TPI - Transpacific Industries Group

[SEC]

i dont get the attraction to this company.
other than being significantly below it pre-august peak price, the financial structure doesnt really inspire me. its still trading at 21 PE despite the SP fallback.

Looks like you're using a historical PE. Using historical PEs to justify current price is like driving using only the rear vision mirror. Forward PE is 18, a significant discount to its peers.

SEC

[Footsie]

SEC a fwd p/e of 18 is not cheap.

They are highly leveraged and are anticipating large growth

either look for a lower entry p/e of 14 or less gives you some buffer

or find another company on a lower p/e
there are plenty out there

[whatsup]

Footsie that may be right but there are few companies in this very important sector that have the growth possibility/desire that TPI have.

[SEC]

either look for a lower entry p/e of 14 or less gives you some buffer

or find another company on a lower p/e
there are plenty out there

Not in waste management or similar industries there isn't. TPI is still significantly discounted to its peers which trade at PEs in the mid 20s. TPI has never traded at PE 14 and I don't expect it to trade at 14 in the future so won't bother waiting.

Yes TPI is leveraged but has good net operating cashflow to cover interest payments 3x over.

So TPI won't be a short term multibagger but since most of my other holdings have been multibaggers (mostly resources based) it has left the portfolio highly leveraged to commodities. TPI provides a good balance at a discounted price.

SEC

[The Big Ease]

looks like ive opened up a bit of a hornet's nest.
tpi may well be a good stock given its business prospects.

but for the same reason i dont buy into high PE companies with debt and low margins, i think i best leave tpi and its ilk alone if theyre highly geared and reliant to a great degree (though not solely) on acquisition.

for comparison; i also hold PME, which has a PE of 21. I consider this company to be good value because it has gross margins of 70%, net profit margins of 50%, high ROE, no debt, pays a very good dividend, has excellent organic growth prospects, stable founding managers etc.

now if both of these companies experience a bump in the road, i reckon PME would have better shock absorbers. for that reason, i hold PME and not TPI. all things being equal, blah blah blah.

[SEC]

for comparison; i also hold PME, which has a PE of 21. I consider this company to be good value because it has gross margins of 70%, net profit margins of 50%, high ROE, no debt, pays a very good dividend, has excellent organic growth prospects, stable founding managers etc.

now if both of these companies experience a bump in the road, i reckon PME would have better shock absorbers. for that reason, i hold PME and not TPI. all things being equal, blah blah blah.

So you prefer a company whose share price has gone nowhere in the past 3 years (cf TPI 300+%), whose major shareholders' last transactions were significant selldowns (cf TPI major holder buying $80M on market) and where the liquidity is dreadful - lucky to get daily volume of $10K (cf TPI $10M).

Each to their own.

SEC

[The Big Ease]

oh come on SEC.
the major shareholders you refer to still own 60% of the company, down from 80%.
this was a direct effort to increase the liquidity in the stock, but nevertheless, i dont regard liquidity as a reason not to hold a stock with quality fundamentals.

the stock price hasnt done much, but there is a commentary that goes with that. management have been building a business base for accelerated growth that is expected to take place over the next 12 months. fortunately, i bought a few months ago and sit on a modest 17% gain, with their growth expected to accelerate into the second half im sure the SP will follow. i didnt buy into it because i thought the SP would remain stagnant. i think there is some exciting growth ahead. concerned about the USD exchange rate though.

anyhow, i dont want to hijack the thread to spruik PME. but going by your argument about shareprice increase, FMG is a better stock to hold than BHP. like i said, its not that i dont think tpi is a good stock. but the financial characteristics place a few other stocks ahead of it at the mo. it would have to take quite a tumble for there to be a sufficient margin of safety. right now, i dont see any margin. full speed, fully geared, low margins.

i wish you well and i may be wrong, but it doesnt change the financial issues i outlined in my first post. i wouldnt call them robust by any stretch. i also think that ABS is better value right now, with good growth prospects, better fundamentals, though carrying similar risks due to growth by acquisition.

perhaps i should ask, other than the purchase of shares on market by management and the acquisitions tendency/pipeline, what is it that gives you so much confidence in this company?

[soulman]

All in hindsight with FMG V BHP. Few points I like to add:

You are not comparing apples with apples with PME and TPI. Both are very much different coy and people value them differently. TPI are defensive with some sort of monopoly. Everybody need waste management regardless of whats happening in the world. The low margin on TPI are the characteristic of the coy. High volume, low margin, just like supermarket chain. It's not a bad thing at all.

Anyway, with BHP and FMG, you can't compared them either. One is producing, diversified and made billions of dollars and the other, never made a profit in the history of the coy. It's just that people are pricing them ahead, hence the margin of safety is never there for FMG. Buying them at between $10 and $60 are speculative, with no historical profits, EPS, PE and dividends. It's just that they hit $60 that you are saying they are better performer than BHP. Anyway FMG are producing just one commodity. Not a comparison at all, just because they are both in the resources sector. Ah, what hindsight can do to people.

[The Big Ease]

all points i agree with soulman.
my comments are only intended at addressing the financial characteristics of tpi, not its prospects for further gains in the share price.

i am only suggesting that for a similar PE, there are other companies out there with excellent growth prospects, better margins, less debt and higher rates of return for capital AND equity. so you get all the "good" traits ot TPI, without any of the negatives.

so what is it about this company?
i cant think of anything but share price and acquisition momentum.

are you happy for the company to retain 75% of earnings and earn 10% on them despite 70% debt? i wouldnt be!

it doesnt mean the SP wont go up further, but in the instance of a set back (market or company specific), TPI may not absorb it as well as a company with better financials.

now ill sit back and watch it treble

[soulman]

Not worries Big Easy. I know I wouldn't buy TPI either according to your comment of their financials so we got something in common there.

But the fact that management are buying big in TPI could suggest many things, management buyout with private equity a possibility.

Many of SEC stocks seems to be in the growth area, low yield, low margins, but that's the characteristics of the coy he likes. I couldn't helped but envy the man that has so many good stocks riding high in recent years. Firms like WOR and TSE, IGO, MCR and other emerging miners. TPI fits in that category. I wouldn't be suprised to see TPI at about $14 comes late Jan.