LGD - Legend Corp

[Lizard]

Recent acquisition of IES investments looks good to me. Fully equity funded, which will improve the balance sheet, although may create a bit of an overhang with approx 36m shares issued at 68-70cps for funding.

Only a part year contribution to FY07 and will be some integration costs. I'm working on 07 NPAT of $10.5m and 2008 of $15.7m, putting them on forward P/E of 10.8 and 7.2 respectively. I value at $1.19.

Big improvements in return on capital should make them much more attractive - need a re-rate in the share price so they don't keep funding acquisitions out of cheap shares! But now that the balance sheet has been improved, this should not be necessary for a while.

[Lizard]

Been very patient with this one. Has been a long time, but I think if they can demonstrate improved quality of earnings and working capital management this half, they should fly. At over the $100m market cap, they are large enough to be on a few institutional watchlists.

[Lizard]

Disappointing half year result announced today and got sold down heavily.

Hard to comment further without the detailed accounts yet provided. But revenue seemed very low c.f. the September quarter.

[Lizard]

I think they could get alot cheaper. Doubt memory prices can come back from a 30-40% drop as fast as they fell. And with a loss in the first half, even a "back to normal" performance in the second half would still leave them on a high P/E with latest equity issues. So their chance to redeem their share price is possibly at least nine months away.

[Lizard]

Not arguing that they're not value. Just arguing that the market doesn't have any imperative reason to value them upwards for a while. So the price could drift off a bit and therefore not a time I would choose to buy more, as probably get them cheaper in a few months.

[Lizard]

Sorry, I thought I'd said that I sold out after HY result, but reading back, it looks like I only wrote it on Share Investor. Had a big post results season clean-out. Only got 53.5cps for them though, so I could have timed it better!

I still have them on my watchlist. Hoping the market takes longer to process FY result than HY and I get the chance to decide whether HY has created a blip/buying opportunity or was a warning of more serious long term issues.

[Lizard]

LGD expecting a good result and pricing creeping up in advance. Probably worth closer to 30cps (currently 19cps), but not sure where the growth will come from to take it beyond that.

[Lizard]

Result came in pretty much as expected and seemed to attract some interest. I thought the best part was the op cashflow, which was pretty spectacular and made a considerable dent in debt. Comes from a wind down in receivables and use of tax losses, as well as low capex for the year.

Initially I thought outlook sounded positive, but then realised it is in fact a rather cautious view. So difficult to see if they can improve much beyond this year. I value at 29cps, but without a compelling growth story at this point, so there may be better buying elsewhere (currently 20.5cps).

[Lizard]

Been picked up by Tim Boreham of The Australian, so might win a few more friends today. (Scroll down article to read section on LGD).

The Australian - Tim Boreham

[mark100]

LGD was tipped by a newsletter