Forum Archive Index - September 2000

["Ben Dutton" <bendutton@sharechat.co.nz>]

Hi Peter,

Good point about BCH's revenue compared to market cap.  I think that the
next twelve months will be vital for BCH as they show investors just how
they will continue to sustain their rapid growth while maintaining and
enhancing their revenue streams.

It will be an interesting time for this share indeed!

I never really waded into the WHS debate, but I think that we could apply
the same thinking by James Cramer that I quoted last night to this share as
well.  What are we actually "valuing" the Warehouse on?  The P/E ratios of
its peers?  The past "standard" P/E ratio for retailers?

We strike the same problem here, IMHO, because the Warehouse has shown
itself as being exemplary in its growth and future business prospects.
Stephen Tindall has created no ordinary business.  I agree with you that
what the Warehouse has achieved over the past ten years has been quite
unheard of in this country.

The real test for the Warehouse will be its next set of results when figures
from their newly-acquired Aussie operations are included.  I'm definitely
looking forward to seeing that.

More food for thought nevertheless.

Best Regards,

Benjamin Dutton

----- Original Message -----
From: "Peter Maiden" <pmaiden@today.com.au>
To: <sharechat@sharechat.co.nz>
Sent: Friday, September 15, 2000 2:20 PM
Subject: [sharechat] BCH - where have I gone wrong?


> Ben - thanks for the great response
>
> I agree that looking at the past clouds the decision making process. Even
though the past may give some indication of the future the main driver of
any investment descision should be ones view and assessment of the future.
>
> Back to BCH. As we both agree they have created a tremendous amount of
value out of their intellectual property. However with a market cap in
excess of $1B that is what they would expect to sell that property for. For
the acquirer that incurs a $50M a year goodwill cost (over 20 years).
Bearing in mind that BCH (with all that intellectual property and know how)
current revenues are only just in excess of $50M things still don't stack
up.
>
> Tempted again to get into BCH but on this basis still think overvalued.
Most likely another lost opportunity but that's my personal decision. Good
luck however to current and future investors.
>
> Basic fundamentals don't always sway my buying decisions. I have an
interest in both RNS and WHS which also trade at high PE ratios.
>
> Since changing their strategic direction a few years ago I have had a lot
of time for RNS. They have been a very innovative company. Firstly they have
used internet technology to capture the efficiencies that that medium offers
and have become a very efficient distribution company. Secondly they have
developed those processes to an extent that they can extract real value out
of their innovation and build a platform for future earnings growth - even
in the global marketplace. They have my confidence and money - good luck to
them.
>
> I am also a strong believer in WHS and have not had anybody agree with me
on this forum when I have expressed my opinion that 600 is still cheap. i
get shot down and reminded that WHS should not be trading at a PE of over 20
and that 525 is a fair value. However as per the argument you put forward
why shouldn't WHS trade at a high PE?. What WHS has done has done over the
last 10 years has been unheard of in NZ business history. A business has
been built up and now operates a model (refer some of my previous postings)
that appears to adapt to whatever is thrown at it. WHS is another business
that has not been afraid to throw money into technology and the rewards are
coming through. Essentially a stuffed NZ is good for WHS. We should not
forget that their sales increases in NZ alone are over $120M - a figure that
a lot of listed companies alone would be proud of their total turnover. That
is what I see the real value in WHS and my I continue to express my view
that even at the current 600 price (even if the PE is 20 odd) there is a
tremendous amount of value yet to be extracted - not just in NZ but as they
get OZ operations in order.
>
> However at the end of the day sentiment rules and that what drives a lot
of the prices.
>
> Enough rambling for now - but a good debate, and hopefully making us all
the wiser
>
> Have a good weekend
>
> Peter
>
> --- Move to a better address ---
>        + today freemail +
>     http://www.today.com.au
>
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