Forum Archive Index - October 2003
Please note usage of the Forum is subject to the Terms & Conditions.
[sharechat] DOW:ASX im not convinced.
Im not that convinced with DOW. I did a bit of analysis of its financials
and this is what i found:
- net cash flows for 2003 went through the roof with a 86% increase from
last year. This was mainly attributable to a large increase in receipts from
customers (24% increase from 2002) while payments to suppliers increased
only 18%.
- as cristine mentioned earlier. goodwill is at $345,706,000!!!!This makes
up an alarming 17% of total assets. Therefore, if at any stage goodwill is
compromised, this will severly affect any debt covenants it may have and
further affect any future financing obligations that may arise in the
future.
- Net assets per share is only 78c. At todays shareprice (87c), DOW is
trading at a premium. Whats even more alarming, is that if u calculate net
assets per share less goodwill, it is only 43c.
- P/E remains relatively low at 12 indicating there is no huge expectation
that this company will deliver any exceptional profits.
- out of the 5 executives, 11 non-executive directors, and 1 executive
director, a total of $4,248,226 was paid out in remuneration. This isnt even
including the $9,768,750 they have in ordinary shares.
- what is however the most worrying is its liquidity ratio (current ratio).
For the 2003 year it was 1.19, its lowest level since 1999. Prior to 2003,
it has averaged around 1.75, so this year it is extremely low.
- also as cristine mentioned earlier, its dividend yeild is only 3.4%
indicating it wouldnt make for a very healthy growth stock.
Based on my analysis, im not that convinced. i prefer to invest in a company
that is trading at a discount to its net asset backing.
Your comments on my analysis is most welcome
regards
shayne
>From: "Morgy 40" <morgy40@hotmail.com>
>Reply-To: sharechat@sharechat.co.nz
>To: sharechat@sharechat.co.nz
>Subject: [sharechat] DOW:ASX
>Date: Thu, 02 Oct 2003 16:18:26 +1200
>
_________________________________________________________________
Need more speed? Get Xtra Jetstream @
http://www.xtra.co.nz/products/0,,5803,00.html !
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.
> >
> >
> >
> >----------------------------------------------------------------------------
> > To remove yourself from this list, please use the form at
> > http://www.sharechat.co.nz/chat/forum/
>
> _________________________________________________________________
> Download MSN Messenger @ http://messenger.xtramsn.co.nz - talk to family
> and friends overseas!
>
>
> ----------------------------------------------------------------------------
> To remove yourself from this list, please use the form at
> http://www.sharechat.co.nz/chat/forum/
Download MSN Messenger - talk to family and friends overseas!
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/
