Friday, September 16, 2011

RIM (Research in Motion) Q2 FY 2011-2012 Result & Valuation Analysis

Blackberry Maker RIM reported Q2 net income at $329 million vs. $797 million which it  reported in the same quarter last year, down 59%.

Revenue came in at $4.2 billion vs. $4.6 billion in Q2 previous year, down 9%.

The company's total cash, cash equivalents, short-term and long-term investments amounted to $1.4 billion as of August 27, 2011, compared to $2.9 billion at the end of the previous three-month period, a decrease of $1.5 billion.

"Uses of cash included strategic purchases of intellectual property assets associated with RIM's participation in a consortium of companies that successfully bid to acquire Nortel Networks Corporation's patent portfolio, of which RIM's cost is approximately $780 million, capital expenditures of approximately $285 million and working capital requirements," the company said 

For Q3 of FY- 2012 fiscal ending November 26, 2011, the company expect revenues to be in the range of $5.3-5.6 billion.

The result didn't went well with the markets and the stock fell down more than 18% in Toronto Stock Exchange to close at $24 CAD.  52 week high low for the stock is 69.3 / 21.4

At the current market price, the blackberry maker's market value is tad over $12.5 billion CAD. Adjusting the cash and cash equivalents the company is trading at an enterprise value of around $ 11 billion CAD.

RIM Valuation:
  • In FY 2010-2011 the company recorded a revenue of $19.9 billion and net income of $3.4 billion (EPS = $6.34). At the current market price of $24 the stock is available at just 4 times PE multiple based on previous year EPS numbers and 0.6 times based on Fiscal 2011 EV to Sales ratio. 
  • In FY 2011-2012 the first half revenue and net income for the company is $9.1 billion and $1.02 billion respectively. Even with the current run rate the company should achieve a net income of at least $ 2 billion in the current fiscal. At $24 the stock price is discounting fiscal 2012 EPS by 6.25 times.
  • Investors with 1 year perspective can buy the stock for a descent return as the current valuation is very attractive vis-a-vis the company fundamentals.

No comments:

Post a Comment

15 Stock Investment Tips from Rakesh Jhunjhunwala

1. Always go against tide. Buy when others are selling and sell when others are buying.  2. If you believe in the growth prospects o...