Forum Archive Index - March 2001

["Malcolm Cameron" <malharcameron@hotmail.com>]

peter
somebody posted an article on american consumers on sharechat a whileback 
you could read this substituting australia for america & be 99% correct 
possibly more single people on good incomes by some standards with 3 & 4 
credit cards maxed to the limit & usually other loans as well


>From: "Peter Maiden" <pmaiden@xtra.co.nz>
>Reply-To: sharechat@sharechat.co.nz
>To: <sharechat@sharechat.co.nz>
>Subject: [sharechat] Ocker Shocker
>Date: Sat, 3 Mar 2001 07:32:24 +1300
>
>Good article by Phil on the Ocker Shocker  - Sharechat front page
>
>Many sectors in Australia are going through hard times - even worse for 
>them because many in Australia have not yet experienced such things.
>
>It is not just Australian divisions of New Zealand companies that are 
>struggling - many Australian companies in their own right are having a 
>tough time. Particularly affected are those in the retail and construction 
>related sectors.
>
>One company in particular is paint and stains manufacturer Wattyl. Even 
>though Australian based Wattyl have a factory in Auckland and sales in New 
>Zealand of about $50M - and makes respectable profits in New Zealand.
>
>
>I was attracted to Wattyl because of the wit in the headlines about them  
>Because of that I have followed the
>miserable performance of Wattyl (ASX - WYL) over the last few years, Some 
>of the headlines have been
>
>'Wattyl they think of our results?'
>'Loss takes gloss of Wattyl'
>'Wattyl performance loses gloss'
>'Wattyl in need of some polish'
>'Wattyl paints less than rosy picture'
>'Wattyl stains it's copybook'
>'Wattyl performance - from gloss to flat'
>'Wattyl they come up with next?'
>'Better varnish on Wattyl result'
>'Wattyl forecasts flat profits'
>'Wattyl performance more unrewarding than watching paint dry'
>
>
>As the headlines suggest a pretty sad picture. Since late 1997 the Wattyl 
>share price has fallen from over $7.00 to $1.94 yesterday. I don't have any 
>-just an interested spectator.
>
>The decline over the last few months has been dramatic. In spite of a poor 
>financial performance (in line with a lot of similar Australasian companies 
>exposed to the building sector and high raw material costs putting margins 
>under stress ) a lot of the decline has come about how the company has 
>managed it's profit announcements - along with analyst and shareholder 
>expectations.
>
>How companies manage these expectations is vital. Doing it badly, as some 
>companies in NZ have found out recently, is a recipe for disaster and the 
>market reacts badly - in some cases maybe a total over reaction. It is 
>importancy that companies retain their credibility by delivering what they 
>promise (good or bad).
>
>In Australia the market is brutal when 'promises' are not delivered. Wattly 
>started sending warnings that the current year wouldn't be as good as the 
>previous year in October at their AGM. Shareprice then has drifted down to 
>$2.92. When in late December Wattyl announced H1 profit would be $5M (down 
>from $9M the previous year) the price went down to $2.60 odd.
>
>When the H1 profit came in at an even lower figure of $3.6M all hell broke 
>out and it is now $1.91.(a year ago it was $4.38)
>
>The message from this little story is that companies do need to manage bad 
>news well - otherwise shareholders will revolt and the company will become 
>a pariah of the exchange they are on. Officiers of any company who may read 
>this take
>note. This applies to New Zealand as well - and a lesson for any New 
>Zealand company contemplating listing on the ASX.
>
>While on the subject of Wattyl,  contrarian or value investors might be 
>interested in having a closer look. The current price is about 60% of book 
>value. Total market capitalisation is now only $150M and as such must be a 
>prime take over candidate.
>Current years earnings are still likely to be about $10-$12M  - EPS $0.15. 
>Wattyl been through restructuring and once market conditions become more 
>favourable and margins get back to past levels large potential for upside.
>
>Cheers
>
>Peter
>

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