Forum Archive Index - October 2003

["Morgy 40" <morgy40@hotmail.com>]

Cristine & Shayne

DOW:ASX

It kept coming up on my recomendation lists from brokers ( circus promoters) etc,so I added it to my watch list, numbers look good and technically it is poised to breakout in the near term if it can break the resistance at .87 cents. I will try to post a chart for it and you will be able to see what I mean.

 

Regards

Morgy

 

>From: "Cristine Kerr"

>Reply-To: sharechat@sharechat.co.nz

>To:

>Subject: Re: [sharechat] Financial Statement Analysis - DOW

>Date: Thu, 2 Oct 2003 12:36:19 +1000

>

>Hi Shayne,

>

>First impressions of Downer EDI (ASX Code DOW)

>

>1) stayer - been around for a while - didn't review assets

>

>2) cashflow - good revenue, diversified income stream, margins appear tight which places higher emphasis on maximising volume and minimizing cost

>

>3) as a growth stock - forward order book appears healthy - announcement 'reliable long-term income streams' seems credible on the surface but without contract details (contingencies and time frames) cannot assess

>

>4) dividend - selling ex dividend at present - reasonable return on stock price but there are better out there, eg; Downer EDI (DOW) dividend 2.9 cents (only partially franked) and selling around 85 cents whilst Cellnet (CLT) 7cents (fully franked at 30%) is selling around 86 cents

>

>NB This is just my own opinion, but the end of the day, I believe a 'growth stock' should provide a good return on your investment. If a company has a good income stream and are able to make reasonable profits they should be sharing a good percentage of those profits with shareholders or justifying holding on to most or all of it in retained profits, eg; communicating plans for future growth that will necessitate investment expenditure.

>

>5) healthy exec salaries - execs seem to be doing well from the business even if shareholders aren't - wouldn't mind having one of those positions!

>

>NB I'm all for execs being paid well, but it should be linked to performance criteria (profit and dividends being just a couple of those) not revenue performance alone

>

>6) Intangibles - would like to know what's been factored into Goodwill - $345,706,000 and Intellectual Property - $34,701,000?

>

>7) Current interest bearing liabilities - $96,204,000?

>

>8) Prefer not to see unexplained entries in the millions, eg; Current Payables, Other? - $31M

>

>9) Don't know their market or competition

>

>May very well grow but not my cup of tea based on the quick review I did. (NB Keep my review in perspective - trading for just over two months.)

>

>Regards,

>Cris

> ----- Original Message -----

> From: Shayne King

> To: sharechat@sharechat.co.nz

> Sent: Wednesday, October 01, 2003 3:22 PM

> Subject: Re: [sharechat] Financial Statement Analysis?

>

>

> I am currently interested in investing in Downer EDI. I have obtained their

> financials and have yet to do any analysis on them yet. How would you

> approach determining whether this company is worth investing in taking into

> consideration their financials and charts? I have heard that they may show

> quite alot of future promise, and one analyst recommends this company as a

> speculative buy. I am interested in short term gains however based on my

> conclusions in their financials, will be willing to be a long term investor

> (growth buyer).

>

> regards

> shayne

>

>

> >From: "Cristine Kerr"

> >Reply-To: sharechat@sharechat.co.nz

> >To:

> >Subject: Re: [sharechat] Financial Statement Analysis?

> >Date: Wed, 1 Oct 2003 14:46:27 +1000

> >

> >Shayne,

> >

> >Thank you for your comments. Great (and fast) response from David.

> >

> >I started to prepare a response but the more I wrote, the more I realised

> >what was left out.

> >

> >There are so many variables I started to go down the path of 'if this',

> >'then that'.

> >

> >The bottom line is, its all a bit of a formula of sorts (in some ways

> >similar to creating formulas for an excel spreadsheet).

> >

> >The formula will be different dependent upon the investment objective/s and

> >risk profile.

> >

> >Identifying your investment objective and risk profile will help determine

> >the type/s of shares you will be comfortable investing in.

> >

> >With this in mind..

> >

> >What is your investment objective?

> >

> >What is your risk profile?

> >

> >This information will help sharechat contributors with your question.

> >

> >Regards,

> >Cris

> >

> > ----- Original Message -----

> > From: david.gibson

> > To: sharechat@sharechat.co.nz

> > Sent: Wednesday, October 01, 2003 10:03 AM

> > Subject: RE: [sharechat] Financial Statement Analysis?

> >

> >

> > >My question to everybody is: When you see a company that you are

> >interested

> > >in investing in, what is the most important analysis that you do?

> >

> > 1) Cashflow

> >

> > For me - cashflow is the key. It is possible for a company to be losing

> > money and still have good cashflow. It is also possible for a company

> >to be

> > making money and have terrible cashflow. The cashflow analysis is the

> >first

> > place I look in an annual report.

> >

> > If a company is generating cash - it becomes a candidate.

> >

> > 2) NTA

> >

> > The next factor is asset backing. This is more than NTA - some

> >industries,

> > in long term structural decline, I would expect the price to reflect a

> > significant discount to the NTA. On the other hand - other industries

> >with

> > long term growth prospects, I would expect to pay a premium. The

> >assessment

> > of NTA is mixed with a number of intangible factors.

> >

> > I will buy into declining industries if the NTA discount is good enough.

> > I

> > will only buy growth prospects if the NTA premium is acceptable.

> >

> > 3) Market Timing

> >

> > Interest rates are the single biggest factor, for me, influencing market

> > timing. (I know this does not directly relate to your question). Some

> > sectors are sensitive to interest rates (retail), some are not

> >(utilities).

> >

> > Generally, if interest rates are trending down - with a lag in timing -

> >I'm

> > buying. If interest rates are trending up - with a lag in timing - I'm

> > selling.

> >

> >

> >

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