D & L Industries, Inc. (DNL, the “Company”) is a holding company that has the following corporate structure:
The Company has the following revenue and profit mix:
***Fees from technical and logistic support (2%-3% of net receipts from operations), and administrative and executive management support (3.5% to 7% of gross income from operations) 
The industries that DNL is engaged in businesses that appears to be promising and resilient from recession. The largest contributor in the Company’s revenues, Food ingredients through OFI, supplies to notable companies. The Company’s top 10 customers provided 64% of DNL’s revenues in the first seven months of 2012.
The Company has an advantage over its competitors with its 33,000 metric tons (MT) storage facility which protects the Company from commodity price volatility. To put that in perspective, 7 months of consumption of the Company’s top 10 customers in 2012 reached 46,000 MT which provided 64% of the revenues. For simplicity, let’s assume that total MT sold for 7 months is 71,875 MT (46,000 MT / 64%). This would mean that DNL’s storage facility can last for 3 months [33,000 MT / (71,875 MT / 7 mo)]. To provide an allowance for the lead time in placing an order, we can conservatively say that DNL is protected from price volatility for almost one quarter.
The next largest contributor is FIC and DLPC. FIC and DLPC have three major products:
- Plastic color masterbatches
- Plastic additives masterbatches
- Engineered polymers – end products that contains DNL’s engineered polymers includes soft and rigid PVC compounds, automotive wiring, building wires, bottle cap liners, etc.
Considering that most cities in the Philippines require plastic to be biodegradable, I thought the growth of FIC and DLPC will be driven by their plastic additives product where they provide additives for plastics to be biodegradable. However, in 2012, FIC and DLPC generated growth from their engineered polymers product line.
Far from contributing material earnings to the Company but proves to be promising is Aero-pack. Aero-pack is the first and only company in the Philippines to design and develop customized aerosol products focusing on maintenance and home and personal care products. Aero-pack’s operations appear to be high margin and net income grew 70%, 57%, and 44% in 2010, 2011, 2012 respectively.
Net income attributable to the Company had increased by 57% in 2012 which was largely due to the purchase of additional 60% stake of OFI in July 2012 and one-time gain from the sale of land of P318 million. 
To conservatively project 2013 earnings, I assumed that 2013 earnings of subsidiaries will have no growth from 2012 and that the annualized earnings of OFI is 907 million [(378 million earnings for 2012 / 5 months) x 12 months] . Below will be the computation:
My projected EPS for 2013 will be at P0.44 (P1,581,047,330 / 3,571,428,995 shs). Applying a PE multiple of 10x we have an approximate on DNL’s intrinsic value of P4.40.
Why the drastic drop from the 2012 EPS of P0.82? The reason is the absence of one-time gain and the use of the weighted average shares (WAS). WAS reflects the share movement (increase or decrease) of a company in a time period. WAS used for 2012 was 1,440,704,519 shares. 
I expect DNL to not to decrease or increase its number of shares in 2013, it is then reasonable to assume WAS to be the same as the total outstanding shares of 3.5 billion.
- D&L Industries, Inc. Prospectus, Industry, p. 128
- DNL SEC 17-A 2012 filing, Note 19, p. 108, http://www.pse.com.ph/resource/corpt/2013/DNL_17A_Dec2012.pdf
- DNL SEC 17-A 2012 filing, Management’s Discussion and Analysis of Financial Condition, Changes of Financial Conditions and Result of Operations, p. 14, http://www.pse.com.ph/resource/corpt/2013/DNL_17A_Dec2012.pdf
- DNL SEC 17-A 2012 filing, Note 11, p. 103, http://www.pse.com.ph/resource/corpt/2013/DNL_17A_Dec2012.pdf
- DNL SEC 17-A 2012 filing, Note 2.19, p. 82, http://www.pse.com.ph/resource/corpt/2013/DNL_17A_Dec2012.pdf
Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.