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Lizard
21-07-2006, 03:32 PM
Carrying on with my reviews of "cheap" Aussie small caps coming into reporting season...

Background

Essa Australia is a small company specialising in the manufacture of laboratory equipment for the sampling and testing of minerals. Initially two separate business, Essa and Labtechnics (formed 1980Õs), the two companies merged in 1996 to form Labtech Essa. The business listed on the ASX in October 2004, raising $5m through the issue of shares at 25cps. Listing was undertaken primarily to enable the company to seek faster organic growth and acquisition activities. The vendor retained 55% of shares on issue Ð since reduced slightly.

The business can be divided into Òstandard equipmentÓ, Òwear and spare partsÓ, Òsampling equipmentÓ and Òlab automationÓ. With the exploration boom pushing mineral testing laboratories to run at maximum capacity, the demand for these products should be high. Looking forward, the main thrust of organic growth is in the supply of higher margin, automated and robotic equipment. The company has also expanded geographically in recent years, with offices in South Africa, Europe and Chile. The company web-site www.labtechessa.com provides an excellent source of information including Patersons reports (Patersons having been lead broker for the issue).

Current Status

Labtech Essa reports having been profitable for every year of the last ten years. From available data, it appears that profits have also grown in every year from at least 2001. The 2005 NPAT of $1.87m came in ahead of prospectus forecast ($1.75m), putting the company on a P/E of 8.2 at the current share price of 35cps. Dividends of 2.6cps were paid, giving a yield of 7.4% plus franking credits. Revenue grew by 38% - a rate that appears somewhat higher than the five year average growth rate of 16%.

However, in the first quarter of 2006, the company experienced some operational hiccups that impacted on profit and resulted in a profit downgrade. Despite this, a recovery was made in the second quarter and half year profit of $0.72m was reported. Currently Essa are forecasting full year revenue to grow slightly to $17.8m, with NPAT falling slightly to $1.65m (largely, it appears, due to higher than normal tax payment). Dividends are forecast to fall only slightly to total 2.50cps (half of which was paid at HY). Achieving these results suggests a forward P/E of 9.3 and yield of 7.1% - cheap for a company with a 10 year profit history, at least 5 years of double-digit growth and with net cash of $1m.

Long Term Prospects

The current resource exploration boom should be beneficial to Essa, particularly given the reported squeeze on laboratories. This should be leading to a period of laboratory upgrades and, combined with skilled labour shortage, automated systems should be high on the cards. In fact, Essa is forecasting growth of 160% in sales of automated equipment for the 2006-2007 year Ð up from 32% in the current period. Unfortunately, it is not clear what base this off, although it has been mentioned that automation projects typically fall in the range $0.5-$2.0m project value.

Around 25% of revenue is generated from sales of replacement parts which provides some underlying consistency to the business growth.

Summary

Essa appears to provide low risk leverage to the resource boom. The shares currently appear undervalued and show prospects for good growth and yield. Based on a continuation of recent growth rates over the next 5 years, a valuation of 64cps seems appropriate. From a sentiment perspective, I would expect the achievement of full year forecast would move the price to around 45cps, with possible upside if the forecast result is exceeded.

Lizard
18-08-2006, 05:36 PM
Transferred from other thread...

Results just out. NPAT $1.8m, P/E 8.5, net yield 7.1% (at share price of 35cps). Predicting further growth for coming year. I have increased valuation to 68cps.

Lizard
18-08-2006, 05:54 PM
quote:Originally posted by Mick100


Thanks lizard
bought in recently at 35.5c
I like the yield and the growth potential
.


Hi Mick. Glad to have some company on one of my obscure picks. 3:30pm on a Friday afternoon might not have been the ideal time to release a good result... still, hope we see a bit of a re-rate on Monday - failing that, the agm might get some more response. :)

Lizard
18-08-2006, 07:27 PM
quote:Originally posted by davidrob

Essa (ESS)

Interesting play here guys,

errr,

but isn't NPAT, ebit,(eps --Year on Year comparo from 2005)-- and ebita.... for ESS, sorta, Down about 15% for the year ?? [?]

Regards,

Robbo :)

Hi Robbo. Just putting my reply on this thread cos I like this thread better due to earlier analysis...

Yes, been thinking about that one too. Definitely needs a watchful eye on the EBITDA margins. Historic data from 2001-2004 indicates they were in the 22-24% range. Last year down to 19%, then first half 2006 down to 12.6%, with recovery to 17.4% in second half.

They acknowledged cost pressures in the first half - as with many businesses - and put in place plans to address. Part of the margin change may also be in the product mix. Alot of the revenue increase seems to be coming from the sampling consumables at the moment. Next year they were indicating an expectation of a 160% increase in the automated laboratory equipment, for which the margins are at the higher end.

So agree that the margins need watching, but still some safety in the valuation and sales growth prospects.

Cheers,
Liz

robbo
18-08-2006, 07:37 PM
Essa (ESS)

Yep, good points Lizzard, very good points.

It may get down to whether the market will accord ESS a Future earnings rating at this early stage...

Which means, to "buy & believe into the co's (ESS) tentative forward EBITA and NPAT projections for 2007 & 2008.

Or instead, whether the market, will sit back, be stubborn and make the judgement not to re rate, not on the currently available Historical and present earnings.....But only when the Actuals are posted later on.....

For those who Hold --(ESS)--- for the Longer Term, my own initial reaction & first- view is, --- (and I have not researched the (ESS) Business Operation & Competitive Advantage & Market Opportunity potential in depth) -- is that superficially at least, their is indeed, seemingly ..... a lot of Upside potential for ESS, but investors, ..... may have to wait a little .....for the ESS fruit to ripen ....???

Be also good Liz, imo, if ESS keeps up the news flow: - (as long as it is substantive and relevant) --- especially later after the present Results Season is, "done and dusted", to at least keep a spotlight on ESS, and the intrinsic potential of this operation maybe .... :) - [?]

My second reflection Liz, is that this company(ESS) reminds me a bit of the ASX listed Scientific Instrumentaion Business --Alpha Technologies, (ASU)--

... And the trick Liz, of course for these type of "high tech" organizations; including ESS presumably--??-- is for management to formulate and construct an effective commercial sustainable Business Model; to provide some form ....of reliable regular on going "Annuity" style repeatable company Earnings & Income; ..... rather than just only to be "locked into" -- One Off bigger box larger Unit Sales ....

So maybe for ESS, they may care to investigate, ...

Maintenance Contracts, licencing exclusivity Agreements, or even to develop a second arm to the ESS scientific Manufacturing/Business Operation; that is related to the current Manufacturing Base....

And, which ALSO taps into ESS's ....>>> as the enterprise is now .... what is presumably, a highly scarce and needful but currently under exploited...>>> Knowledge Capital base.

And then the next step for ESS, to maybe, exploit that already existing "knowledge capital"-- into a high margin "annuity flow" income style operation .... to, under gird the present ESS --OEM(Original Equipment Manufacturer) present manufacturing operation....??--

Anyway Liz, .... Just some food for thought... :)

Kindest Regards Liz,

Robbo :)

Lizard
18-08-2006, 08:32 PM
Thanks Robbo. Some useful thoughts :)

Mick100
18-08-2006, 09:23 PM
quote:Originally posted by davidrob
[

... And the trick Liz, of course for these type of "high tech" organizations; including ESS presumably--??-- is for management to formulate and construct an effective commercial sustainable Business Model; to provide some form ....of reliable regular on going "Annuity" style repeatable company Earnings & Income; ..... rather than just only to be "locked into" -- One Off bigger box larger Unit Sales ....

So maybe for ESS, they may care to investigate, ...

Maintenance Contracts, licencing exclusivity Agreements, or even to develop a second arm to the ESS scientific Manufacturing/Business Operation; that is related to the current Manufacturing Base....









you really should go and have a look at the website Robbo

A good proportion of earning is coming from replacement parts for the equipment that they sell - there's your ongoing income.

As Liz has pointed out, a good prportion of income is expected to come from the new automated sampling equipment over the next financial yr. I assume this automated gear has been patented.
This is where expansion is expected to come from.

It looks like a sound business plan to me
Managment must be reasonably confident in future earning to be paying out 60% of earnings in dividends.
.

Bobbyvee
19-08-2006, 12:43 AM
I'd have to agree with Robbo on this one. Was attraceted to Essa a year or more ago as a company with a niche specialisation in a relevant sector. In the end I gave up as they do not seem to be a growth stock. Dividend OK but share price goes nowhere. For a small cap emerging company this is not IMO sufficient. One would be better invested for example in the big banks for the same return.

Lizard
29-09-2006, 08:22 AM
Announced acquisition of Stace yesterday. Small acquisition, but expected to be eps positive immediately. Didn't help the share price though which fell back (though I think it had not traded since going ex-dividend).

Bobbyvee, disagree that you can define a company as "not a growth stock" based on share price movement (or lack of) over a one year period. Personally, would rather let the 5 year record of revenue and profit growth decide that.

Lizard
19-10-2006, 03:35 PM
Volume buys arrived of late. I have added this week at 37-38cps.

Mick100
19-10-2006, 09:07 PM
Still here Liz

BNT may be worth a look at the moment
Sounds like they are on the cusp of signing another mining contract to begin in march 07.
.
Waiting for a pullback to grab a few more IMD
Bought some BDL recently.
.

Mick100
01-12-2006, 04:47 PM
Looks like essa is starting to move Liz

The depth on the sell side has almost completely dried up.
.

Lizard
01-12-2006, 06:34 PM
It has been taking its time! I thought we were going to get a break out when it hit 40cps a few weeks ago. Was disappointed not to get an agm presentation to push it on.

Weird how the sellers took their offers off today and the sell side moved back to 46cps. Leaves depth looking promising but that spread could halt progress.

stockpanther
07-12-2006, 11:15 AM
Well guys - nice to have had my sign-up finally authenticated!

I'm a holder of ESS and believe it still sitting below it's intrinsic value (still a good 25% below IMO based on FY07 EPS of 5.2cps)

I'll post more later!

Lizard
08-12-2006, 05:01 PM
Earnings update - forecast $1.5m NPAT for the half year (up 80%). Includes only 3 months of Stace contribution. At FY estimates of $2.5 - $3.5m, this is on a forward P/E of 6.0 - 8.5 at current price of 48cps...

ohmyme
08-12-2006, 05:12 PM
Hey Liz nice pick here. Just one thing the forecast is for EBIT. So at $1.5million EBIT, there isnt much debt so no I, however looks to me like they are paying full tax. Therefore full year target is $2.1million (assuming they double the first half) NPAT. Which is a PE of around 10. This is pretty much in line with the sector. RCR is trading on historical PE of around 11. ANG is on around 10. etc etc

Nice though.

cheers.

Lizard
08-12-2006, 05:15 PM
Oops. Thanks for that correction Ohmyme! [:I]

stockpanther
09-12-2006, 03:39 PM
Well guys - it is nice to hear some decent news to confirm our beliefs!! up 28% in the last month!

No surprises in this announcement...
I think we can conservatively extrapolate the first half and say that full year EBIT will not be lower than $3mil, less about 200k for interest (remember STACE was partially funded by debt so i've just picked a conservative higher amount), less $800k in tax gives NPAT of $2m (4.5cps).

This is conservative I believe because:
- my extrapolation only accounts for 6 months of earnings from STACE
- my extrapolation uses the low side of guidance provided (management have stated at least $1.5mil EBIT of 1H07

Based on the guidance, my personal view is I would be happy with (and I think ESS will achieve this) full year NPAT of about $2.2mil (or 5cps) which is just below my previous estimate of 5.2cps. I think we are looking at anywhere between 4.5cps (worst case) and 5.5cps (best case)

We have probably cashed in on the best part of the pricing discrepancy now I think, but I'll continue to hold as the price is still good, the company has solid growth potential and their management have demonstrated that ability to run a profitable organisation year after year.

Lizard
22-12-2006, 02:25 PM
This seemed like a very good announcement today - $8m worth of significant new contracts AND (to quote) "the result of extensive design work...a versatile modular laboratory automation system which can be offered to a broad spectrum of users"

Given 2006 revenues were $18m, this is going to be a significant amount of work for ESS and (my guess) adds at least $1m to NPAT (2.3cps) over the 2007/2008 years.

With ESS currently coming back from its recent high of around 55cps, this announcement seems to have slipped under the radar, producing a mere 1cps gain to 50cps.

stockpanther
22-12-2006, 10:54 PM
I viewed this as a fantastic announcement, and am very surprised the shareprice moved only 5%. Why:
- ESS indicated automation would be a primary growth driver for the business going forward
- Automation revenue in last FY was approx 2 mil from memory
- a potential 7 mil automation contract has been announced
- to me this seems like excellent delivery on a key growth strategy.

Do you think this $7m is partially included in ESS's 35% increase in revenue guidance provided recently Liz?? - I believe not personally, the way the announcements have been released leads me to believe that this potential $7m rev is on top of the 35% increase already experienced.

Your statement that ESS is a potential growth stock is certainly looking as if it will be realised.

I continue to hold and believe ESS remains great value at these levels - might even be worth a top up as this is an excellent announcement.

Lizard
23-12-2006, 06:02 AM
I don't believe it was included in the recent upgrade as the previous announcement related to the first half of this financial year. These projects seem likely to be generating most of the revenue in calendar year 2007, probably with the majority in the 1H08 financials.

So I would think maybe another $0.1-$0.2m NPAT in second half 07 and $0.8m+ in the following period?

I agree that the stock is still very under-valued at these levels - particularly following this announcement. My 12 month target is now around 90cps, so 51.5cps is still a bargain!

Flying Goat
23-12-2006, 12:45 PM
Nice pick Lizard, you really have pulled some good shares out of the hat this year[8D]!

FG

stockpanther
28-12-2006, 03:24 PM
using some ISS proceeds to top up on ESS....still undervalued at these levels...forward p/e of under 10 with good growth prospects in the automation area to come on top of this low valuation

Flying Goat
30-12-2006, 04:15 PM
quote:Originally posted by stockpanther

using some ISS proceeds to top up on ESS....still undervalued at these levels...forward p/e of under 10 with good growth prospects in the automation area to come on top of this low valuation


hi panther, lizard and co

must say that i agree with you, i got on board yesterday at 51.5 cents and think still view that as VERY cheap given the earnings growth trajectory, and the past five years proven healthy. steady revenue growth... with the forecast margin improvement (from current npat margin of around 10%) on the growing revenues, plus the new contract in Russia etc... this looks exciting indeed! Looking forward to this one approaching lizard's 90 cent target...!

FG :)

Mothman
03-01-2007, 09:25 PM
I'm on board ESS at 52 cents

Has anyone run their ruler over CHL (CCI Holdings Ltd.)?

It supplies engineering and other services to the coal industry and has been the subject of a failed takeover offer by Campbell Brothers (CPB). They offered 35cents a share and only got 12.67% of the company.

CHL is currently trading on a forward 2007 PE of approx 10.

I currently hold:

IMD
ESS
CHL
BHP
MCR

Lizard
04-01-2007, 07:34 AM
Mothman and FG, I guess you would have both been happy to see ESS close at a new high yesterday of 57cps, though on tiny volume, so can't get too excited.

I looked at CHL a while back - liked it but was worried about the possible need to replace equipment as depreciation seemed artificially low due to writing down old plant (wrote some comments on ShareScene). As a result, I missed the big ride last year and gave up following when I thought CPB were going to take it out.

Probably the biggest mistake I make as an investor is to walk away from shares I think I've "missed" because I didn't buy at the low when I was following them. Psychologically, buying in later seems to be one of the hardest things to do!

kura
04-01-2007, 08:21 AM
quote:Originally posted by Lizard

Probably the biggest mistake I make as an investor is to walk away from shares I think I've "missed" because I didn't buy at the low when I was following them. Psychologically, buying in later seems to be one of the hardest things to do!


I found selling at a loss really hard to do (but think I've mastered that trick now)

Flying Goat
04-01-2007, 04:55 PM
Excellent, closed down at 51 cents today, think it will be top up time for me tomorrow :)

FG

stockpanther
04-01-2007, 07:18 PM
I think you'lll be doing well to pick them up at 51-52c still FG......not many shares are being offered on the sell side at all.

Flying Goat
04-01-2007, 08:28 PM
quote:Originally posted by stockpanther

I think you'lll be doing well to pick them up at 51-52c still FG......not many shares are being offered on the sell side at all.


I suspect yr right panther, but will probably give it a go anyway...!

FG

Flying Goat
05-01-2007, 05:11 PM
quote:Originally posted by stockpanther

I think you'lll be doing well to pick them up at 51-52c still FG......not many shares are being offered on the sell side at all.


Not wrong panther, ended up adding at 55 cents, with another order in for 53... will someone please sell me their ESS...!!!

By the way, checking out the STACE acquisition in more detail today, looks like they bought it on the cheap, and EPS accretive. Nice to see it funded from cash reserves and bank debt instead of the usual business for stock arrangement that dilutes our holdings...

FG

stockpanther
05-01-2007, 05:24 PM
Strong balance sheet and decent cashflows has ESS....they could certainly fund some more acquisitions on the basis of cash debt...dare say they'll spend it in developing the automations business a bit more though.

Can't go too wrong with essa at these prices....current earnings may be fairly priced in possibly, but there is potential for some rapid growth in automation and I do not see this priced in at all?

Lizard
11-01-2007, 06:27 PM
Closed at 63.5cps :)

I admit to selling a few traders at 62.5cps (bought 39cps in Nov). Buy depth looked thin when I put the sell order on and went out... methinks that could prove a mistake!

Still, have 80% of my holding in longer term holdings, so I won't be rueing that one too seriously.

stockpanther
11-01-2007, 09:03 PM
Fair enough taking some profit Liz...it has run quite hard lately!

I still have my full holding (initial 39c, top up 51.5c post-announcement)....at current price I think it's forward 07 p/e is still only around 11.5....not a rip off by any stretch with the automation prospects in the wings.

FG...will get to the ATG thread soon, work has been killing me lately thats all.

Lizard
05-02-2007, 12:12 PM
Good half year result out with NPAT at $1.55m (EBIT $1.85m) - well up on their Dec forecast.

Optimistically annualising that performance, they are on a forward P/E of 9.5 at current price of 65cps. Not bad considering revenue growth of 48% and NPAT growth of 114% over the pcp.

If the $8m of automation projects go through for next year (at higher margins), there should be some serious growth still to come. Plus a little bit from the Stace acquisition yet to contribute.

Flying Goat
05-02-2007, 08:17 PM
Hi Liz,
Dont worry yr no alone in following Essa, am still in there and was very pleased with todays result as was not sure what to expect. Dividend also up and the result did not even include contribution from STACE acquisition, so my guess is happy times for a few more reporting periods yet....!

FG

stockpanther
05-02-2007, 08:51 PM
Wow profit certainly came in higher than expected....I continue to hold - ESS is still decent value at 65c.

stockpanther
08-02-2007, 11:43 PM
Was just thinking about Essa on my trip home from work today...this one has certainly exceeded all my expectations....good thing is at 73.5c it still isn't overpriced!! amazing

Flying Goat
09-02-2007, 06:52 AM
quote:Originally posted by stockpanther

Was just thinking about Essa on my trip home from work today...this one has certainly exceeded all my expectations....good thing is at 73.5c it still isn't overpriced!! amazing


Not to mention the yield is >4% and probably set to grow, quite a good yield for a micro cap growth coompany imo as well... will be signing up for the div reinvestment plan myself.

:)
FG

stockpanther
11-03-2007, 06:48 PM
looks like there was a great opportunity to get in the other day at $0.58 briefly. I continue to hold despite the dip - fundamentals remain tops.

Flying Goat
12-03-2007, 07:15 AM
quote:Originally posted by stockpanther

looks like there was a great opportunity to get in the other day at $0.58 briefly. I continue to hold despite the dip - fundamentals remain tops.


I agree, still cheap, still a great little business. Expect to hear results on robotic device tests this month... judging by recent volume and price action that should be good news?!

FG

Zephyrus
12-03-2007, 12:20 PM
Yeah, it was an excellent opportunity to top up. I managed to get some more at 57cents (my average entry price from before). I think it even went as low as 55 at one stage. Got some IMD as well at 97. Definitely 2 stocks to watch IMO.

Flying Goat
24-03-2007, 04:33 PM
Yaay! Got a juicy dividend cheque in the mail today, had almost forgotten about that. Looking forward to acceptance testing results in May with regards to the conditional $7 million automation contract. Trying to decide whether to top up now or wait until these results are out. Looks tempting, still looks very cheap on a pe of 10, that does not even factor in any of the higher margin earnings that will flow from the automation work or the growth of replacement parts to their ever expanding sampling equipment market.

Hmmm, what to do?!

FG

stockpanther
25-03-2007, 02:27 PM
FG - I guess it's just a fact of do you think ESS can deliver the expansion into automation sucessfullY?

They've pumped a fair amount of coin into it, and don't have much other business to show for it yet (asides from the $7m contract).

I'm tipping success - love their track record..but time will tell.

Mothman
26-03-2007, 12:35 PM
Topped up some more at 63c

Will be a bargain in 6 months time :)

Low P/E
Good growth prospects
Good industry
Good Management
Low market Cap

Juicy takeover prospect too...

Mothman
27-03-2007, 10:00 PM
Anything under 70c is still good value for Essa.

My prediction is 80c by the time they release their FY 2007 results

stockpanther
04-04-2007, 04:55 PM
Did anyone notice the 3.25m shares traded off market? - Surely this could result in a change of substantial holding announcement?

Flying Goat
18-04-2007, 06:17 PM
quote:Originally posted by stockpanther

Did anyone notice the 3.25m shares traded off market? - Surely this could result in a change of substantial holding announcement?


Hmmm, am starting to develop a theory here:

Someone approached a family trust a few weeks ago and bought big bundle of shares off market.

Today the price spikes 20% in one day.Are these two events unrelated or could there be a takeover offer on its way!?

Lizard
18-04-2007, 06:47 PM
I hope not FG! I haven't extracted nearly enough value from this one yet!

I would have picked "stock tip" buying except that course-of-trades suggests there was a very large buy on the open. Anyway, price was a nice surprise when I arrived home this evening.

Mothman
18-04-2007, 06:58 PM
Bugger I saw the 18,000 shares for offer at 60c this morning and was think of buying some more later in the week.

Like I said before any price under 70c is a good deal

Flying Goat
18-04-2007, 07:22 PM
Hi Mothman and Lizard,

Yep roger that, agree with both of you on those points!


:)FG

Mothman
29-04-2007, 02:35 PM
ESSA still on PE of approx 10.

Good buying at these levels IMHO.

Wondering who bought those shares from the family trust at 60c each. There must be a SSH notice coming out soon.

Does anyone know how long after purchase the SSH must be filed according to ASX rules?

Seems to be some decent buying lately at around 67-69c mark. Are you fellas topping up? I admit I bought some more last week;)

Mothman
29-04-2007, 02:38 PM
When I said PE of 10 above I was referring to a forward PE of 10 based on my conservative forecast for FY profit of $3.1M

Flying Goat
29-04-2007, 04:37 PM
Hi Mothman,

Have not topped up in the last week or two but hold quite a few. Only thing that concerns me with ESS is that they have an extremely good ROE, yet they keep paying most of their earnings out in dividends. Personally would prefer to see them re-invest in growing the business, given the that so far they are achieving around 20% return on invested capital. Alternatively if they at least offered a dividend reinvestment plan with the aim of re-investing capital additional shares on issue could help with liquidity and improve market cap required to attract very big investors... other than that naturally am very happy with progress....

Mothman
02-05-2007, 04:01 PM
Nice rise to 78c today, albeit on quite small volumes.

Anyone heard any news?

I won\'t be selling any at the current price. ESSA is a medium term hold for me.

Would love to know who bought that large parcel at 60c

Lizard
02-05-2007, 04:25 PM
Someone mentioned on another forum that Tricom put out a report, valuing at 91cps recently.

Fingers-crossed, the acceptance testing on the automation contract gets the thumbs up this month.

Still one of my favourite stocks and nice to see it making a new high after recent retracement.

stockpanther
05-05-2007, 11:02 AM
Nice to see the stock bounce back - I still have my full holding, and am still optimistic for a yearly eps of 7cps plus future prospects in the automation business.

Flying Goat
05-05-2007, 12:28 PM
quote:Originally posted by stockpanther

Nice to see the stock bounce back - I still have my full holding, and am still optimistic for a yearly eps of 7cps plus future prospects in the automation business.


Me too, I hold many ESS and think that if the sample automated sample equipment robot comes through, that is 7 mill revenue, add to that extremely high margin of this division and this stock goes above $1, piece of cake... :)

stockpanther
14-05-2007, 03:19 PM
I would think that we should be hearing about the acceptance testing soon?

82c - all time high.

thereslifeafter87
14-05-2007, 03:28 PM
quote:Originally posted by stockpanther

I would think that we should be hearing about the acceptance testing soon?

82c - all time high.


Yeah, excellent sp performance, especially for those who bought in on the market volatility that saw it trading in the 50's.

Flying Goat
24-05-2007, 03:07 PM
Whoa! I take it that means the robotics trial passed all the tests!!

Geez, there were some eagre punters out of the starting blocks in the news... to 93 cents!

Mothman
24-05-2007, 04:20 PM
My estimate for FY NPAT is looking close to the money.

$3.1M as mentioned earlier in the thread ;)

stockpanther
25-05-2007, 06:06 PM
I just took my profits at 92c...very happy with performance - initial purchase 39c, top up 51.5c

prospects are still good for ESS - i just wanted to cash.

Lizard
26-05-2007, 12:26 PM
Nice result Stockpanther. Would be interested to hear if you have any other investments in mind. :)

Flying Goat
07-07-2007, 10:20 AM
Mothman/Zman/Stockpanther.

Any of you still on board? I still hold quite a few because of the dividend. My guess is that it will be increased maybe even doubled based on the free cash flow coming from the awesome results lately. Just noticed however that the share price is starting to come up again on decent volume, wonder if something is up. Still seems cheap to me, hopefully this will be the next to break through the dollar barrier!!!

:D:DFG

Mothman
07-07-2007, 11:37 AM
Yes still hold quite a few of these, haven't sold any ;)

I am pleased they are back up to closer to fair value (my assessment)

While to prospects are good, the PE is low and the fund managers are starting to take an interest there is no point to sell.

Only headwinds I can see is the exchange rate eating into their overseas profits...Does anyone know what % of revenue comes from offshore (I estimate around 20%)

My largest holding[8D]

Flying Goat
07-07-2007, 11:59 AM
Hi Mothman,

Well done. On the forex you raise an excellent point and is a problem facing most AU exporters. In my calculations however the exposure to offshore earnings is even higher, probably around 40%. This is based on the fact that FY07 earnings are set to be around $29m - we know that the Russian Robot order came in at $7m and that they also have other operations going on over there. Add to that they have reportedly been making decent sales in Brazil (see recent research report on their website that includes findings from site visits and interviews with customers who regard ESSA products as number 1 in the industry).

In conclusion however my guess is that earnings growth should outpace the deterioration caused by the strengthening AUD.

Regards,
FG

Lizard
12-07-2007, 11:06 AM
I still hold ESS too. Bought 31-38cps from memory, and took a few profits again recently, but is still one of my favourite holds.

Mothman
18-07-2007, 11:31 AM
Whats up this with ESSA today?

Sellers getting hit at up to $1.01

Something in the wind...

Only time will tell :)

Lizard
23-07-2007, 05:14 PM
Er, ah, no crownies for me thanks Robbo...[:I]

Just a nice bottle of that cheap red wine you Aussies do so well will be fine - what is it called? Penfolds Grange? [8D]

Flying Goat
23-07-2007, 06:10 PM
Think lots of us owe you at least one expensive bottle of red for this pick Liz!







:D

Lizard
23-07-2007, 06:20 PM
Thanks FG. Just my sense of humour. Chafing under the hard time I got from those Oiler lads on Saturday at the Wellington meet!

I know I'm a sad anachronism, investing in diversified industrials during a resource bull, but 225% in a year for these solid small-caps still okay by me.

lakeys
23-07-2007, 06:24 PM
yes thanks liz for starting the thread, my only requet is few few i brought.

Oiler
23-07-2007, 06:37 PM
Liz

Sorry I didnt get the chance to talk to you on Sat night....
You have had a very impressive increase in your portfolio.

"Thanks FG. Just my sense of humour. Chafing under the hard time I got from those Oiler lads on Saturday at the Wellington meet!

I know I'm a sad anachronism, investing in diversified industrials during a resource bull, but 225% in a year for these solid small-caps still okay by me."

Looks like the challenge has been made !! hehe

[^]

Lizard
23-07-2007, 07:55 PM
Nice meeting you both on Saturday, Lakeys and Oiler2. :)

Afraid 225% was just the return for ESS in the one year since I started this thread, and not my whole portfolio. Though a few others from around the same time have been in the 100-200% range (STS, IMD, KLM, HST).

Shrewdy tells me that's what the oiler team make in a month these days though, so no competition!

Lizard
16-08-2007, 08:21 PM
ESS reported NPAT of $3.25m - ahead of recent forecast of "more than $3m". Closed at 95cps off a low of 74cps - P/E of 12.9, yield of 4.7% plus franking.

Pre-acceptance testing on the $7m automation contract to be completed shortly and expected to contribute significantly to 2008 result.


In summary, Essa has a number of well defined expansion opportunities within a very favourable operating environment.
These factors provide the Directors with confidence that a further increase in profit in 2007/08 will be achieved.

Mothman
16-08-2007, 09:07 PM
Excellent result from ESS - nice juicie dividend increase. Only bit of green in my portfolio today!

_Michael
30-08-2007, 07:14 PM
Hi All,

Essa really seem to be ramping up their activities in South America with the partner company willing to 100% equity in distribution backed with a five year contract to distribute Essa products - would appear a vote of confidence.

http://www.asx.com.au/asx/statistics/announcementSearch.do?method=searchByCode&issuerCode=ESS&timeFrameSearchType=Y&year=2007

Mike

_Michael
11-09-2007, 06:25 PM
How odd. Wonder why they have bothered paying generous dividends all this time, only to turn around and issue new shares to raise capital?! An acquisition in the wind or just a display of corporate silliness!?

Lizard
11-09-2007, 06:35 PM
Agree. The need for $6m (approx) seems a little surprising. Can only assume it relates to the need for working capital to fund the robotics contract? Acquisition is always a possibility, though usually capital raising is optimised by announcing in conjunction or post-acquisition.

_Michael
11-09-2007, 07:28 PM
Perhaps - might also be linked to growing the South American Business.

Lizard
28-09-2007, 08:49 AM
The announcement on the acceptance for the new automation contract came out so late last night that I almost missed it! Two automation systems to be completed and installed for SGS over the next several months. Excellent news and should see the share price take a further move forward.

thereslifeafter87
28-09-2007, 10:05 AM
The original announcement in December referred to a $7million automation system. The latest announcement refers to two systems.

I'm probably getting caught up on semantics here. I would assume the second announcement is referring to the same subject matter ast the first.

_Michael
29-09-2007, 10:20 AM
Never the less, ESS seems to be crossing the border from hopeful/speculative small cap to emerging growth stock worthy of Insto Attention (see Perpetual have emerged as substantial holder).

I have just realized the 7m contract clearly was not invoiced during FY07 so will no doubt be a significant contributor to FY08, combined with organic growth and STACE management are confident of EPS growth on expanded capital base.

Any thoughts about ESS at this price? If they can manage NPAT $4m for FY08 then even after cap raising its sitting on a PE below 15 times.

The announcement this week also stated that the compay who are purchasing the automated system have network of labs worldwide, so there may have been a hint in there. Fingers crossed as this is expected to be higher margin.

M.

Mick100
29-09-2007, 11:13 AM
[QUOTE

The announcement this week also stated that the compay who are purchasing the automated system have network of labs worldwide, so there may have been a hint in there. .

M.[/QUOTE]

Yes, that's the part of the announcment that got my attention:)

_Michael
17-10-2007, 06:27 PM
The book, by Edwin Lefevre (1923) reckoned Jesse Livermore's ears would stick up when a stock hit a new high for the first time... if still around he would no doubt have noticed ESS today with some keen buyers busting above 1.30 for the first time since listing... some heavy interest as well - after PPT recently revealed building a substantial holding looks like more institutions have on the buy list. Personally was not too enthused by announcement last week that founder sold down large number of shares and stepped back from operations. Never the less that might not mean more than that he wants to retire! Pays not to be too paranoid, I guess, but at least a little skeptical... :D

Lizard
19-11-2007, 03:42 PM
While positive, the AGM speech was probably more conservative than market expectations. Same long term story, but perhaps less of a jump in earnings this year than initially calculated.

thereslifeafter87
20-11-2007, 09:42 AM
I thought the announcement was quite negative on the whole. Profits flat or down in first half, albeit with an increase in the full year.

I was picking big gains from the contract win but perhaps they are pushing it through on a low margin basis to set themselves up for future opportunities.

Large sales growth should see profits pick up in 08, but the current sp is no longer undervalued IMO.

_Michael
20-11-2007, 05:32 PM
I agree, my take is that the current fairly full multiple had factored in some more earnings jumps - but if moderate growth expected, and cyclical its looking less of a bargain. It might also explain why the founder is selling down his stake. On the other hand they sell consumable replacement parts for their durable standard testing equipment and the durable sales have been on the up over the last few years - so we should be able to expect steady sales and margins from the traditional lines of business for the next few years, w/ the added upside of maybe selling a few more automation systems....

thereslifeafter87
21-11-2007, 09:33 AM
I think there is an over-reaction to the increased costs in the first half:

There is still a strong increase in sales,

Tax rates are difficult for the company to reduce any longer with strong on-going profits,
Establishment of Brazil office is an investment in future growth,
Establishment of warehouse is an investment in future growth,
Completion of first stage of automation project and commencement of second seems to be just reflecting the lumpy nature of large project income compared to expenses.

There is no mention of any margin or cost pressures.

None of these things seem to reflect any problems in the growth and profitability of the ongoing business.

Even with all of these factors, the company is still forecasting an increase in full year, after tax profit.

I won't be selling any just yet,

The issue is whether the PE multiple deserves to be so high when profits are further away than what was previously expected.

thereslifeafter87
21-11-2007, 02:01 PM
Profits are already here now, this year, last year and the year before.
Profits are growing, last year and this year.
I see the investment in future growth as a positive long term, not a negative.
The decision to invest cash flows in future growth does not change the cash generating capability of the ongoing business.

You've missed the point.

Profits are growing, but not as quickly as anticipated, and not in line with sales.

Therefore, the business does not justify as high a PE as it did according to previous expectations.

See PPL/CCP/RAK for this phenomenon in action.

thereslifeafter87
21-11-2007, 02:02 PM
Although admittedly CCP and PPL reported smaller profits rather than slightly larger ones.

_Michael
22-11-2007, 09:19 PM
yep - but what all of them have in common is that profit hits are being taken due to investment in growth - i guess the long term returns on equity become key factors in assessing each of them for the long haul in this situation... and you cannot disagree both ppl and ess have well above average roe so far... that and wether the management have histories on delivering on their promises - which so far both do... i also have one eye on the cylcicality factors both with resources (ess) and retail (ppl) and am wondering how ugly things could get if either of those suffers a sevre downtown which is what worries me about buying anything on a pe above 15 now ...

thereslifeafter87
23-11-2007, 08:49 AM
Michael -

I agree with you.

Retail has had a cyclical downturn in NZ and Australia over the last few years, though Australia seems to be improving now.

The Macro environment for ESSA is very favourable presently, and will only get better as more new mines are brought online. Eventually the cycle will turn down, but it will be a few years yet I would say. The one thing that may impact on ESS is "Dutch Disease": Demand for Australian commodities could push up the AUD further, making ESS's products more expensive compared to competitors. We have already seen this happen to some extent.

Mothman
05-08-2008, 03:27 PM
Well ESSA has dropped down to 94c from its high of 150c in November last year. (Like the rest of the market!)

But it has the following things going for it:

Low PE : Around 12
EBITDA and NPAT frowing strongly
Good markets: Resources still trucking along (Just because BHP is down 6% today doen't mean the resource bull is dead)
Small cap: around $47M

Much easier to turn a $50M company into a $100M company than turn a $1BN company into a $2BN company - just ask Infratil in NZ :) (sorry a bit off topic there)

Good old fashioned growing revenues from selling quality products - not some over leveraged financial engineers plump and dump play. Takeover target for sure - if anyone had any cash at the moment;)

Disclosure: Just bought back in to ESS

Anybody out there still holding? Lizard...?

Lizard
05-08-2008, 04:18 PM
Yes, I still hold a few, though took profits on more than half at various times.

I like ESS, but I am not sure whether the bell has rung on "stronger for longer" resources for now - and hence, whether by association - mining related stocks may have had their best days for a while.

When the cycle turns, conditions usually end up suiting a different set of stocks to what worked at the end of the last bull. So far, I'm not buying much at all in Aussie - I think NZ has more promise until the resource stocks have sorted the direction. So the few trades I am picking in Aussie tend to be well clear of the resource sector.

_Michael
05-08-2008, 07:49 PM
Wow - ESSA thread resuscitated!

I took some large profits over a year or so ago riding 60 cents to 120 cents.

Recently watching closely and looking to buy pending full year result.

Want to make sure there are no cost over-runs etc coming out of Brazil expansion.

Reason being have been burnt by expansion going awry by similarly small caps.

Will continue to watch though as I like their capital equipment + replacement parts business model.

Good luck

Mothman
29-09-2008, 08:29 PM
After selling my second holding at $1.03, I am back in at approx 90c.

At these levels it is a no brainer for me:

- Growing Revenues
- Growing Profits
- Pays a dividend
- Good niche business
- Selling replacement parts for their equipment!
- Strong Balance Sheet
- Good Management (I assume - they also have skin the game)

Good long term (1 to 2 year hold)

But if it gets to $1.50 again I might get trigger happy :)

Moth

Mothman
04-10-2008, 02:28 PM
Anyone still hanging in there?

Maybe I made my purchase too early, price down to an 18 month low of 81.5 cents. I couldn't resist and bought some more - seems like a no brainer at this price...but I could be wrong :(

Lizard
04-10-2008, 03:56 PM
Still holding. Not buying - considered selling against slowing mining background and better alternatives for yield/sentiment. However, think it still stacks up okay - looking pretty cheap on EV/EBIT of 5.5 as a takeover possibility, although I think management have a blocking stake.

Maybe risky as to whether any more automation projects come on stream for a while, but seemed pretty quiet on that front anyway. Consumables probably continue to do all right.

Biggest issue is how cheap the market as a whole might get before any real liquidity comes back into small-cap stocks

macduffy
04-10-2008, 05:09 PM
It's on my watchlist but all stocks connected with the resources scene have been marked down heavily. Plus the general market sentiment!
I like its fundamentals and I'll be waiting for the turnaround.

;)

Mothman
23-10-2008, 07:51 AM
I have been buying more at 65c. Time will tell if it has been a wise move!

Essa keeps digging

Friday, 3 October 2008

By Tim Treadgold

Turmoil on global financial markets has hit the resources sector hard. But as Darryl Stevens, chief executive of mining equipment supplier Essa explains, the mining won’t stop because commodity price are falling.
Prices may be falling, but volume isn’t. That’s the first lesson for anyone wondering what happens to the resources sector when global financial markets go into meltdown, as they are at the moment.
The second lesson is that someone always makes a profit from volume, such as the specialist mining equipment supplier, Essa Australia.
Generations ago, firms such as Perth-based Essa where referred to as “pickaxe” sellers. They did not take the risk of digging, but sold the pickaxes to those who did.
Essa’s speciality products are more technically advanced than pickaxes, but the principal behind its core business of designing and manufacturing mineral sampling equipment is identical.
Most mine sites in Australia, and many overseas, use an Essa device to extract, crush, or grind samples of ore for assaying, or use Essa’s consumable products such as the pots, pans and crucibles used for assay preparation.
Over the past five years, as Chinese demand for resources grew, so did Essa’s business, with sales in the year to 30 June up by 53.7% to a record $43.6 million, and profit up by 37.2% to a record $4.5 million. The latest result followed a 57% growth in revenue and 79% growth in profit in the previous financial year.
Essa chief executive, Darryl Stevens, says that despite lower mineral prices and most mining companies suffering sharp share price declines, he expects more strong growth because the volume of exploration drilling and mineral production remains strong thanks to China’s continued economic expansion.
“We’re a business exposed to the real economy,” says Stevens. “Exploration might slowdown, and mineral prices might contract, but the mining doesn’t stop.”
There isn’t much exotic about the equipment Essa makes. Its mineral preparation gear includes jaw crushers, cone crushers, and roll crushers. Its sampling gear includes devices that scoop minerals off conveyor belts and equipment that measures variables in an ore stream such as moisture.
One of Essa’s more interesting pieces of speciality equipment is a rotary machine that separates the millions of diamonds produced at the Argyle mine in WA into representative parcels for valuing – an essential step to avoid the need to study every individual gem.
It hasn’t always been easy going for Essa, and the current market crash would be bringing back some painful memories for the company.
In the last great sharemarket collapse in 1987 the company was caught on the wrong foot, having just gone through a delicate management buy-out at the same time as cheap imports hit one of its cash cows, the production of crucibles and cups used in mineral assay work.
“Back then, we even had the bank demand immediate repayment of a $2 million loan, which almost sent us under,” Stevens says. “That caused a few problems and it wasn’t until 1990 that we got out of the woods.”
At the time of its brush with a demanding bank (National Australia, if you must ask) Essa was a much smaller business, turning over $1 million a year and employing 20 people. Today, staff numbers have grown to 130 and the business has expanded to include offices in South Africa, Brazil, Germany, Chile and Russia.
In effect, Essa has followed the expansion of the mining industry. But as well as following its customers, which include some of the world’s biggest miners, Essa has also exported Australia’s high standards in measuring and testing mineral samples.
One of the most important “exports” has been to train European and Russian miners and explorers to test much bigger samples of rock to get more accurate measures of their mineral content. In Europe the standard used to be only 500 grams per sample compared with Australian miners testing three kilograms at a time – six-times the volume.
Stevens says roughly half of Essa’s sales are of sampling equipment and half preparation of samples for assay.
As well as its range of standard products, two major growth areas have been added in the past three years. A robotics and automation division is generating close to 15% of annual sales and a majority stake in a maritime repair and testing service is also accounting for 10% of sales.
“We see automation and robotics as a major growth area,” Stevens says. “There are a range of factors attracting our clients in that direction, including faster throughput of assays and samples, down to occupational health and safety issues, which include employees being limited to lifting 10 kilo loads at a time in a repetitive job.
“Automated systems were the standout area of our sales performance last (financial) year, reflecting our heavy investment in research and development in that area.”
However, the bread and butter for the business remains its standard equipment product range of mineral crushers and grinders, followed by sales of what Stevens describes as Essa’s range of “high margin wear and spare parts” – the consumables used in the mineral testing business.
Essa’s exposure to the resources sector has proved an attraction to investors. Since listing at 25c a share four years ago, the stock has traded as high as $1.50 earlier this year, before retreating to recent sales around 93c, a price that capitalises the business at $47 million.
Stevens says Essa’s business outlook, despite uncertainty on world financial markets, is strong.
“We’re not going to match the 50% revenue rise of the past two years, but we will continue to grow,” he says. “We’ve never had a year when we’ve gone backwards.”

shasta
28-10-2008, 04:27 PM
I have been buying more at 65c. Time will tell if it has been a wise move!

Essa keeps digging

Friday, 3 October 2008

By Tim Treadgold

Turmoil on global financial markets has hit the resources sector hard. But as Darryl Stevens, chief executive of mining equipment supplier Essa explains, the mining won’t stop because commodity price are falling.
Prices may be falling, but volume isn’t. That’s the first lesson for anyone wondering what happens to the resources sector when global financial markets go into meltdown, as they are at the moment.
The second lesson is that someone always makes a profit from volume, such as the specialist mining equipment supplier, Essa Australia.
Generations ago, firms such as Perth-based Essa where referred to as “pickaxe” sellers. They did not take the risk of digging, but sold the pickaxes to those who did.
Essa’s speciality products are more technically advanced than pickaxes, but the principal behind its core business of designing and manufacturing mineral sampling equipment is identical.
Most mine sites in Australia, and many overseas, use an Essa device to extract, crush, or grind samples of ore for assaying, or use Essa’s consumable products such as the pots, pans and crucibles used for assay preparation.
Over the past five years, as Chinese demand for resources grew, so did Essa’s business, with sales in the year to 30 June up by 53.7% to a record $43.6 million, and profit up by 37.2% to a record $4.5 million. The latest result followed a 57% growth in revenue and 79% growth in profit in the previous financial year.
Essa chief executive, Darryl Stevens, says that despite lower mineral prices and most mining companies suffering sharp share price declines, he expects more strong growth because the volume of exploration drilling and mineral production remains strong thanks to China’s continued economic expansion.
“We’re a business exposed to the real economy,” says Stevens. “Exploration might slowdown, and mineral prices might contract, but the mining doesn’t stop.”
There isn’t much exotic about the equipment Essa makes. Its mineral preparation gear includes jaw crushers, cone crushers, and roll crushers. Its sampling gear includes devices that scoop minerals off conveyor belts and equipment that measures variables in an ore stream such as moisture.
One of Essa’s more interesting pieces of speciality equipment is a rotary machine that separates the millions of diamonds produced at the Argyle mine in WA into representative parcels for valuing – an essential step to avoid the need to study every individual gem.
It hasn’t always been easy going for Essa, and the current market crash would be bringing back some painful memories for the company.
In the last great sharemarket collapse in 1987 the company was caught on the wrong foot, having just gone through a delicate management buy-out at the same time as cheap imports hit one of its cash cows, the production of crucibles and cups used in mineral assay work.
“Back then, we even had the bank demand immediate repayment of a $2 million loan, which almost sent us under,” Stevens says. “That caused a few problems and it wasn’t until 1990 that we got out of the woods.”
At the time of its brush with a demanding bank (National Australia, if you must ask) Essa was a much smaller business, turning over $1 million a year and employing 20 people. Today, staff numbers have grown to 130 and the business has expanded to include offices in South Africa, Brazil, Germany, Chile and Russia.
In effect, Essa has followed the expansion of the mining industry. But as well as following its customers, which include some of the world’s biggest miners, Essa has also exported Australia’s high standards in measuring and testing mineral samples.
One of the most important “exports” has been to train European and Russian miners and explorers to test much bigger samples of rock to get more accurate measures of their mineral content. In Europe the standard used to be only 500 grams per sample compared with Australian miners testing three kilograms at a time – six-times the volume.
Stevens says roughly half of Essa’s sales are of sampling equipment and half preparation of samples for assay.
As well as its range of standard products, two major growth areas have been added in the past three years. A robotics and automation division is generating close to 15% of annual sales and a majority stake in a maritime repair and testing service is also accounting for 10% of sales.
“We see automation and robotics as a major growth area,” Stevens says. “There are a range of factors attracting our clients in that direction, including faster throughput of assays and samples, down to occupational health and safety issues, which include employees being limited to lifting 10 kilo loads at a time in a repetitive job.
“Automated systems were the standout area of our sales performance last (financial) year, reflecting our heavy investment in research and development in that area.”
However, the bread and butter for the business remains its standard equipment product range of mineral crushers and grinders, followed by sales of what Stevens describes as Essa’s range of “high margin wear and spare parts” – the consumables used in the mineral testing business.
Essa’s exposure to the resources sector has proved an attraction to investors. Since listing at 25c a share four years ago, the stock has traded as high as $1.50 earlier this year, before retreating to recent sales around 93c, a price that capitalises the business at $47 million.
Stevens says Essa’s business outlook, despite uncertainty on world financial markets, is strong.
“We’re not going to match the 50% revenue rise of the past two years, but we will continue to grow,” he says. “We’ve never had a year when we’ve gone backwards.”

ESS - Ann: Multi million dollar contract win!

http://www.stocknessmonster.com/news-item?S=ESS&E=ASX&N=426819

Hope to see you the Wellington meeting, Mothman ;)

Mothman
28-10-2008, 08:23 PM
Yes I hope to make it for a drink - is it on Election night?

A largish 40,000 seller at 65c and one at 69c make for a one sided depth!

I got a few at 60c today. Mate I keep telling myself it is a good company as I keep averaging down and down and down....

I made some quick money on BNB last month - bought at 80c sold at $2. I can sleep easy (kind of) holding ESSA not so with BNB!!!

shasta
28-10-2008, 08:56 PM
Yes I hope to make it for a drink - is it on Election night?

A largish 40,000 seller at 65c and one at 69c make for a one sided depth!

I got a few at 60c today. Mate I keep telling myself it is a good company as I keep averaging down and down and down....

I made some quick money on BNB last month - bought at 80c sold at $2. I can sleep easy (kind of) holding ESSA not so with BNB!!!

Yes it is, will post some more details on the relevant thread tomorrow

Mothman
19-11-2008, 08:58 PM
Well that was bad timing buying in before a profit downgrade. That is what you get in this market I suppose. They will just have to go in the bottom drawer, I still see value longer term and I believe there is a high probability that the company will not go bust.

Lizard
27-09-2009, 09:44 AM
I bought a small trade in this one again this week at 28cps. Hasn't participated much in the recovery - perhaps deservedly after some of the shocker announcements.

Anyway, market cap at 28cps is about $15m, with net cash in bank at yr end of $5m and underlying NPAT for FY09 reportedly $2.4m. With some recovery in the mining sector, there is a possibility their sales will bounce back from last half year lows.

On the downside, it's not yet clear what liabilities they will have incurred from the automation project disputes or why these occurred and potential impact on future business.

Bit of a gamble on "more upside than downside".

Lizard
10-03-2010, 04:50 PM
Hmm, well I don't remember what happened to that last trade - which probably means I got out at a small loss. However, am back here now thinking it is time to accumulate ESS on fundamentals. Okay, I admit that ESS has been a disappointment on some aspects of management and not the ideal company. However, imo there are two things making this potentially a good time to accumulate:

1. Results trend heading in the right direction: They say that 1H10 looks to have been the bottom of the cycle for them and now on the upturn. This is also backed by clear reduction in costs over prior half year, despite slightly lower revenue. And they have confirmed that they expect a resolution to their contract dispute without further substantial cost. So at this point, they are now in a position to book a profit from continuing operations in second half.

2. Working Capital Bargain: ESS currently also meets the Graham criteria of being a "working capital bargain" - ie current assets-total liabilities > market cap (at 21.5cps). So far, my (limited!) experience with shares that meet this criteria is that they tend to perform exceptionally well over a 1-2 year timeframe. Obviously there are no guarantees attached - it's always possible that they'll spend the cash on a dud investment - but just provides a bit more of a buffer.

Overall, there isn't too much short-term impetus for ESS as it's unlikely they'll look excessively cheap on FY profit. However, assuming no dramatic change in market conditions, I am tentatively thinking they could/should move to 40cps over the next 12 months.

Lizard
11-08-2010, 07:59 PM
Been a quiet year so far - they've only got two announcements on the ASX this year, and they were for half year result. Going to be heavily results dependent as to where it goes, but plenty of upside as per my previous (March) post.

Looks like making a bit of a pre-result breakout, though on lowish volume (currently 25cps).

drillfix
12-08-2010, 02:05 AM
Been a quiet year so far - they've only got two announcements on the ASX this year, and they were for half year result. Going to be heavily results dependent as to where it goes, but plenty of upside as per my previous (March) post.

Looks like making a bit of a pre-result breakout, though on lowish volume (currently 25cps).

Hi there Liz,

How is it going and hope all your trading has been good of late.

US getting smashed as I write this so looks like another tough day tomorrow.

Hope all is well and you got some nice profits locked too.

Cheers,
DF

Lizard
20-08-2010, 03:03 PM
Just caught a peek at ESS and looks like a cracker of a result out today - a real second half recovery to $1.6m NPAT for the year after a small loss in first half. With net cash of $8.6m and the likelihood of second-half performance carrying over for a much stronger 2011, I am thinking that even the $14.9m market cap achieved on the stiff bounce to 28.5cps is not nearly enough.

Final div to be paid of 1.75cps.

mark100
20-08-2010, 03:13 PM
I tried to get in when the re-opened Liz but they went up a bit too fast for me. But yes a cracker of a result

Lizard
20-08-2010, 03:31 PM
Just noticed that the reported NPAT includes a one-off $0.3m impairment, so normalised is even better. I'm still trying to figure out what is a fair estimate for 2011 - not sure if doubling 2H10 is getting too enthused? Still think I'll get my 40cps soon, and potentially quite a bit more if they can maintain current run-rate through 2011.

mark100
20-08-2010, 03:34 PM
When the said FY11 would exceed FY10 I wasn't sure if they meant normalised or reported FY10 NPAT. I'm also wary of taking a single good half year result and doubling it for mining services companies. I bid 25.5c but it re-opened at 26, now 32. Bugger!

Lizard
11-10-2010, 04:59 PM
Not sure what it was in that CEO presentation that caught the market attention, but jumped anyway.

Now 42cps (and ex 1.75cps div), so this trade is holding up well.

thereslifeafter87
12-10-2010, 02:45 PM
Hi Liz.

I've been in this one from around 22c. I've sold half my position, as it was getting uncomfortably large, but am still happy to hold the remainder for the time being.

It's not a screamer like it was - NTA is at 36cents v current SP of 42. However, if they get another strong half, the sp should re-rate as the market annualises the results. So there is plenty of upside.

Downside is minimal due to a low P/NTA ratio, so on balance this is a good one for me to hold. Especially so I can hold on for the CGT discount.

Cheers
TLA87

Lizard
15-10-2010, 02:32 PM
I've been in this one from around 22c. I've sold half my position, as it was getting uncomfortably large

I'll have to do the same eventually (bought 21cps), but...42cps when you wrote that three days ago, now bid at 52cps. Pretty fast run for this type of share, so no doubt a pullback eventually, but still a long way off pre-GFC highs. I've been sucking on the ice cubes and chilling... (though my ice cubes are feeling a bit crunchy today...:ohmy:)

soulman
15-10-2010, 02:46 PM
Not sure what it was in that CEO presentation that caught the market attention, but jumped anyway.

Now 42cps (and ex 1.75cps div), so this trade is holding up well.

I think the CEO presentation stating/updating that profits will better last FY performance is the catalyst. I sold at 42.5 after ex-div (it was a marvelleous sell at that time). Had an instinct to jump back in at 45/46 due to the volume but missed it. I see that the AGM is located in my ex-suburb. I used to live 3 minutes away from their address. Might go down there for fun and giggle. Not sure if ex-shareholders are invited though. Still, another month away from the AGM.

thereslifeafter87
18-10-2010, 10:31 AM
I sold half back in mid-September. I'm comfortable holding on to the remainder at the moment. It's still probably cheap on P/E basis if you look at the results co's like IMD have produced in the first quarter.

Lizard
06-12-2010, 03:30 PM
Looks like my trade in ESS is going to close out with a takeover offer at 73cps. Was a decent run on this one from 21.5cps entry back in March. Thanks ESS. :)

drillfix
06-12-2010, 03:55 PM
Way ta go there Liz, you are rocking along by the sounds of things, it must be raining money were you come from, well done :)

Lizard
06-12-2010, 09:31 PM
Thanks Drillfix - I must go dig up the ones I've sold at a loss and make sure I post them too!

Has been a good couple of weeks - though a chunk will go to fund a few Xmas presents and holidays... :)

soulman
06-12-2010, 09:57 PM
Well done Liz. I re-bought since my last post for 52 and sold for a small loss. What the hay. That's the way the cookie crumble.