Ebos Limited EBO

[h2so4]

Looks like EBO is suffering from the law of large numbers. As issued capital and NPAT grow it gets harder and harder to post similar percentage increases as those when the company was much smaller. My biggest concern is whether becoming more reliant on the pharmaceutical business in Australia - which isn't yet reflected in results - exposes EBO to greater governmental/regulatory risk than in previous years.

I sold a few in July but EBO is still one of my biggest holdings.

My biggest concern is whether or not FALL IN MARGIN AND REVENUE is consumer driven.

SOLD

[RTM]

Yes it accounts for loans.

You obviously with ANZ. They like people understanding things like NTA and in their Education Dept they have this little article

https://www.anzsecurities.co.nz/dire...spershare.aspx

OK….got it. The words are confusing. But the formula is crystal clear. IF they had said "less" or "minus" instead of "excluding" would have helped. Sorry. Science Grad.

"NTA (net tangible assets) is described as the total assets of a company, excluding intangible assets (such as goodwill, trademarks and patents) minus total liabilities. The NTA/share value is used to determine, in theory, the money that each shareholder would receive if the company was forced into liquidation and all of the assets were sold at that point in time.

Formula: NTA = total assets - total liabilities - intangible assets"

Intangibles must create havoc for the auditors over the years. How do you value them ? How fast and much do they depreciate ?
Appreciate you pointing me in the right direction.

Cheers
RTM

[winner69]

Intangibles must create havoc for the auditors over the years. How do you value them ? How fast and much do they depreciate ?
Appreciate you pointing me in the right direction.

Cheers
RTM

RTM ...good you are interested

Intangibles are ‘valued’ at the time a acquisition is made - essentially the difference between the acquisition price and the tangible assets (real things).

Things like goodwill aren’t amortised (the word they use for depreciation when it comes to intangibles) but there are some intangibles that have a finite life that are amortised (just like depreciating a piece of plant)

The value of the intangibles is tested each year to see whether it is still worth that amount - they generally let the accountants do discounted cash flow models assuming future growth rates and all that sort of stuff. If the SUMs say that the value of any intangible asset is at least what it is recorded as in the accounts all OK ....but if that value can’t be justified they need to reduce the value of that asset. That’s called an impairment ......and affects profit.

You are familiar with Ebos so have a read throughnof Pages 46 to 51 of the Annual Report
http://nzx-prod-s7fsd7f98s.s3-websit...615/285091.pdf

If you read it reasonably thoroughly without getting bogged down in the detail you’ll get a pretty good feel for what’s going on. There are a few paragraphs in plain English

Weekend homework

[Maverick]

Thanks Winner for your break down of the jargon. You have explained it well.I really do appreciate the time you took to go through this ,seriously.
I have always treated goodwill EXTREMELY suspiciously , for example, I take the boys (employees)out on the town..... I dont expense it , rather I call it "goodwill".
this way I have not hurt this years company's taxable profit because the beer doesn't come off the annual profit, rather it is treated as an asset, ie improved the intangible " brand"(obviously everyone is happier and will stay on another year-staff retention) . Therefore an asset to the company and the company is now worth more on paper.
... it improves the ( intangeble)asset brand of the company making it more valuable as a brand and this years profit is all but unaffected. ........ current management look good as the profit is high and the company looks asset rich...... drink on I say, everyone wins.
Personally I Look for the real cash, ie ... dividends. That's proof there is actual money in the pot.
but again. Winner , I do appreciate your responses, just have strong feelings about goodwill and the trap it can set for the unwary.

[Maverick]

Disclaimer. Have done zero homework on EBOS , so am unfit to comment on their result. Just too busy loving the retirement villages (sum/oca/arv)... now there are some serious assets.

[Snow Leopard]

...I have always treated goodwill EXTREMELY suspiciously , for example, I take the boys (employees)out on the town..... I dont expense it , rather I call it "goodwill".
this way I have not hurt this years company's taxable profit because the beer doesn't come off the annual profit, rather it is treated as an asset, ie improved the intangible " brand"....

That is NOT goodwill, that is fiddling your accounts, and is [hopefully] NOT how it works for proper companies.

[Maverick]

that was a simplistic example a pretty smart friend explained to me once. Big companies seem no different. In fact they might be worse.Dick smith, Tegel,Moa etc ......

[Snow Leopard]

I will exercise goodwill to those who mis-understand goodwill and let the matter drop.

Meanwhile despite the lack of revenue increase this year
and the below average EPS increase
and the fact that I (always) regard it as currently overpriced,
I have pulled up a long term chart, omm-ed a little, let peace and serenity enfold me and decided not to sell any.
Instead I will watch it joust with HLG for the #2 position in the portfolio.

Next year they start reporting in AU$.

Dividends are 100% (AU) franked but not 100% (NZ) imputed and I have realised that if I could persuade the registry that I was an Australian non-tax resident instead of a New Zealand non-tax resident (just for EBO mind) then I would end up with more money from the dividend/shares from the DRP

[Maverick]

I apologise Snow Leopard. You are totally correct , I have wrongly lumped the two two terms " intangible asset" and" good will " together in my head as one.I do see them both as similar fuzzy accounting tools that can manipulate the books and am wary of them both. Cheers for your patience. matter dropped.

[RTM]

Thanks all, much clearer now. Beaut day, chugging back to marina after having new antifoul applied. Need next months dividends!