AGL - Accordant Group. was previously AWF Madison, Allied...

[Snoopy]

I love it when the FA's get the abacus out, us minions can pull up a chart and check out the SP entry/exit capital risks. Thanks Snoopy, you're a Legend.

This is a weekly chart, it looks pretty anaemic for the past couple of years, has no respect for the 200day EMA (39EMA on the weekly chart), but has developed a very symmetrical trading pattern, and is poised to test the 39EMA weekly / 200EMA daily, again, right now. A break out above the 39EMA, then the descending trend line would give confidence, but a rise above $2.54 would suggest a breakout has some legs.

$2.54(1+i)^10 = ($3.44+$1.83) => i= 7.6%

That is 100 base points worse than the return I would be getting (per annum). This is the reason I wouldn't use charts to 'enhance' my return on an investment such as this. Another point: The dividend is a relatively high percentage of the overall return both historically and in the forward projections. So the chart data is not complete.

Of course as a chartist there is no need to make any assumption about the 'legs' of any break out. You simply ride it and exit once the trend ends. With this share though, I have a pretty good idea of the breakout potential. The underlying drivers of share price improvement are earnings improvement and valuation multiple improvement. The current valuation multiple is not out of line with the history of this share. So there is unlikely to be a boost in share price from that perspective. Long term earnings growth is something like 3.3% compounding per year. So it is unlikely we will see big leaps in the share price. More like sensibly sized steps from small legs.

With investment it is always a good idea to grab the low hanging fruit. My strategy is to grab an extra 24c of value before the likes of Baa would jump in. So Baa would give away the easy profit, and enter at significantly higher level? I am sorry, but none of that makes any sense to me as part of an investment strategy with AWF Limited.

SNOOPY

[winner69]

Well done snoops, I like it

One question - is the jump in ROE in 2017 to 17.7% related to your 1+1=3 discussion? (Forgive for not checking back)

You seem to have short changed yourself on the dividends or is there a reason for not including 2026?

She a pretty smart gal that Mary, Warren owes a lot to you I reckon

So from many years posts Warren wouldn't be buying AWF ....his 15% pa hurdle.

Good work

[Baa_Baa]

Far be it for me to take on a guru and FA expert, however being alerted to this company by Snoopy whom I have great respect for, I pulled up a chart and saw to my surprise that it is in a pattern of sustained capital erosion over the past two years.

Roughly 33% of capital from the May17'2013 high has been lost, which if the trend continued would make it unwise imho to enter now with a new holding, or increase an existing holding, as the risk is further loss of capital and thus erosion of dividends. There's nothing right now that suggests the trend has changed.

My usual 10/14 weekly EMA would be unreliable on this chart as the stock is not strongly trending. Even the 200EMA is unreliable as that the price has reverted quickly after each breakout during the past two years.

My point I thought was simple, it is not about enhancing ROI it is about whether the trend of capital loss reverts to capital gains and at what price would give confidence to take a position, enjoying capital growth and dividends. The chart is just a timing tool, it helps I think with better understanding the market sentiment around AWF.

Respectfully,
BAA

[Baa_Baa]

Sorry, I retracted my questions from previous post after re-reading Snoopy's posts, that a price below $2 is a good entry. That implies the downtrend may continue, which will of course bring down the EMA's as well. I'd still prefer buying a confirmed breakout of the descending pennant though, with the risk being that I miss the easy profit, assuming the price rises from a $2 entry and does breakout of the trading range.

[winner69]

BaaBaa, Snoopy says $2.might interest him.

From that May 13 high of 321 AWF is down ....all of 85 cents. You could say one reason is eps being down but market sentiment has played a part as well with the PE falling from 17 to 14

Lower earnings impact 34 cents and the market sentiment (PE down) impact is 51 cents

Double whammy and the chart shows it.

I think Snoops hypothesis is earnings have recovered and will grow and that in 10 years time it will deserve a PE of 13. Reading snoops mind I don't think he gives a stuff how the share price gets to his model value of $3.45 in 2026, as long as it that price then. But isn't it spooky,really spooky, that his target of $3.45 is about what it was 2 years ago. Just shows how wrong / stupid the market was 2 years ago. That change of sentiment reflected in your charts.

So I'd watch that chart .....once it turns and snoops hypothesis turns into reality good gains to be made.

Often when sentiment changes like it has for AWF over the last 2 years the rerating will overshoot on the underside - like go to a PE of 10, ouch a share price of 170. Sometimes they become a pariah of the market and languish at low PEs. Sometimes something excites the market and a downtrend can eeverse quiet quickly.

Your charts will tell what eventuates won't it BaaBaa.

Like you I would be buying just now either

But Mary a smart lady. She be telling Warren over a cuppa don't buy above 136 'remember that 15% pa hurdle dear"

[noodles]

I will be following how AWF use the funds from their recent capital raising.
SNOOPY

They are paying down debt.

[Baa_Baa]

Thanks winner, nice mediation, bringing together varying perspectives all looking for a bright future through differing lenses. Hopefully the sum of the parts equals more clarity.

[Snoopy]

I pulled up a chart and saw to my surprise that it is in a pattern of sustained capital erosion over the past two years.

Roughly 33% of capital from the May17'2013 high has been lost, which if the trend continued would make it unwise imho to enter now with a new holding, or increase an existing holding, as the risk is further loss of capital and thus erosion of dividends. There's nothing right now that suggests the trend has changed.

Baa, I don't think that pulling up a chart and looking at it without further thought has produced a true picture of what has been happening at AWF over the last couple of years.

From FY2013 the following dividends have been declared and paid:

8, 6.4, 12.2, 6.4, 7.6, 7.2 (all cps)

I am not including the most recently declared dividend of 8cps, as we are not yet past the ex dividend date for that one.

So total dividends paid over your 'period of concern' amount to 47.8cps (fully imputed).

There has also been a one for four rights issue at $2.10 declared on 4th March 2015. On 4th March 2015, the AWF share price was $2.40. For every four of those shares held, shareholders got the right to subscribe for a new share at $2.10.

This means the theoretical ex-rights issue share price at the ex-rights date was:

(4($2.40) + $2.10)/5 = $2.34.

That means 6c of 'value' that you might deem lost is solely due to shareholders being able to buy new shares at a discount. This discounted share offer was a good thing for shareholders, not a bad thing.

In summary, the total value transferred to shareholders, after tax, over your 'period of concern' was:

47.8c + 6c = 53.8c

I put it to you that the capital loss that you think you see in the chart has actually been transferred to shareholders pockets. Returning capital to shareholders is good, because it gives them the choice as to whether to reinvest that capital or not. The capital loss that you thought you saw is only there because you didn't take into account the other transfers of capital not shown in your chart. Thus I submit there is no pattern of capital erosion as you claim, and no pattern of capital loss to avoid.

Your suggestion that dividends may erode is spurious too as the earnings per share trend is steadily increasing not decreasing. In short by not doing your homework fully, your chart has painted a picture which is the exact opposite of what is really happening with AWF.

SNOOPY

[Snoopy]

Sorry, I retracted my questions from previous post after re-reading Snoopy's posts, that a price below $2 is a good entry. That implies the downtrend may continue, which will of course bring down the EMA's as well. I'd still prefer buying a confirmed breakout of the descending pennant though, with the risk being that I miss the easy profit, assuming the price rises from a $2 entry and does breakout of the trading range.

Baa, just to be clear I am not forecasting a share price decline to $2. What I said was IF the share price declined to $2, then I would be interested in buying - a rather different thing.

SNOOPY

[Snoopy]

Well done snoops, I like it

One question - is the jump in ROE in 2017 to 17.7% related to your 1+1=3 discussion? (Forgive for not checking back)

Winner the first line in my earnings table, relating to FY2016 refers to the current year which includes the dividemd of 8c declared but not yet received. I have assumed the second dividend payment for this year does not change (is 7.2cps) as no forecast of a dividend increase has been made.

The jump you noted, in the FY2017 year, is because I am assuming an ROE of 17.7% in that year and all subsequent years. The 17.7% comes from the actual ROE figures from FY2010 to FY2015 inclusive that have been averaged. The actual ROE figures for each year that I have used to generate 17.7% were:

10.8%, 17.8%, 19.7%, 22.3%, 20.4%, 15.1%

It is only since FY2011 that AWF has been generating decent ROE returns. One could argue I should leave the FY2010 data point -at 10.8%- out. But I have included it because all businesses do occasionally have bad years. The 15.1% ROE for FY2015 is probably artificially low because it includes the capital raised by the company on 31st March from the rights issue. The company was not able to use this new capital at all during FY2015, even though it is there at the end of year balance date. All things considered, I believe my 17.7% ROE figure is reasonable, maybe a bit conservative. But then again I have made now allowance for any Madison execution strategy risk.

You seem to have short changed yourself on the dividends or is there a reason for not including 2026?

I have always included 10 years worth of dividends Winner, not 11. This is the way Mary Buffett does it. I guess you could devise an alternative method using say 9 or 11 years of dividends. I'll have to give it some thought.

She a pretty smart gal that Mary, Warren owes a lot to you I reckon

So from many years posts Warren wouldn't be buying AWF ....his 15% pa hurdle.

For those who don't know, Mary Buffett is Warren's estranged daughter in law and author of the 'Buffetology' series of books. So I don't think Warren himself will be worrying too much about Mary these days.

I must admit have relaxed that 15% return hurdle for myself in recent years. It is hard to be that staunch when the alternative is earning 3.5% at call!

SNOOPY