Forum Archive Index - January 2001

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

Hi Peter,

 

Your reasons for picking Ebos are very similar to my own.  I was impressed by Ebos' careful approach towards implementing their sophisticated inventory system.  They certainly seem to have covered all their bases, ensuring an efficient and lean operation.

 

Here are some stories on the warehouse and inventory system:

 

From Infotech Weekly:

 

http://www.stuff.co.nz/inl/index/0,1008,539367a1898,FF.html

 

From The Press:

 

http://www.stuff.co.nz/inl/index/0,1008,551444a1936,FF.html

 

Also, from another source I heard that last year there were some issues with manufacturers starting to sell direct and cutting Ebos out of their distribution system.  This news may have contributed to the weaker share price for the year.  I understand though that Ebos was able to overcome these difficulties with ease and are looking forward to a strong coming year.

 

The weaker dollar would not have helped the market's perception of Ebos as well - but as you say, their margins will grow as our dollar strengthens. 

 

Thus, I believe that the company may represent a good growth opportunity for investors.  The dividend yield isn't too bad as well - just over 7% at Friday's closing price.

 

Liquidity is an issue with this company - the spreads can be rather large sometimes - I'm not too sure how many shareholders the company has, but looking at the historical volume figures, it would appear that they hold their shares tightly to their chest.

 

I haven't bought in yet, but am looking to do so in the near future.  Ebos is definitely an overlooked company on the NZSE.  Hopefully, investors will recognise the company this year and our pick will be a successful one, Peter!

 

Best Regards

 

Ben Dutton

 

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

From: Peter Maiden

To: sharechat@sharechat.co.nz

Sent: Saturday, January 20, 2001 11:37 AM

Subject: [sharechat] EBOS

Ben - I was actually wondering why you had EBOS Group as one of your picks of the year.

 

EBO have been on my watch list on and off for some years but I have never been tempted to show any real interest in them until the mid of last year.

 

What turned me around was they recognised that embracing technology was the way to go  to drive efficiencies out of their distribution system. They also have decided to go beyond  that and exploit technology over the whole value chain. Companies who manage to do this well do increase earnings and it does lead to competitive advantages to drive further growth. 

 

RNS is a great example where distribution efficiencies generated from the use of technology has lead to the creation of a great deal of shareholder value. You know my views on RNS.

 

EBOS is not a big company and it their approach to developing these processes that has impressed me. Firstly they have not spent millions (that they could not afford) but used local (NZ) expertise and knowledge to give them an affordable solution.

 

I admire companies who exploit technology for the benefits of shareholders but who take this sensible approach (instaed of jumping in boots and all) It is good for the country as a whole.

 

Still need to do well financially though. EBO has a pretty solid balance sheet. Recent acquisitions have been funded by shareholders. That could be one reason why the share price has drifted down to its present level.

 

Growth prospects look good and with improving dollar margins will improve.

 

I see EBO undervalued at the current price of $2.80. Market to book value just over 2. Returns greater than cost of capital means adding real shareholder value. Forecasted growth for the next few years less than current PE etc...........

 

I do see price going to $4.00 - $4.50 plus over time (say 12 months) - at least that is what my DCF says. Some risks around low liquidity of shares.

 

You asked for it - sorry about rambling on.

 

Ben - why did you pick EBO?

 

Peter.