Magix Sixes – Quick Check UPM-Kymmene OYJ (ISIN FI0009005987)
One stock which has been popping in and out of the Magic Sixes Screen several times is the Finish Paper Company UPM Kymmene.
Current “simple” value metrics are (stock price 8,30 EUR):
P/B 0.60
P/E Trailing 2010 5.4
Dividend Yield: 6,65%
Market Cap is 4.4 bn, there are no majority shareholders. The stock is fairly liquid.
Some standard quick qualitiy checks:
Tangible Equity: Tangible book value per share is 10,86 EUR (YE 2010), which represents ~80% of book value, so no issues here
Debt: Net debt per share is relatively high at ~7.1 EUR per share, however with ~2.5 EUR trailing 12M EBITDA per share, total EV/EBITDA at ~6.8 looks OK.
Free cashflow: Free cashflow is positive as far as I can look back (1999).
If I find a stock interesting, I try to do a quick check of historical earnings quality and cashflow usage based on Bloomberg numbers:
| Year | Earnings | Dividends | Free Cashflow | Debt per share |
|---|---|---|---|---|
| 2001 | 1.93 | 0.75 | 1.62 | 10.52 |
| 2002 | 1.06 | 0.75 | 1.67 | 10.53 |
| 2003 | 0.61 | 0.75 | 1.26 | 10.21 |
| 2004 | 1.76 | 0.75 | 0.70 | 9.58 |
| 2005 | 0.50 | 0.75 | 0.31 | 9.62 |
| 2006 | 0.65 | 0.75 | 1.11 | 7.92 |
| 2007 | 0.16 | 0.75 | 0.37 | 7.96 |
| 2008 | -0.35 | 0.40 | 0.14 | 9.12 |
| 2009 | 0.33 | 0.45 | 1.97 | 7.74 |
| 2010 | 1.08 | 0.55 | 1.43 | 7.14 |
| Total | 7.73 | 6.65 | 10.57 | |
| In % of Earnings | 86.1% | 136.8% |
In this case, the result looks quite good. UPM seems to generate much higher free cashflows than earnings (137%). Also 86% of Earnings have been distributed to shareholders via dividends and the company has significantly reduced debt until 2010.
First summary after this “Quick check”: From a “semi mechanical” point of view, the stock might be a interesting Contrarian investment, so it makes sense to more deeply research the company.
value and opportunity 
#luc,
yes, you need a bloomberg account and you need to download the data with the Excel Interface.
mmi
Interesting. UPM is part of the paper industry, which, besides its cyclical performance is also in need of more consolidation. However, UPM i of course one of the market leaders.
Where on Bloomberg do you find the 10y free cash-flow data? Do you need a Bloomberg-account?