Forum Archive Index - October 2001

["SWLEE" <SWLEE@xtra.co.nz>]

Peter,

Just like every dog has its days, CAH share price is currently under due to its cyclic nature of its business. It is encouraging to note that the company is maintaining revenue growth in the trying commodities environment, albeit profit growth. I would be more concerned if both revenue and profit growth is on the decline. At least they are capturing more market for their business, more so than one can say about many companies in NZ.. Who knows when the market will turnaround but it will, and when it does, CAH is well placed for it.

 CAH is in a capital intensified industry, but I think the most differentiating factors about CAH compared with many other companies are:-

- They are investing wisely by scooping up businesses in NZ and OZ at bargain prices at the bottom of the cycle, building a solid foundation for the rebound in business. 

 

- They made good profit from the sale of their Chile investment and rather than re patriate the proceed to the major shareholders, they decided to put it to some strategic investments that hopefully bear fruit in time to come, and one can only have faith in their management to carry out the right business decisions,  unlike many big companies in NZ (eg TEL TRH) whose major shareholders have been sucking bloods of the companies.

 

-They have a prudent management structure, sure, CAH offers low dividend yield but they are managing their business within their means, unlike other companies eg AIRNZ paying out dividend that they could have been used to support and expand their business, and FBU paying out annual dividends more than the profit they made for the last 2-3 years-living on borrowed money in hope of good time to come.

 

All said,  at the current price representing a respectable P/E and substantial discount to NTA,  CAH offers a good entry point for a medium to longer term perspective with minimal risk of downslide, underpinned by as a potential take-over target, a housing boom in OZ.

 

Stephen

(sitting tight and hopeful, hold CAH and building on) 

 

 

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

From: Peter

To: sharechat@sharechat.co.nz

Sent: Tuesday, October 16, 2001 12:54 PM

Subject: Re: Re: [sharechat] WHS

Stephen - interesting points on CAH. One day (like Contact) its major shareholder IP will do something with their interest. Because of this being a possibility (one day) is one of the few reasons why many shareholders hang in there.

 

I don't think I'll ever buy CAH shares. However for some obscure reason (maybe in seeing how many more years they can continue to make so little money on the $5B or so of invested capital) I keep a spreadsheet going of CAH performance. Give CAH credit in reporting quarterly figures - something others could take up in NZ.

 

I'll update my rolling four quarter totals graphs tomorrow and expect to see the revenues line going up and the earnings line going down.

 

June quarter sales in excess of $969M will see the revenues line go up but anything less than $86M in earnings will see the rolling four quarter total fall below $113M (on revenues of about $3.8B). No matter what the result I can't see it being better than the September 2000 quarter result. Operating margins getting pretty thin.

 

Maybe at the bottom of a cycle and due for a rebound - buts that's what been said for years.

 

It seems that sharebrokers start touting CAH everytime it gets down to 150 odd - or maybe when they feel the market is flagging a bit and this is an opportunity to drum up some business.

 

WHS is at interesting point. A price of 620-625 seems to be a resistance level WHS finds hard to break through. Should it break through and not fall back through soon afterwards this level may become a new support level and the price could head up towards 700. Phaedrus's chart seems to suggest thst it could fall back and then there is the matter of the buyback. Interesting few days ahead for the WHS price but what happens could map out the future position of WHS will go over the six months or so. Hanging in there so far today.

 

Peter