Forum Archive Index - September 2002

[Holden Glova <dsafari@paradise.net.nz>]

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On Sat, 21 Sep 2002 19:29, Nick McCaw wrote:
> An Update for all those who are interested. Bought LHG at $1.27 on
> 6-9-02 after discussing it on the forum. As mentioned, it was decided to
> sell if it fell back below the $1.25 support resistance level.
> It got very close for a couple of days, and in response to a recent
> query, I did not have an active stop in the market, In this case I
> prefer to wait for a close below the sell level, then sell at market the
> next day. Stop loss strategies are explained well in GO Learn Shares, If
> you haven’t downloaded the free demo courses, you really should.
> www.golearnshares.com <http://www.golearnshares.com/> .
> LHG has bounced around but is behaving pretty well as planned. The trend
> is continuing and a break above $1.37 would be a convincing reason to go
> out for dinner.
> In the mean time, the plan will stay the same. I will probably lift the
> stop level to $1.29 if the current trend continues. It helps that Gold
> is strong but whatever the reason, the ticker never lies.
> Is there a good fundamental reason to reconsider my strategy.
>
> Have a super weekend
> Nick McCaw

I'll take a stab at an initial fundamental look at it. I'm still not entirely 
sure of all the information I should be gathering when trying to look at 
things fundamentally - but here goes.

What are they up to?
~~~~~~~~~~~~~~~~~
LHG is currently heavily involved with the LIHIR project. The LIHIR project is 
one of the world's largest underdeveloped gold resources, and is based on an 
open pit mining operation which will supply high grade ore for processing and 
low grade ore which will be stockpiled for future processing.

Some Numbers
~~~~~~~~~~~~~
Asset backing per share = 165 534 000 / 1 142 334 000 = .145
(I must have goofed here, not sure why this is so darn low??) To get the first 
figure I referred to the 2001 balance sheet, I couldn't find more up to date 
financials online at lhg website. I took the assets minus liabilities to get 
that figure. The number of shares on issue at the moment I got from nzherald 
stockwatch site.

Asset back ratio = 1.35 \ .145 = 9.31
If the above ratio was calculated correctly this would imply that your 
investment is worth $0.107 for every $1.00 invested. Certainly not good value 
:)

EPS = 10.1
DPS = 0
I guess this means they pay no dividend and put all their money back into the 
company.

P/E ratio = 20.2
P/E ratio for the sector = 12.41
Quite a bit higher then the average for their sector.

P/E growth ratio = 10
P/E growth ratio for the sector > 10

Beta = .88
Beta for the sector = 1.00
Seems to be less volatile then the average for this sector.

Debt/equity ratio = 9%
Debt/equity ratio for the sector = 1%
Not too sure exactly what this means or if it is really even important. I 
think this indicates that they have a slightly higher amount of debt compared 
with their equity compared to the average for their sector. Can anyone 
confirm this?

Misc findings
~~~~~~~~~~~
EPS at 12/01 look higher then they have been since the end of 1995 sitteng on 
10.1. Just one year prior they where at 5.9

Net profit at 12/01 was the highest it has been at 115.9 million.

Revenues for 12/01 where 351.6 million, which was lower then the previous year 
which was 417 million. However, it is still the second highest over the 6 
year span dating back to 1995.

Large earthquake didn't disrupt any gold mining.
THE END


I find myself trying to find a bargain when I look at stocks now - perhaps 
that is how I will invest, not sure yet, still have read "Technical Analysis 
Explained" by Martin Pring once it arrives from Amazon. However, it is a fun 
game to try and find a bargain and hopefully make a buck :) From my (early) 
slant towards looking for value, I think this would be a poor investment just 
by looking at the asset backing ratio. Had I discovered that, I would 
probably have ceased to look into this stock much further - is that silly 
reasoning? I'm still a bit amazed at that asset backing ratio, I hope I 
calculated it correctly.

Anyhow, that is my rookie stab at it :)


- -- 
Signed,
Holden Glova
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