this year’s surplus, pay a retained earnings tax of 5% and promises to shareholders But receiving cash dividends is the responsible approach.
Faced with challenges external to the interests of the company’s shareholders, Evergreen responded, “The company has always advocated for corporate governance and, for the distribution of profits, has comprehensively considered factors such as operating conditions, future planning, expenses capital and cash flow, and protected rights and interests of the shareholders to be returned to the shareholders. The related resolutions of the company will also be in accordance with the articles of association of the company, and the board of directors will draw up a profit distribution plan, and submit it to the shareholders’ meeting for approval prior to distribution.”… (This article is taken from issue 673 of the biweekly magazine “Financial News”)
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