Fundamental Bargain of the New Year?

[Lizard]

Isn't it typical that the one time I get some free time, the market is closed?

On the good side, at least it offers some time for a bit of in depth analysis.

I've churned through quite a bit of analysis, but yet to find a stock I liked as much as those I already own. Hence asking for suggestions. Looking for scenarios that fit either Fast Grower, Turnaround or Cyclical recovery. Not interested in any company that has not yet made a profit. I know there are plenty out there right now - just trying to pick the cream.

I'd really like to get a few more good stocks, so just hoping others are willing to share their suggestions on stocks which are fundamental bargains (and a few sentences as to why).

[Corporate]

Isn't it typical that the one time I get some free time, the market is closed?

On the good side, at least it offers some time for a bit of in depth analysis.

I've churned through quite a bit of analysis, but yet to find a stock I liked as much as those I already own. Hence asking for suggestions. Looking for scenarios that fit either Fast Grower, Turnaround or Cyclical recovery. Not interested in any company that has not yet made a profit. I know there are plenty out there right now - just trying to pick the cream.

I'd really like to get a few more good stocks, so just hoping others are willing to share their suggestions on stocks which are fundamental bargains (and a few sentences as to why).

Good thread Lizard. It may help if you disclose what stocks you current own so that we don't double up..

[Lizard]

Good thread Lizard. It may help if you disclose what stocks you current own so that we don't double up..

I'm left wondering whether you're taking the piss or whether you actually want an entire blow-by-blow repeat on the entire collection? :o

[Dr_Who]

Watch for the rural sector in Aussie. ;)

[steve fleming]

Isn't it typical that the one time I get some free time, the market is closed?

On the good side, at least it offers some time for a bit of in depth analysis.

I've churned through quite a bit of analysis, but yet to find a stock I liked as much as those I already own. Hence asking for suggestions. Looking for scenarios that fit either Fast Grower, Turnaround or Cyclical recovery. Not interested in any company that has not yet made a profit. I know there are plenty out there right now - just trying to pick the cream.

I'd really like to get a few more good stocks, so just hoping others are willing to share their suggestions on stocks which are fundamental bargains (and a few sentences as to why).


Hi Liz,

BSA, i am guessing you probably have already ran your ruler over, but it's recent very cheap acquisition of Allstaff Air Con (on an EV/EBITDA multiple of about 2) which it completed a couple of weeks ago, has helped to de-risk it, as well as providing it with the scale and geographic base to secure more lucrative contracts.

FY10 EBITDA estimate: $15m (FY09 actual) + $6m (FY10 est for Allstaff prior to acq costs)
=$21m

Current EV: $62m m/c + $12m debt for acquisition + $10m net debt at 30/6/09
=$84m

EV/EBITDA= 4

Therefore, BSA, a substantial (FY10 turnover of $350m+), reasonably low risk (survived FY09 very much unscathed) highish dividend yielding (FY10: 5.8%, FY11 6.4% - per Huntleys), low geared (23%D / D+E) small cap, nicely leveraged to a recovering economy, is trading on a very undemanding EV/EBITDA multiple of 4. Don't think there would be that many $250m+ turnover stocks currently trading on an EV multiple less than 4.

Current pe is 7.5, FY11 pe is 7.1.

Earnings upside will come from integration/ economies of scale from the Allstaff/ Triple M combination, and the potential to secure lucrative high margin national infrastructure project work as a result of the increased size of the group.

[Lizard]

Thanks Steve and great post. Looks good - I'd forgotten BSA and hadn't looked at the Allstaff acquisition. They seem very upfront with their figures in the recent presentation too. :)

[shasta]

Good thread Lizard. It may help if you disclose what stocks you current own so that we don't double up..

Corporate

Liz doesn't have a portfolio of stocks, she has her own index :D

One stock that always seems "cheap", & with an expectional dividend yield is CWT:ASX

Share price is less than half of it's NTA, with it's assets mostly being land developed for viticulture, plus they own the water rights.

I think they may own a couple of wineries as well :rolleyes:

There main revenue comes from owning vineyards & leasing them to established wine makers (like Delegats, & Australian Vintage), so they are somewhat sheltered from the Australian wine oversupply problems & the current depressed wine prices.

Thought you might like this Liz, as it's a steady performer, non resource & not a day traders play thing.

I'm picking the wine industry oversupply issue could turn around for the 2010 summer season, so there could be some flow on upside for CWT.

CWT's Annual Report

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=174007

[Lizard]

One stock that always seems "cheap", & with an expectional dividend yield is CWT:ASX

Share price is less than half of it's NTA, with it's assets mostly being land developed for viticulture, plus they own the water rights.


Thanks Shasta, another great post! Not sure about CWT. It's more of an asset play but the value of the assets is difficult to ascertain. If, as you say, the prospects for the wine industry turn up next year, then there's certainly plenty of leverage in CWT.

A couple of points:

1. although it may look like a safe "land" play, it could be said that (taking into account the level of debt), the NTA is ultimately tied to the value of the vines rather than the land. Unfortunately, the valuation of biological assets under IFRS can leave quite a bit of room to move (APB is a classic in this regard). Without full details as to the assumptions used in valuing the vines, it is pretty well impossible to know if they've been valued conservatively or generously. Were the 25% write down in the value of vines to be repeated in FY10, a good portion of that discount to NTA would be wiped out.

2. The yield looks very attractive, but being a fully underwritten DRP, it might as well be a bonus issue.

That probably sounds a little negative, but it is more just cautious. I don't think it is as low risk as it initially sounds. On the positive side, looking at cashflows, I'd conservatively estimate $10m/yr of free cashflow should be maintainable - a good (18%) return on current market cap (even if most of it ends up going towards reducing debt). Plus, if the industry IS coming out of a slump, then the leverage is going to be a positive.

I guess the industry couldn't get much worse:
The Age (http://www.theage.com.au/national/flood-of-cheap-wine-sours-local-industry-20091226-lfqq.html)
Though can't tell if the worst is yet reflected in the valuation of vines and vineyards.

Btw, I admit I'm just getting old and grumpy, but haven't been able to finish the last few bottles of red wine I opened as quality now seems so poor, even at $20/bottle. Am fast becoming a tea drinker!

[buns]

By no means a glory stock, but how about TLS?

Seems to be well oversold during Separation/NBN talks, and again after recent guidance downgrade. After years of struggling in mobile, they seem to be coming to grips with this, and should provide some decent growth in coming years with Trug now well gone...

Analysts think the share price has built in all worst case scenarios of NBN and separation, however with TLS gaining access to a 4G wireless spectrum (not guaranteed yet) from this, and in a way offsetting loosing fix access through leasing its assets to the NBN. Then there is the benefits through ICT Telco’s are now moving towards, namely cloud computing…I think Telstra can come out of this quite nicely.

Even with zero growth, the dividend yield (fully franked) is close to 9%, with stated increased dividends in years to come.

I’m assuming a lot of people got burnt on TEL and are still scared away from regulatory situations..

[Lizard]

By no means a glory stock, but how about TLS?


Thanks Buns. Analyse TLS? That should keep me out of mischief for a few days...:cool:

[Lizard]

One of my current "bargains" that I've posted on in the recent past is Ambertech, AMO - as a recovery play, looks just too cheap to pass up.

Ambertech - ST thread (http://www.sharetrader.co.nz/showthread.php?p=281166&highlight=amo#post281166)

Niche distributor of high tech gear, both retail and commercial.

Combined directors and management hold a substantial quantity of shares.

On a historic P/E of 8.5 (at 50cps), but first half forecast exceeds last (depressed) full year NPAT, so forward P/E possibly 4 or lower. Minimal debt, so historic EV/EBIT about 5.6, but should also fall - perhaps below 3.0. FY09 yield of 7.0% (likely to rise this year).

Price is currently depressed due to selling by major shareholder, HGL Ltd (HNG) who has decided to exit their minority shareholdings in listed companies in order to use cash to support/grow their majority owned distribution businesses. Possibly AMO would have fitted their portfolio, but unlikely they would have got a majority at a cheap price due to management holdings, so they are exiting. They have just gone ex-substantial which leaves them with 1.5m shares to sell. Watching the price action over the last few weeks, they seem happy to sell down to 50cps but won't go below, so if you're considering buying, don't pay up. For the small buyer, might as well wait until at least another 1m shares have gone through the market. Larger buyers have a one-off opportunity to pick up a larger quantity now. Only risk is, distributorship is not an ideal growth business (in my view) and currency tail-wind this year could make it difficult to improve in 2011, so might not be a long term stock.

[buns]

Flemmo

I've only spent 15 mins on it, but boy do I look the look of BSA.

Leaders in the industry, blue chip clients, hiring all the right people combined with a strong Balance sheet these guys look set to contining growth. Also stoked with there strategy, and interest in the health sector with aging populations.

This stock will be sitting right beside TLS high on my watch list as I follow the NBN discussions, it seems BSA should benefit huge from contracting with the NBN and/or from Telstra's proposed mobile roll out.

Good stuff

[percy]

thank you lizard,
i will research amo & bsa.
two companies i have that i like are;
ave retirement villages in good locations.good growth, with aging population they are in the right sector.
iri. great growth,low peg,paying a dividend.

in nz zin has the hypercom agency for eftpos,growing company,paying divy with experianced nic gordon having a lot of flesh in the game.
i have shown you 3 of mine,now show me more of yours.!
ps i already have scy

[Lizard]

Hi Percy, thanks. Three picks is a bonus!

IRI I know well - have had some good trades off it over the years. Gave up the last one at 53cps as the high AUD must be a frustration for them, but I've still got them on watch and valued about 74cps. For some reason they never value out as well as I expect them to - perhaps it's because my calcs on some value measures (e.g. EV/EBIT) tend to normalise tax (do they pay less because of R&D credits on capitalised R&D?). Also have to wonder how many years it will take for them to find away to extract value from all that cash!

It's a good pick though and a stand-out on ROIC type measures - put it in "fast grower" category (with an asterisked reminder as to how quickly competition can undermine IT fast growers)

[shasta]

Hi Percy, thanks. Three picks is a bonus!

IRI I know well - have had some good trades off it over the years. Gave up the last one at 53cps as the high AUD must be a frustration for them, but I've still got them on watch and valued about 74cps. For some reason they never value out as well as I expect them to - perhaps it's because my calcs on some value measures (e.g. EV/EBIT) tend to normalise tax (do they pay less because of R&D credits on capitalised R&D?). Also have to wonder how many years it will take for them to find away to extract value from all that cash!

It's a good pick though and a stand-out on ROIC type measures - put it in "fast grower" category (with an asterisked reminder as to how quickly competition can undermine IT fast growers)

Liz

Check out my MNL thread, that might fit what you are after

[Lizard]

Regarding AVE, it will probably take me a while to make up my mind on AVE, as need to look more closely into them. Superficially, look cheap vs RYM for instance. However, I am ambivalent about investing in the retirement village model at this point. They're generally fairly tied to residential capital gains - a lull could see the industry down-rated to plodder status (perhaps that's already happened with AVE).

[shasta]

Regarding AVE, it will probably take me a while to make up my mind on AVE, as need to look more closely into them. Superficially, look cheap vs RYM for instance. However, I am ambivalent about investing in the retirement village model at this point. They're generally fairly tied to residential capital gains - a lull could see the industry down-rated to plodder status (perhaps that's already happened with AVE).

Liz

I looked into AVE, & have been following it since 80c, but at the time i bought some SIP (Healthcare/Pharmaceutical), that wasn't too long ago.

I wasn't sold on it, yet it's nearly doubled since!

It has remained on my "Undervalued watchist", but perhaps is more fair value now & should be removed.

http://hfgapps.hubb.com/asxtools/imageChart.axd?BI=2&COMT=index&OVS=XJO&TF=D6&TIMA1=20&TIMA2=20&s=AVE

[Lizard]

Thanks Shasta. MNL looks pretty interesting - amazed I never noticed this one before. :)

[steve fleming]

Hi Liz,

in terms of ASX300 companies, APZ (m/c $280m) has some of the best valuation metrics for a mid-cap:

Fy10 pe: 7.3
Fy10 div yld: 9.6%

Fy11 pe: 6.7
Fy11 div yld: 10.5%

Discount to NTA of 33%

Gearing of 30%

Of course, any upside (risk) will depend on the recovery (deteriotaion) of the WA economy/property market.

[Lizard]

Percy's mention of ZIN is interesting, but, given their outlook for current period (ending March) is weak, I'd see them as a watch only at this point. There are so many recovery-type opportunities that look likely to offer low risk, 25% that it doesn't seem worth the risk to buy into a small transformation play with the risk that it may not play out this year.

[Lizard]

Hi Steve,

Pretty big discount to NTA there on APZ. At first glance, I didn't spot what items brought the operating cashflow down so hard in 2009 - not enough to cover distributions. Will have to have a closer look sometime. Family are nagging that I've done enough mucking about for one year - hope they mean for 2009.... ;)

[percy]

lizard.
you are a better analsys than me.
iri i do agree with your comments but i have had a great run with wtf and hope iri can do the same.
zin. again your comments are spot on;outlook for current period is weak.the share price is strenghtening however.
ave.again spot on.whether we are past the lull or not i donot know.the company is gaining mass.rym model is stronger.nana HAS to go into care while ave is more lifestyle.
foster,port macqarie,would be great places to retire.

[Stranger_Danger]

I'd go CLH. Still like FSA and CCP too in the sector, but CLH is in my view the most conservatively managed, has the better long term prospects yet has appreciated the least (isn't THAT the theme of the year, the junk goes up faster!).


Disc : own all 3.

[winner69]

I'd go CLH. Still like FSA and CCP too in the sector, but CLH is in my view the most conservatively managed, has the better long term prospects yet has appreciated the least (isn't THAT the theme of the year, the junk goes up faster!).


Disc : own all 3.

Good old CLH eh ... what a ride post IPO from just over a $1 to $5 plus .... before the **** hit the fan .... and the expected profits jsut seemed to evaporate

There was always some doubt about how they valued their ledgers and the amortisation rates they were using .... the numbers didn't just stack up and so it proved.

Maybe CLH is no longer a dog (or junk) but from being the best performing stock on the ASX (yes of ALL the stocks) one year to being one of the worst performing a year or so later pissed many punters off ... and as often happens they become the pariah of the markets and nobody is interested in them anymore ..... investor pyschology is an interesting study.

CCP got caught out with their ledger valuations as well and a bit of cash squeeze but somehow have done a better job assuring the market all is OK

Interesting sector but over the years they all have all promised so much (financial performance) but the excessive profits never seem to eventuate. In saying that there has been times when good money has been made riding the waves of positive investor sentiment .... Baycorp for many years (traded at 20 times sales once) .... CLH post IPO was a 5 bagger for me ..... CCP I got in at about $4 and out about $10 but it carried on to over $12 (amazing eh) ..... and for all the excessive profits from collecting debts that the banks 'gave to them on the cheap' never eventuated

Just a rave .... thank for the memories stranger

[Stranger_Danger]

Winner,

I agree, the sector does have a "varied" history to say the least!

I too remember when debt collection stocks were hot and being spruiked by all and sundry. However, in the last 12 months, I've mentioned these stocks maybe 3 times in total, and the only response has been you going on about how bad they used to be! No one else has said a word.

In my experience, real profitable dividend paying businesses, tarnished by something, can turn out to be excellent investments.

The dangers with CCP, CLH et al, were highest when every moron was spruiking them. Who is doing that now? They're unloved and ignored.

Seriously, run your ruler over them now, forgetting the past. Why is CLH not a buy today?

In hindsight, debt collection stocks were a canary in the coalmine, showing us the impact of easy money several years before the general s*** hit the fan.

Their problems were caused by overpaying for ledgers, based on easy money, coupled with with a constant desire to "beat the market", a side effect of your sector becoming a market darling.

Are these the conditions today? I think not.

In the CLH of the past, directors were selling and management was making non core acquisitions. In todays CLH, directors are buying and management has got rid of the junk and is focussing on what is core.

CCP is a slightly different story, and I'm not as fond at $2.83 as I was at 50 cents, but, I think they're a decent hold until mid next year before reviewing. They are definitely the riskiest of the three, in my view.


I *DO* agree with you that we can learn a lot from history, but I reckon we have to be careful when it comes to what we choose to learn.

In other words, is the conclusion from the period you describe

"All debt collection companies are bad and should never be bought"

or perhaps it is

"Any hot sector being touted by all and sundry that is being built on a foundation of easy money will eventually blow up".

I believe the correct conclusion is the latter one, and doesn't in any way describe the sector as of today.

[winner69]

Good response SD

Was just a rave about the past. The sector has been good to me over the years (even though not been it over the last 12 months) and i still take an interest.

Agree with your conclusion "Any hot sector being touted by all and sundry that is being built on a foundation of easy money will eventually blow up". and that is what happened here.

No the world is a bit more sensible it is those companys with a solid business model that will be rewarded ... and CLH at least appreciate that making money is hard work and doesn't happen overnight.

What the last few years has done is reinforce my thinking that investing to make money over time (as opposed to short term trading) is a balance between 'fundamentals' and 'market sentiment' (what the charts show).

I agree with you that the CLH fundamentals (in particular the direction they are taking) are now much better than 2-3 years ago. Even though the shareprice has doubled (great effort) overt he last 12 months it has been a bit ststic around the 70 cent mark .... market obviously waiting for the next announcement and if it is good will probably take another step up .... and might even be rerated a bit closer to the 12 pe that CCP has.

I think we are on the same page here .... you have triggered me to take another real close look at CLH again ..... but i will stay away from CCP as I still believe thy still have a problem with their ledger valuations (ie reported profits should be lower) buts that my view I have had for many years and the reason i sold out before the top of a few years ago.

happy New Year

[Snoopy]

One share that has not had such a good year in 2009, for NZ investors anyway, is NYSE listed YUM brands: the master franchise owner of KFC, Pizza Hut and Taco Bell. The share price is trading near the 2009 year high on a PER of around 15. But of course, so is the NZD vs USD exchange rate. And that means for NZ investors ‘flat’ best describes investor returns over the last year. IMO when US interest rates start to rise again though, that currency effect could turn around. In short I think that YUM could be a good place to stash away some of your ‘High New Zealand Dollars’.

In USD terms YUM profitability in terms of eps is up 12.9% annually over the last five years, even though last year eps profits only rose some 6%. YUM has long been touted as a ‘China Growth story’. But it is equally likely to be an ‘Indian Growth story’ in the future. In China, YUM are far ahead of McDonalds in terms of market penetration (albeit only in the first innings of a nine innings ball game as the YUM CEO puts it). Yet in India where McDonalds are established, YUM are really only just getting started.

In addition YUM are that most onerous of things (on this forum at least), a steady dividend payer! For the credit crunched US investor this is no bad thing. Yield is modest by NZ standards at 2.4%. But at least that is enough to pay your FIF tax obligations on such an investment without having to sell shares to do so. YUM are only paying out about 1/3 of their earnings as dividends. So there is very little chance this dividend will be cut in any upcoming double dip downturn.

The long term outlook was enough to make me bump up my investment in YUM again in November 2009. And with the current FIF tax regime in force, I can’t think of any other company outside of Australia and New Zealand in which I am prepared to do that.

SNOOPY

[voltage]

thanks for the insight snoopy. I need to diversify and have more funds globally. There are many ways of doing this with 100s of ETFs on the market etc. Another way is to select 5-10 large global companies and hold for the long term. YUM fits that idea well. Some of these large global companies are historically at excellent value. Have you considered GOOGLE and APPLE? What do you think the future is for the FIF tax regime? Your thoughts are always worth reading

[Snoopy]

I need to diversify and have more funds globally. There are many ways of doing this with 100s of ETFs on the market etc. Another way is to select 5-10 large global companies and hold for the long term. YUM fits that idea well. Some of these large global companies are historically at excellent value. Have you considered GOOGLE and APPLE? What do you think the future is for the FIF tax regime?


Voltage, I think the FIF tax regime is here to stay. However I think for investors with longer time horizons it is an extremely severe tax. The reason I say that is because of the fact that you cannot carry losses from year to year. That means you can end up paying tax while still recovering your lost capital, having made a loss. This was perhaps not so much of an issue during the once in a generation bull market in which the tax was conceived. But I think it will be much more of an issue in the more normal markets we will have in the future.

The effect of the FIF regime on my investment strategy is that I will now only invest in an overseas company when that company can generate growth in good markets and bad right across the business cycle. Also I am very wary of paying too much for an FIF investment, given the potential for generating a tax bill even on losses. Perhaps this is a good thing as it means long term investors should stick to their ‘home’ (NZ/OZ) market unless that overseas investment case is really compelling.

I think both Apple and Google are great companies. But whether they are great investments at today’s prices is quite another matter. I haven’t studied either in detail. But my instinct says that they fall into the category of good companies priced to perfection. Technology companies are particularly prone to the phenomenon of PE deflation. That means that profits can be rising. But the share price still falls because profits are not rising fast enough, and that means you lose money.

I would agree that most NZ investors do need to have a foothold in more global business markets. But that is not quite the same thing as saying they should have more money in global sharemarkets. Off the top of my head four NZX companies come to mind: Cavotech MSL, Scott Technology, Rubicon and Tenon. All are listed on primarily on the NZX. Yet these are not New Zealand market businesses. As far as I am concerned they are overseas businesses almost entirely dependent for their fortunes on business conditions outside of Australia and New Zealand. Don’t get me wrong, I am not necessarily recommending any of these companies at today’s prices. I am making the point that you don’t necessarily have to invest in Exchange Traded Funds or pick shares in overseas markets to make sure that you have an ‘overseas corner’ in your investment portfolio.

SNOOPY

[percy]

lizard
i was looking for something else but came across a good article on zin and nic gordon
at www.unlimited.co.nz

[Lizard]

Thanks Percy - that is a good article. I will definitely put ZIN on watch and try to follow for a bit.

Also thanks to SD for mentioning CLH - haven't looked at it in years, so would be worth re-visiting.

[ratkin]

MFF on the australian market has yum brands as one of its core hodings , might be a good one if you looking to diversify but dont want direct ownership of an american share.
Plus when the aussie dollar eventually falls MFF will gain

[Lizard]

Hi Ratkin,

Yes, I already have some MFF and actually thought it would suit Snoopy perfectly and meant to mention it to him. I think he would approve of the stock selection and holding style the management use. Also, at least until recently, has been trading at more than a 15% discount to net asset backing. Management fees are not high (about 1.25% pa plus performance fee. Performance fee takes 10% of outperformance over hurdle index but only if the Australian govt 10yr bond rate is exceeded in the year)

He should also look at MFG - they combine both significant investments in their own funds with the funds management business itself. Given the asset backing provided by cash and investments, there appears very little value being assigned to the funds management business - currently growing at an impressive rate (went from $393m at 30 June to $694m at 31 Dec). Fast heading towards achieving critical mass and funds management business will make a maiden profit this year. Combined with profit on fund holdings, this should be a good year for MFG. In addition, I expect they will make the All Ords index from 1 April, so possibly MFG will avoid the FIF Regime (whereas I don't think MFF can).

Currently the MFF held by MFG is worth about 20.5% of the MFG share price.

[Lizard]

In addition, I expect they will make the All Ords index from 1 April, so possibly MFG will avoid the FIF Regime (whereas I don't think MFF can).


Having said that, I should of course point out (before Snoopy does!) that, as an Australian company, MFF/MFG will still pay tax on capital gains, so Snoopy is probably still better off (in most years) directly owning YUM and wearing the FIF regime.

[root]

Morning Liz,

What is the FIF regime?

[Lizard]

Hi Root - FIF is a New Zealand tax regime for overseas investment. It was modified by the Labour government to cover a wider range of overseas investment (basically only NZ shares and most shares in the Australian All Ords are exempt). Applies to NZ taxpayers whose offshore investments had an initial value of greater than $50k.

As a theoretical method of taxation it has its merits, but on paper it can be time consuming to calculate tax liability (and, I would guess, rather difficult for IRD to police!).

[root]

Cheers Liz, does that tax apply to earnings only or capital gain as well?

[Lizard]

Hi Root,

It is not that straightforward. It basically works on the assumption that an investor makes 5%pa (the "fair dividend rate") OR 5% on an individual trade (for short term trades) and taxes accordingly. However, for an individual investor, the actual earnings can be used if they are less than 5%, averaged across all investments - though losses cannot be credited or carried over. Hope that helps.

If you think you might fall under this regime, send me a PM (preferably with a contact e-mail address) and I can send you some more information.

[voltage]

interesting looking at their shares held in both funds. Global giants. I think directly owning 2-3 of these is the smart way to go although this approach lacks diversification but will make a good compliment to a portfolio. Yums as snoopy points out has has excellent dividend growth

[percy]

Hi Percy, thanks. Three picks is a bonus!

IRI I know well - have had some good trades off it over the years. Gave up the last one at 53cps as the high AUD must be a frustration for them, but I've still got them on watch and valued about 74cps. For some reason they never value out as well as I expect them to - perhaps it's because my calcs on some value measures (e.g. EV/EBIT) tend to normalise tax (do they pay less because of R&D credits on capitalised R&D?). Also have to wonder how many years it will take for them to find away to extract value from all that cash!

It's a good pick though and a stand-out on ROIC type measures - put it in "fast grower" category (with an asterisked reminder as to how quickly competition can undermine IT fast growers)

Article on IRI www.thebull.com.au.
aussie tech stock on buy list.
on another thred KW has warned methat IRI cannot brake 55cents.
interim report out mid feb.I will read that before deciding what to do.

[shasta]

Corporate

Liz doesn't have a portfolio of stocks, she has her own index :D

One stock that always seems "cheap", & with an expectional dividend yield is CWT:ASX

Share price is less than half of it's NTA, with it's assets mostly being land developed for viticulture, plus they own the water rights.

I think they may own a couple of wineries as well :rolleyes:

There main revenue comes from owning vineyards & leasing them to established wine makers (like Delegats, & Australian Vintage), so they are somewhat sheltered from the Australian wine oversupply problems & the current depressed wine prices.

Thought you might like this Liz, as it's a steady performer, non resource & not a day traders play thing.

I'm picking the wine industry oversupply issue could turn around for the 2010 summer season, so there could be some flow on upside for CWT.

CWT's Annual Report

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=174007

Liz

Just thought i'd update the thread with this relevant ann, from CWT's major tenant

AVG - Trading Update

http://www.stocknessmonster.com/news-item?S=AVG&E=ASX&N=176520

Perhaps things are slowly turning around, not just for AVG but for the industry in general?

[Lizard]

Thanks Shasta. I'm thinking AVG might be more interesting...

Steve, I saw BSA today and think that is a mite disappointing in light of the EBITDA expectations you had?

[percy]

AVE.result out today.Growth,Profit,Dividend.Looks as though moving forward with caution.Lowly geared with sp discount to NTA.Not a sexy share,but a good sectorto be
in.Villages located in nice places like Forster and Port .

[shasta]

Corporate

Liz doesn't have a portfolio of stocks, she has her own index :D

One stock that always seems "cheap", & with an expectional dividend yield is CWT:ASX

Share price is less than half of it's NTA, with it's assets mostly being land developed for viticulture, plus they own the water rights.

I think they may own a couple of wineries as well :rolleyes:

There main revenue comes from owning vineyards & leasing them to established wine makers (like Delegats, & Australian Vintage), so they are somewhat sheltered from the Australian wine oversupply problems & the current depressed wine prices.

Thought you might like this Liz, as it's a steady performer, non resource & not a day traders play thing.

I'm picking the wine industry oversupply issue could turn around for the 2010 summer season, so there could be some flow on upside for CWT.

CWT's Annual Report

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=174007

CWT Update

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=176697

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=176698

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=176696

http://www.stocknessmonster.com/news-item?S=CWT&E=ASX&N=176695

Market likes it, up 3.5c to 30.5c

FY10 Distribution set at 7.0c (roughly 23% divvie! ;))

[Lizard]

CWT Update

Market likes it, up 3.5c to 30.5c

FY10 Distribution set at 7.0c (roughly 23% divvie! ;))

Shasta, I took a look and am still very cautious, considering it high risk. Points to note:

1. NPAT excluding revaluations was 17.5% lower than prior year. Finance costs are up and operating cashflow has fallen by over 20%.
2. The dividend is not being paid out of cash, but is underwritten sufficiently to be close to a bonus issue. The yield is therefore somewhat meaningless.
3. The underlying asset value per share already fell by 1cps due to fall in asset values and will fall another 3cps to 56cps when the first half dividend is paid. NTA falls to around 44cps.
4. Although they reduced debt, the fall in property values means the gap between debt and value of investment property (against which it is secured), only improved slightly - bankers are still relying on vines for security, which I doubt they are very happy about. (Last year, the big fall in value of vines was taken in the second half. Could this happen again this year?)

In my view, unless there is strong evidence the market has bottomed, then they may need to raise capital this half. Perhaps 1 for 2 at 23cps would do it - higher if the market chooses to take the div at face value.

[Lizard]

Hi Percy,
What did you think of the IRI result? I thought bit disappointing, although impact of higher AUD not unexpected. Hard to guess what they can pull off for the FY. However, dividend pretty much all coming out of cash reserves as cashflow was piddly, so erodes the stats a little. Bumpiness and unpredictability has been typical of IRI's history though. (I'm not holding, but still follow with interest)

[percy]

Lizard,
I too thought it was disappointing so sold.Bit embarrising as I could not find the paperwork.My broker at craigs sorted it out and sent me a contract note.
Brought august last year at 40c sold today at 49c.missed divie when i brought and will miss this divie.I think it is best to sell when a share stops performing and I was very mindfull of yours and Kw,s advice.Nice to have you two to call on. Thank you.

[voltage]

Snoopy an excellent find with YUMS posted earlier. How do you unearth these?

[Snoopy]

Snoopy an excellent find with YUMS posted earlier. How do you unearth these?


Most of my overseas investments generally have some NZ connection Voltage. I was an RBD shareholder, saw all this money going out as franchise fees and got annoyed. However rather than stay annoyed I figured that if I owned a share in the company that was raking in all of those fees then perhaps I could turn my annoyance into a benefit? I turned up on the YUM share register shortly after that.

SNOOPY

[percy]

AVE have today upgraded cashflow and profit forecasts.RBS Morgans's research report that was sent to shareholders arrived today.The AVE upgrade is well ahead of morgans forecast.
morgans rate them in their report dated 15/4/20 as a buy with target price $1.72.Makes a nice change to have a profit upgrade.

[voltage]

AA good recommendations. What rental house would give you these return?

[Lizard]

Just re-visited this thread and forced to say it... what a lot of disaster stocks were picked by what is normally a great bunch of stockpickers! All credit to Stranger Danger with CLH - he got a big bump up in January and hasn't retraced it all. Snoopy's YUM also deserves honorable mention. My own AMO was looking good for a while but never really got traction before revealing that second half wasn't going so well and suffering a nasty thud. CWT is looking rather ugly today with the forecast falls in vineyard valuations further emphasizing the risk. BSA, IRI and AVG have quietly slid away. APZ, AVE, MFF and ZIN seem to be going okay, but pretty much tracking sideways.

Either "value" plays need a bit more patience to play out, OR we are mostly pretty hopeless at picking them! :eek2:

[shasta]

Just re-visited this thread and forced to say it... what a lot of disaster stocks were picked by what is normally a great bunch of stockpickers! All credit to Stranger Danger with CLH - he got a big bump up in January and hasn't retraced it all. Snoopy's YUM also deserves honorable mention. My own AMO was looking good for a while but never really got traction before revealing that second half wasn't going so well and suffering a nasty thud. CWT is looking rather ugly today with the forecast falls in vineyard valuations further emphasizing the risk. BSA, IRI and AVG have quietly slid away. APZ, AVE, MFF and ZIN seem to be going okay, but pretty much tracking sideways.

Either "value" plays need a bit more patience to play out, OR we are mostly pretty hopeless at picking them! :eek2:

Just reading the CWT anns now, seems the turn around that was shown in AVG hasnt really triggered the sector back into life.

Still think the viticulture industry is due to turn around, question is when?

[Lizard]

It perhaps makes sense that wine-makers might turn around before vintners. Look at the recent OBV announcements - the amounts paid for grapes have been slashed this year. This will help wine-makers back to profitability, particularly those in a position to buy grapes under contract on the spot market. Meanwhile, vintners have to slog it out, waiting for the weakest to fail and reduce supply.

[shasta]

It perhaps makes sense that wine-makers might turn around before vintners. Look at the recent OBV announcements - the amounts paid for grapes have been slashed this year. This will help wine-makers back to profitability, particularly those in a position to buy grapes under contract on the spot market. Meanwhile, vintners have to slog it out, waiting for the weakest to fail and reduce supply.

Slightly off topic, but theres a glut of quality wine available at very good prices, lets hope it lasts a bit longer aye...

[Silverlight]

Fundamentally I am taking a look at the following companies as near bargain prices

Microsoft, Research in Motion, Takeda Pharmaceutical, Ebay, Nintendo, Cisco, Intel, & Texas Instruments.

Low PE, & net cash (as a % of their mkt cap)

MSFT 10.2 with 7.5% net cash.
RIMM 8.0 with 12.7%
TKP 10.5 with 29.2%
EBAY 14.9 with 12.1%
NTD 13.2 with 34.9%
CSCO 12.2 with 12.1%
INTC 9.5 with 9.5%
TXN 9.8 with 12.8%

At what point do you say thse companies are too cheap? esepecially with Net cash, let alone all their other non current assets!

[drworm]

There's been no secret that mining services has been a major cyclical recovery sector. And most stocks in the sector have been doing quite well. In the recent weeks a couple of turnarounds have caught my eye.

ASX:VMG and ASX:STS. Both got caught up in the mining boom, leveraged up, made bad acquisitions and got pummelled during the GFC. Since, they've pulled themselves back from the edge, raised some funds, paying down debt in a major way, cut costs while maintaining market share. They're back to paying dividends and posting decent profits.

But they're cheap and are turnaround companies in a rebounding sector. By my all-stock-inclusive calcs, VMG and STS posted FY10 earnings of 8c/s and 14.4c/s* putting them at P/Es of 6.25 and 5.55 respectively (lower if you use weight stock figures). In my opinion, a bit too difficult to ignore especially if the world economy holds up.

* - earnings from continuing operations

Disclosure: I hold both.