Forum Archive Index - March 2001

["Peter Maiden" <pmaiden@xtra.co.nz>]

Gerry - yes another fantastic rise in Collection House price on Friday - closing at $3.90. When you enlightened me to this stock in your previous posts I started to take an interest and although not acting immediately I managed to get in at about $3.30. For those who were convinced at the time of listing a fantastic increase from the $1.40 back in middle of last year..

 

The chart is looking interesting - as it always is when looking at high fliers.

 

As said before the price has found numerous solid support levels on it's way up. The rise is due to find another support level and this is most likely around the current levels - say with a bit more enthusiasm on Monday at around the $4.00 mark

 

Interesting trends appeared in early December, mid January and late February. During these periods there was a bit of a downer in the price but each of these was followed by a strong rise to another support level. Have a look at your chart to see what I mean. If this sort of activity continues then over the next month the price may drift down to $3.80 a few times and then rise to another support level at $4.50. 

 

As with many successful new listings the price does tend to overshoot a realistic price before falling back to that level - Frucor comes to mind. Collection House seems to have got past that stage and with all the good news coming out there is no reason to say there will a downturn in price. Finding the support levels on the way up to where it is now suggests that the market has had several opportunities to re-rate the stock, if it thought it needed to.

 

Collection House has been around for many years before listing - and made many acquisitions over the last few years. It's P&L and balance sheet look really healthy. Sales forecasted of A$53M makes it about the same size as Baycorp and a lot bigger than RMG

 

Collection Houses margins are not as great as Baycorps but currently achieving operating profits before tax of 20%. Balance sheet shows very little borrowings and a manageable level of intangibles at $16M.

 

Collection House is trading at PE of just under 40. This is lower than Baycorp (>50) , Data Advantage ( >100) and RMG which is yet not profitable.

 

Such PEs are high but Collection House still has to see the benefits of it's many acquisitions come through. Supporting such a high PE means that the market demands earnings certainity. That is what investors want at this stage of the economic cycle - and something that Collection House appears to be able to achieve. Baycorp has a fair degree of earnings certainity and that is what keeps their share price up - investors are prepared to pay now for profits that will likely eventuate. One of Collection House's other competitors is Data Advantage and they have had a pretty bumpy earnings history - even though Baycorp see a lot of good in them.

 

The other favourable factor about Collection House is that they are getting favourable analyst coverage - and that goes a long way.

 

Gerry - maybe Collection House is the Australian version of Baycorp?

 

Read in the Sydney Morning Herald that their long time "Chartist" has died. Garry Jones's weekly columns in Australian papers were always worth a read.

 

Cheers

 

Peter

 

pmx