Evergreen’s bizarre valuation of one times the price-to-earnings ratio has made the locked-in 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 ranks 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 stocks, whether it is stock price increases, valuation calculations, or shareholder rights protection, there is a special existence. At present, it only has a price-to-earnings ratio of 1 times, and the bizarre valuation has been spread under the sun. The only chance to change is that shareholders take actions to protect their own rights and require Evergreen to reasonably distribute the “windfall windfall” that has flown out of the sky during the three years of the epidemic. “—This is the profit due to shareholders.
Evergreen started to rise from 11 yuan in July 2020, soared to a maximum of 233 yuan in July 2021, an increase of 20 times in one year, and then reached 80 yuan before the capital reduction in September 2022, a drop of up to 65%, and the stock price rose sharply. Afterwards, the EPS (following-tax net profit per share) for the first three quarters calculated on the basis of the capital reduction of 21.1 billion yuan was 143.8 yuan. Assuming that the annual profit is 150 yuan, the current stock price is almost 150 yuan, and the price-to-earnings ratio is only 1 times. The price is strong.
The company has the final say on how to distribute the cash
“Financial News” reported that Evergreen’s net value per share reached 254 yuan, with a stock price-to-book value ratio of 0.6. The cash and equivalent cash at the end of the third quarter reached 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 not clear. “Shareholders’ rights and interests are in the company, and cash decision-making power is in their own hands. If you distribute it to employees, everyone will thank you, but if you distribute it to shareholders, you will have nothing.” A chairman of a listed company revealed his truth in private.
It is difficult for small shareholders to share in the upstart epidemic
However, Caixun analyzed that “shareholders’ rights and interests have different meanings for large and small shareholders.” A senior investor who once served as a director of a listed company and has practical experience in corporate governance said that taking Evergreen as an example, he has made a huge profit of 5,000 in the past three years. A large amount of cash remains in the company, and operators can dispose of it at will, while small shareholders can see it but not eat it, which is the biggest reason for the stock price downturn; therefore, are operators willing to use this windfall with Shareholder sharing is a key factor in stock price performance. Taiwan’s corporate governance has always been “only seeking to prevent disadvantages, not seeking profit.” It avoids discussing the rational use of shareholders’ rights and allows companies to retain great discretion, which really hurts shareholders’ rights.
Evergreen’s high profits during the epidemic were abnormal. If we take the EPS of the 10 years before the epidemic and from 2010 to 2019, the highest was 4.94 yuan in 2010 (the main cause of the financial tsunami was the loss of 3.22 yuan in 2009), the lowest was negative 1.88 yuan in 2016, and the average was 0.24 yuan. Simple restoration The average EPS following the capital reduction was 0.6 yuan; the annual cash dividend payment rate was only 6.3% during the same period; the average annual cash dividend per share was 0.13 yuan during the same period, and it was 0.325 yuan following the capital reduction was restored. The conclusion is that if you look at the normal 10-year average profit of Evergreen, it can be said to be a small profit, at least not losing money, but the cash dividend distribution rate is very low.
Secondly, according to a report by Caixun, even if Evergreen is beaten back to its original shape from 2023, it will neither earn nor lose in the next 10 years. However, earning 24.3 billion yuan following tax 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 whole year), and 579.8 billion yuan in three years, can be regarded as The windfall should be shared with shareholders.
For example, if the dividend distribution 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 10 yuan should be allocated every year for the next 9 years. After all, there are a lot of high-end hold-ups in Evergreen’s stock price, and following the capital reduction, only 40% of the shares are left. As mentioned above, even if Evergreen does not earn or lose in the next 10 years, it will allocate 50 yuan this year, 10 yuan per year in the next 9 years, and only 150 yuan in cash per share in the next 10 years. The current net value is 254 yuan, and there will be more in 6 years. 104 yuan is definitely enough for the company to respond to the situation.
Promise that the future dividend policy should be transparent
The “Financial News” report pointed out that, what’s more, Evergreen retains a huge shareholder’s equity, but only makes small profits. The ROE (return on equity) does not even have 1%, and this kind of company has no investment value. After all, the net worth refers to the realized value of the liquidation of the company. The company has not done anything and has not been liquidated. The net worth is just a reference. Even if it is Jinshan, you can see it but not eat it.
From the perspective of 10 years, it is impossible to make no profit and no loss is an unlikely pessimistic situation. If, as Evergreen said, buying new ships in a low-end economy is both environmentally friendly and efficient, and their performance is better than that of peers, we will definitely wait for the economy to pick up in the future. to better profits than the industry. If Evergreen can make its dividend policy transparent at this time, it will be a powerful reassurance to shareholders.
The “Financial News” report pointed out that senior accountants also believe that from the standpoint of a balanced dividend policy, even if the capital reserve is not much, they can retain a large amount of this year’s surplus, pay a 5% retained earnings tax, and promise shareholders But receiving cash dividends is the responsible approach.
In the face of external challenges to the company’s shareholders’ rights, Evergreen responded: “The company has always upheld corporate governance, and for profit distribution, it has comprehensively considered factors such as operating conditions, future planning, capital expenditures, and cash flow, and safeguarded shareholders’ rights and interests to give back to shareholders. The company’s relevant resolutions will also be in accordance with the company’s articles of association, and the board of directors will draw up a profit distribution plan, and submit it to the shareholders’ meeting for approval before distribution.”… (This article is from Issue 673 of the biweekly “Financial News”)
Further reading:
