Forum Archive Index - July 2000

["Mark Hubbard" <mhubbard@es.co.nz>]

Hi Geoff

 

Yes, there has been another report issued by O'Neil subsequent to 10/05, which was even more pessimistic, stating that the group was still profitable, however, its earnings are predicted to now fall by more than the 15% decrease initially postured. I also note that at least one Aussie analyst is now predicting after tax earnings of AUS$10m for the group for the year ended June 2000 (compared with AUS$18 the year before, a 44% drop!). That same analyst predicted earnings of AUS$15 for the current financial year ending 30 June 2001.

 

My own discounted earnings valuation is based on a base earnings of AUS$10 (ie, pessimistic), with only 8% earnings growth for the next five years, then 5% in perpetuity thereafter, and at a discount factor of 17% - this gives a share price of AUS$1.22. But given the history of this firm, I view this as very pessimistic (and the share is currently trading at AUS$0.99).

 

The problem is, its very hard to estimate value from the year just gone until the full damage for that year on earnings is revealed.

 

As for GST, apparently it has been a concern, but I don't know of its true affects. I don't think anybody does. The problem is mainly that the sector this firm provides services to (its very diverse, however, big concentration on resource sector) is currently out of favour (another reason to buy?), and a number of the firm's projects have been deferred. As you will know, however, from the 10/05 statement, their forward order book is currently 1.5 times larger than at the same time the previous year.

 

For myself, however, I shall not be making a further investment, and I try to keep to very disciplined diversification strategies, which such an investment would break. I still believe over a three to five year time frame I will see a good return on my AUS$1.55 investment.

 

This means that I still have some money that needs placing? Any ideas?

 

 

 

 

 

----- Original Message -----

From: Geoff Ewert

To: sharechat@sharechat.co.nz

Sent: 1 July 2000 5:04 PM

Subject: [sharechat] UCR (ASX)

Hi Mark,Has CEO Dennis O`neil (or anyone else in the know) indicated an improvement since his gloomy report 10/05/00 ?What effects GST on ASX(rational or otherwise)?

Regards G