I thought I will put out some of the interpretation of the data just to clear the head a bit.
10 Year Data
RMG share price grew from $0.36 to $2.18 for a total of 500% gain. Annualized gain was 19%.
Revenue grew from 99 mil to 311 mil for an annualized 12% growth. Each year’s revenue was more than the previous year.
Profit grew from 7.8 mil to 55 mil for an annualized 21% growth. That is seriously impressive shit.
Free cash flow grew from 10 mil to 60 mil for an annualized 19% growth. This is inline with profit.
Based on past history RMG is a seriously fast grower, even during the though times of 2009.
ROIC and COIC
ROIC and COIC have shown good growth from 9% to 19%.
For the past 10 years lowest ROIC reached was around 15% and highest 22%. While not exceptionally high, the consistent above average ROIC above cost of capital indicates certain advantage in their operating space.
It increases the probability future capital deployment will be accretive from a company perspective.
Valuation and Yield
RMG have never been high yielding. The highest earnings yield reached was during 2009 when earnings yield hit 7.14%.
Most of the years the historical yield is between 4.5% to 5.5%. This probably indicates most of the time PE is around 20 times.
A high quality company like this at 20 times indicate participants are willing to pay a premium for stability and superior growth.
If a fair PEG is 1, then at 20 times PE a necessary growth rate is 20% per annum.
Judging by the past 10 years, it does indicate that capability. Will good companies remain as good companies?
What is the total return going to be like?
Assuming the earnings yield to be 4.5%, and the payout ratio to be 15%, the distribution is 0.67%.
3.825% are reinvested at a roic of 17% at a cost of capital of 10%, the reinvested return is estimated to be > 3.825 x 17/10 = 6.5%
Organic growth of the industry in the past have been 12%, that is rather high.
A total return of distribution + reinvested return + organic growth could add up to 19%.
That looks like a very good return versus a current risk free rate or even most equities.
Of course the majority of the returns perhaps will come from the industry growth.
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