How do investors apply Value.able in practice?

Value.able | Comments (100)

How do investors apply Value.able in practice?

Everyone has their own unique way of  learning new skills.

Michael had the opportunity to read Value.able whilst on holiday in Bali – in his own private plunge pool.

Michael’s classroom may be slightly more lavish than Jesse’s offshore rig, but reassures us that a comfortable chair and place to put your feet up is all that’s needed to put Value.able into practice. And here is more evidence from Young Les who managed to find his own deserted island.

Posted by Roger Montgomery, 16 September 2010.

INVEST WITH MONTGOMERY

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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100 Comments

  1. Roger D
    :

    Hi Roger,

    Just wondering what your intrinsic values currently are for Industrea (IDL) Im getting something like 0.65. I dont think their current ROEs are sustainable in the long term. Am I on the right track? Thanks Roger, you’re my investment idol.

    • Roger Montgomery
      :

      Roger D.

      I don’t want to be an investment idol. I will settle for teacher or guide. You are doing the work, I am just giving you a map and some tools and really I am standing on the shoulders of those who have been astoundingly successful before me – even five decades before me. Industrea is a B2 (it was a B4 the year before and a C4 the year before that) and I get 42 cents.

  2. Craig
    :

    While the rival’s voluntary recall might hinder their sales for a quarter or so, they’ll probably be able to stockpile products to flood onto the market at a discount to the price of CSL’s competing products after the quarter is up. Swings and roundabouts. In the long-term, the fact that a rival of CSL has had a product recalled won’t make much difference to the intrinsic value of CSL.

  3. Jim Caine
    :

    Hi Roger and fellow readers,
    Oroton (ORL) announced a ROE of 80% on Friday. This makes their average ROE over the last 3 years 76.67 %!! (2008 76%, 2009 74%, 2010 80%) What a company!! Roger your Table II.2 goes up to a max ROE of 60 %. How can I work out a multiplier for say 80% ROE? – (or shouldn’t I bother?)
    My valuation -with guestimation above 60 % ROE – came out at $6.66 using EPS $0.56, POR85.7%, ROE 82%, RRR at 10%.
    I’d appreciate any comment or comparative valuations

    Jim

    • Roger Montgomery
      :

      Hi Jim,

      I am working on a way to get everyone who has purchased value.able the opportunity to access these. In the meantime, I get a valuation for Oroton of $9.20 at the moment.

  4. george
    :

    Hi Roger,
    Can you tell me your thoughts on SFH. It appears to be trading a long way below its IV. It has low debt, low gearing and a good dividend.

  5. Brad S
    :

    Hi Roger,

    Thanks for your response about SWL and the cashflow issue. I had a look at the cashflow statement for SWL. In the charimans address they do make mention of the issue however that it was temporary and resolved by July 2010. To be honest, I do not really understand the cashflow statement, however it seems they have paid more tax upfront compared to the previous year which accounts for a 3.5 million difference, and the overall negative cashflow of $571050. I am no accountant!

    I was wondering what your MQR and IV for SWL is?

    Thanks again,

    Brad S

  6. fred
    :

    Hi Roger,

    ERA, 2009 earning’s was just a 1 off and thats that, back to medium and slow growth……..under $7.50 a buy

  7. fred
    :

    Hi Roger,

    What would you consider a high debt/equity ratio, BKL & NWS have a greater than 50% debt/equity ratio & you still rate them a A1…….?

  9. Brent
    :

    Hi Roger,

    I would like to say thanks for the book, it feels good to finally have a method to value stocks instead of stabbing around in the dark. After finishing your book I have jumped head first into finding some bargains and rating my existing portfolio.

    First problem I found and this is a warning to all your subscribers who use commsec data, is that commsec calculates ROE by NPAT/Current Year equity. Took me a bit to work out why the commsec ROE’s were not matching my results.

    Secondly, have you had a good look at ERA yet? I have found late 2009 the stock was trading at a premium to IV, then with the problems they have faced this year with production the share price has fallen in the vicinity of 50%. Now that we are 3/4 of the way through their 2010 recording period and their production guidance is back to normal, their sales are still predicted to be 5000 tonnes for the year due to stockpiles built up previous, based on a resonably stable sale price of $45 USD/lb for ore, an average exchange rate for the last half of 0.92 and last years expenses my IV for year end 2010 is still quite close to end 2009 and the stock is currently trading at a large discount to IV.

    BUT, it seems that it will be hard to recover from this year. Coming back to a NPAT half way between 2009 and 2010 as an estimate for year 2011, my IV slumps to a around current SP. I guess this highlights the problems with mining companies as you have stated, we will have to wait for upcoming reports to get a better judgement on direction.

    Any thoughts Roger?

    Thanks Brent

    • Roger Montgomery
      :

      Hi Brent,

      I can’t add anything to what you have said about mining companies. Well done. Consider yourself a value.able graduate. I have received a few queries about ERA so I will put it on my list to cover soon.

  10. Ray
    :

    Hi Roger,

    I would be interested to hear your thoughts on Austin Engineering (ANG).

    They raised capital for an acquisition in South America last year that included a good deal of ‘accounting goodwill’, but aside from this blemish it appears to me to be a very sound company.

  11. Ben
    :

    I was working out the IV of TPG Telecom. It looks like from my calculations that this is well under $1 whereas the price is way over. Has any one here worked out their IV on this? The market is punishing the price right now.

  12. George
    :

    Hi Roger and others,

    Ive noticed a few people calculating the IV for 2012 and 2013. What data are you using? Is it the CommSec forecasts or another source?

    Thanks

  13. Frank
    :

    Hi Ashley and Rusell,

    Thanks for sharing your valuations.

    Both of you seem to be very optimistic on ACR. I am looking at it at the moment. I assume those valuations assumes that Axiron gets passed by the FDA and Lilly markets it succesfully. However, looking at their presentation, they estimated total market share for Axiron and their other testosterone product to be approximately 2 billion. Say they get 10% of it (which I think is optimistic at this point in time) thats approx 200 million. Further the royalty agreement is uncertain. Is the $13 justified? or for that matter $10. Would love to hear your comments on these issues.

    • Ashley Little
      :

      Hi Frank

      Don’t Own and probably never will

      Just using some forecast earnings,

      My vals are based on analyst forecasts which although they they know much more than me will probably prove wrong

      Just cos it trades below IV does not put the BUY tag on it. There is much more to it than that.

      eg using forecasts BHP looks like the only pup in the race at a late night dapto dogs race.

      Doesn;t mean it is a buy

  14. Lloyd
    :

    Roger,

    By your estimate, how many of the 31 A1 businesses that you have identified trade at a meaningful discount to the business IV?

    If my recall is correct, back in April (or thereabouts) you stated that only 2-3 traded at a discount to IV. The overall stock market has traded down and back up since this time and I wonder how the avalanche of the recent reporting season has changed, if at all, your perspective of things.

    Regards
    Lloyd

    • Roger Montgomery
      :

      Hi Lloyd,

      It was back in May (May 4) that there were about 3-4 and a short list of others I listed as worth investigating. ABout ten in total. The market at one point was 15% lower and there were recently substantially more (of course when I say ‘substantially’ I don’t mean thirty or anything that exciting, but perhaps double. I am working on a blog post with all the post-reporting season valuations.

  15. Will
    :

    Roger, can you recommend any data vendor who can supply ASX financials in a spreadsheet or XML format? It would be so much easier to apply the analysis in your book if you were starting with data that was usable instead of having to retype it.

  16. Grahame Taylor
    :

    Apart from criteria concerning working capital, gearing levels and cash flow, I have set myself a margin of 50% I.V. to the equity price on ASX. Does the Value-able community think this too high? I have set this as one of my “Margis of error” having taken consideration of Rogers writings on pages 115,184 and 226-8, of his book. Does the Value-able community think this maybe a high/low figure?

    Thanks, Grahame

    • Roger Montgomery
      :

      Great question Grahame,

      The higher your personal tax rate, the bigger the margin of safety needs to be. Keep in mind that the post tax discount rates in the book are post corporate tax. In any event there is no point in being precise about it. I don’t approach the problem using, say a 10 per cent discount rate expecting a ten per cent return on my money. You can’t expect that from the market. In any event the model is a straight line model – to infinity – and so expecting 10 per cent (or anything about GDP) would be unrealistic.

    • Roger Montgomery
      :

      Hi Kathy,

      Excellent stuff, thank you for posting the link. I like the following comments “Never say never, but more companies die from indigestion than starvation,” and “Mergers and acquisitions is not everything it’s cracked up to be by investment bankers: growth by M&A is actually fraught with danger and often driven by ego.” I am sure he would enjoy a copy of Value.able!

  19. Ken Milhinch
    :

    Roger,

    Can you do something about your replies not appearing against the comment to which they refer ? I mentioned it to a friend who runs a small forum and he said you must be doing it wrong at your end. (sorry ?)
    It would certainly improve the flow of information on a subject.

    Thanks, Ken

    • Roger Montgomery
      :

      Hi Ken,

      I cannot work out why that is happening. It all goes fine for three or four replies and then, quite randomly, I hit “submit reply” and all my replies end up at the end of the column? Can anyone help?

      • Nick
        :

        Most probably a bug in the way the “Submit Comment” button’s script has been coded.

        It’ll be in how it determines where on the page to insert the reply comments (hence under certain circumstances unintentionally placing those posts at the end instead).

      • Craig
        :

        Hi Roger,

        There may be a setting in your blog code or management tool that enables you to set the number of nested levels. Currently it seems that after the original comment and two lots of nesting, any further nesting appears as a new comment at the bottom of the page. Not sure what platform your blog uses but there may well be something in the help facility about choosing the number of nesting levels. I’m no expert, but might be worth a look.

        Regards,
        Craig.

      • David
        :

        It looks like it is not a random problem but a limitation in the number of levels of ‘nested’ replies the blog will allow. To explain what I mean, when someone replies to a post, the reply is indented as shown below:

        Comment
        Reply 1

        Any additional replies to the original comment go on the same level as the first reply:

        Comment
        Reply 1
        Reply 2

        However, if someone replies to a reply, rather than to the original comment it gets indented again:

        Comment
        Reply 1
        Reply 2
        Reply 3

        So far so good, but the problem seems to occur when someone replies to the third reply (in this example). The blog doesn’t seem to want to set up another level of indentation, but puts the reply at the end of the comments list instead:

        Comment
        Reply 1
        Reply 2
        Reply 3

        Reply 4 (not linked to previous replies)

        I have no idea why this occurs, but you could probably work around it.

      • Ashley Little
        :

        Hey Roger

        Nice work,

        Might be good to let us blogger know about the protocols as well cos we could be stuffing it up as well

      • Craig
        :

        Hey Ashley

        great work further up the page with valuations mate. Really liked the way they were set out over 3 years, tells a story about each company. I am trying to do a similar thing with my spreadsheet, doing a valuation using the reported profit then projecting valuations using consensus forecast.
        I agree with your valuations so wont try and match them but noticed you don’t have one for CSL so here goes, I have tried to include the reduced shares from the buyback in the 2012 val.
        From 2010 33.81 2011 31.72 2012 41.58

        Criticism welcome from all.

      • Ashley Little
        :

        Hi Craig

        Great you are thinking this way.

        My formulae is a quick and dirty and does not account for capital raisings and buybacks.

        Because of this I intentionally deleted CSL and WOW from my post

        I have sat down and redone WOW but not done csl yet

        Let me say right from the start that CSL is one of the best businesses in the world. That said I have not rushed into looking at CSL as due to the tax differential WOW will be paying lower than IV. This may not be the case for csl.

        You only val CSL for the next few years at the $32 range so if the company is only paying IV for its stock they are not paying a bargain and IV should not change materially with the buyback.

        I will have a look at it though and let you know.

        By the way my formulae for calculating IV is different to the one in valueable so if you try to match don’t bother. That said, the thinks is similar and what we are all trying to do is buying great businesses at large discounts to IV

        Hope this helps Craig

      • Craig
        :

        Thanks for the reply Ashley,
        your formulae is “quick and dirty” sounds quite the Maverick.
        I was using a different formula than Rogers value-able also in my original spreadsheet but have now incorporated value-able but only the 10% tables. Only because the formula we used(stumbled upon it with a mate) works out IV’s at around 10%, we believe this ’cause when we typed in EQ=100, ROE=10%, no of shares=100 the IV is always $1 regardless of the POR.
        We now run it with value-able and get an IV range instead of a straight number then we apply the margin of safety we require and the way I’ve been operating is asking for greater discounts from non to low div payers than the higher div payers ie want a bigger discount for FGE than ORL.

        OK back to CSL for 2011 I have starting equity of 4215 roe 25% por 44% NoS 550 and iv 31.70
        Now for 2012 I have Eq of 3903, I got from reinvesting 588 then subtracting 900 from the buyback.
        I am bullish for their prospects in 2012 and look for a NPAT of 1163mln that gives me a roe 29.8% and the reduced NoS should be 525mln, so thats were my rather inflated IV of $41 comes from.
        I won’t bother trying to match but still liked your “quick and dirty” workings

      • Ashley Little
        :

        thanks craig,

        if you what my quick and dirty just ask roger to email it i have sent him the basis workings

      • Craig M
        :

        thanks Ashley, looks like Roger will post it for all of us.
        I’ll shout you a beer at the Inaugural Annual Roger Montgomery Value.Able Graduates Value Investing Conference – Australia’s Woodstock for Capitalists.

      • Ashley Little
        :

        Thanks craig

        look forward to it craig.

        This is not a bad idea

        a yearly gathering of the graduates

        What do you think roger

      • Peter
        :

        Craig,

        FWIW, using an RR of 11% I’ve calculated CSL at:

        2010 = $18.17
        2011 = $24.51
        2012 = $33.97

        The buy back makes the calculation on this one interesting.

      • Luke
        :

        Hi Craig,

        I have been a CSL holder for a few years now – they were the first stock I ever purchased! They are also the worst performing stock that I am still holding. I am unsure about these analyst forecasts. For the last few years, CSL has given guidance (at constant currency) and has been reasonably accurate. Of course, they havent been able to predict the USD/AUD exchange rate. For the next year they are saying there will be no growth and I think (with the share buyback) the EPS forecast is slightly optimistic. But what about the year after, where you say the IV is $41.58? I think CSL is going to need to find a new cure for something or increase sales (how?) if they are to grow. It is as if they are now too big for their own benefit.

        I will continue to hold this red mark in my portfolio since they are still good quality (A2) but I wouldn’t buy more at the current price.

      • Roger Montgomery
        :

        Hi Luke,

        Or perhaps one of their rivals will have a massive recall because that company’s product has triggered some heart attacks and CSL will gain market share…The poor share price performance over the last five years that you mention could be due to paying a premium over intrinsic value at the outset?

      • Lloyd Taylor
        :

        I suspect that the rival’s recall may help partially offset the effects of the rising A$ on earnings translation in the current financial year, but not much else. An appreciable part of CSL’s problem over the last five years, is that the 35% strengthening of the A$ has really hurt IV calculated on A$ functional currency accounting basis.

      • Roger Montgomery
        :

        Hi Lloyd,

        Regarding CSL and Aussie dollar. Commodities cycle, the $A reflects commodities so the $A cycles too. We’ll see it lower (and higher) than this. If and when it falls CSl will benefit (of course everyone will think Australia’s heading for a recession and stocks will be sold off).

      • Craig
        :

        Hangin there Luke great companies are forgiving. If they are your worst pick then you must be doing very nicely. Congrats

      • Ashley Little
        :

        Hi Craig

        back again after relooking at csl.

        I get IV ranging between $31 and $36 out to 2013.

        Just one point they don’t buy the shares back for free so you will have to take into account the loss of $900M in cash in your new equity per share calcs.

        Also I don’t know how Roger handles this but the dividends are only franked to 11% so an adjustment is needed to get the after tax dividend stream to do your valueable cals. Presumably, you take a discount to his income stream multiplier of say 73% as the dividends are not tax free in a 30% tax enviroment.

        All that said if we see commodity prices tank, housing prices fall to more realistic levels and unemployment rise to 10% then our dollar would fall to say 40 or 50c and you would see analysts ramping up their EPS for CSL Quite perversely CSL’s value would rise by heaps.

        BTW the above will happen( it’s called a recession) I just don;t know when

      • David
        :

        Hmm….. your blog appears to have taken all of the spaces out of my previous comment, which means that the explanation won’t make much sense. Can anyone else explain it in a non-visual way?

    • Ken Milhinch
      :

      David,

      The simple answer would appear to be – always reply to the original comment, not to another reply. That should work in most cases. What say you ?

      Regards, Ken

  20. Kerry Jones
    :

    Roger.Love the book thank you.
    I am following a share that I believe has enormous potential and I think could be the next 10 bagger. Would like you to take a look at the Unilife safety syringe story and see if you agree with my enthusiasm.All the ducks are lining up to make this a world leader in their field.ASX listing UNS
    Kind regards
    Kerry

      • Matthew
        :

        Hi Kerry,

        I would look in to how common needle stick injuries are and I think you will find that they are incredibly rare. My understanding of the statistics is that on average every doctor is expected to have one needle stick injury in their career. Considering how many needles a doctor uses every day, I would think this is a pretty low incidence.

        I found this article on wikipedia: http://en.wikipedia.org/wiki/Needlestick_injury#Frequency

      • Ashley Little
        :

        Hi Kerry,

        Thanks for sharing your thoughts,

        In my humble opinion you would have to have a great deal of information that is not publicly available to be interested in this stock.

        What the valuable graduates want is fat equity and fat return on equity.

        This company had equity of 7.6M in 2002 and this has risen to 56.2M in 2010. During that time the company hardly ever made a profit so the increase in equity is due not to retained earnings but from patience (or foolish) shareholders being tapped on the shoulder because the company has run out of money.

        The ROE has gone from a less than startling 1.4% in 2002 to a negative 67% in 2010. This actually means that the company lost two thirds of all the money the shareholders have ever sent it in one financial year.

        The finacials look more like a junior gold explorer than a quality A1 business and much smarter people than me think gold mines are holes in the ground with lairs on top.

        If you buy UNS tomorrow you may do really well but with the publicly available information you would be speculatling not investing.

        Thanks agin Kerry

        Hope this helps

      • Brad S
        :

        Hi Kerry,

        Needle stick injuries are not that common, especially with contaminated fluids and even rarer with infected contaminated fluids. The chance of than acquiring HIV/ HEP B or C is even rarer with post exposure prophylaxis.
        Safety syringe devices sound like a great solution, however in practice they are more difficult to use, and require a lot more skill to use. Unfortunately they have been rolled out in the public hospital I work at… mainly by the infection control nurses who have no idea how difficult they can be. I would rather use a non safety needle/intravenous jelco without gloves.
        Thankfully they have not reached many private hospitals, and hope it stays this way until the technology is so improved that they are comparable to non-safety devices. Unfortunately, they are probably here to stay and there use will increase.
        Regards,
        Brad
        PS I have no idea which brand of safety devices UNS make.

    • Ken Milhinch
      :

      Kerry,

      I remember looking at this a couple of years ago, so they have been singing this song for quite a few years now and they aren’t making any real money out of it yet. It sounds like a very good idea, but I wouldn’t be putting my money into a company that has been burning shareholder funds like they have for the past 9 years. Also, they have gone from a maiden profit of $12M last year to a loss of $34M this year without providing any warning of this during the year. That sort of lack of transparency would worry me even more than their financials.

      I know you directed this question to Roger, but I couldn’t restrain myself in case you were going to plunge some money into this. Hope you don’t mind.

      Regards, Ken

    • Lloyd Taylor
      :

      “Build a man a fire, and he’ll be warm for a day. Set a man on fire, and he’ll be warm for the rest of his life.” – Terry Pratchett

      • Vishal
        :

        ACR seems quite speculative to me. They are relying on FDA approval for their product which is due in the first quarter of 2011. Its value seems to me to be depend heavily on this approval coming through? Does anyone know how likely the approval is?

        Regards,

        Vishal

      • Vishal Hargovan
        :

        I wouldnt want people viewing this great blog to see some of the valuations and just buy based on them without any research!!

  22. Nath
    :

    Hello

    So ive gone through all Rogers A1 companies and the ones that I have found at a discount are

    intrinsic(current share price)
    LYL $6.34($4.01), FGE $9.16($3.78), MIN $14.32($10.50), KAM $0.86($0.60), ACR $9.08($2.24), ISS $0.61($0.18), TGA $1.93($1.49), KRS $0.53($0.34), EZL $1.89($1.28), FRI $2.04($1.04), MCE $8.39($4.62), RHD $0.90($0.74)

    How does everyone elses valuatins compare??
    These are just 2010 values, I have not taken into account future valuations as yet. Just more wondering if im on the right track

    Cheers
    Nath

    • Ray
      :

      If you chose the 11% after tax return my calculated valuations on ISS, TGA and KRS were within 1 cent of yours. I was further away on KAM and LYL which I think are trickier to value and I would expect that the 2011 valuations on both of these would be below the current IV.

      I am only a newbie so not climing to be an expert at these calculations yet.

      Cheers
      Ray

    • Pat Fitzgerald
      :

      Hi Nath

      For ‘2011’: LYL ($3.45, ROE=27.5 & RR=12), MIN ($12.20, ROE=27.5 & RR=11),
      ACR (I think that ACR’s ROE will drop dramatically in future years, as one-off payments cease, therefore I am not sure on ROE & RR but I get $2.43, ROE=25 & RR=14), ISS ($0.26, ROE=25 & RR=14), TGA ($1.77, ROE=22.5 & RR=12), MCE (I am not sure what ROE to use as some earnings forecasts for 2013 have ROE dropping dramatically, hopefully I am being conservative but I get $6.26, ROE=32.5 & RR=12 ), RHD ($0.97, ROE=17.5 & RR=12), I don’t have any 2011 earnings forecasts for FGE, KAM, KRS, EZL, FRI and I am interested to see if anyone else does.

      Thanks for you post

    • Ken Milhinch
      :

      Nath,

      One of the big variants in all of this is the RR% you use.
      For instance, in the case of FGE, I can get the same answer as you (within a few cents) if I use a RR% of 10%, but personally, I prefer 12% for companies in this line of work, so I get an answer of $6.67.
      I get $3.65 for LYL, and I suspect that is because of my higher RR% and also the fact that I took $3.2M out of the NPAT figure because it was an abnormal tax item that will not be repeated in future.
      MIN $7.53
      KAM $0.51
      ACR $9.84
      ISS $0.62
      TGA $2.29
      KRS $0.58
      EZL $1.13
      FRI $1.31
      MCE $4.16
      RHD $0.83

      In addition to all of this, the way you calculate the ROE% will make a difference (sometimes quite a large one). You can use LY equity, or you can use TY equity or you can use an average of the two. If the equity does not change much from year to year, it really doesn’t matter.
      Personally, I use the average of the two, except where the equity has increased by more than 25% since LY, and then I use TY only. That is a pretty conservative approach, but I would rather be safe than sorry.

      Hope this is of some help.

      Regards, Ken

    • Stuart
      :

      I have $5.75 for FGE, $4.11 for LYL and $6.49 for MCE. But I am new to this and still learning so I may have been too conservative compared with you.

      • Roger Montgomery
        :

        Hi Stuart,

        You could wake up tomorrow morning and the Dow Jones is down 1000 points and suddenly your approach won’t seem too conservatives at all. We tend to underestimate the risk of big shocks. They occur more frequently than we care to admit. Conservative estimates combined with patience is the best approach.

    • Peter
      :

      Hi Nath,

      Of the ones I’ve calculated, I’m pretty close to your valuations for LYL, FGE and TGA. I have a lower value for MCE (closer to $6). Be careful with KRS (they’ve just written down the value of their inventory) and KAM (who had a one off tax benefit which made up a good chunk of their 2009/10 profit).

      Cheers,
      Peter

    • Russell
      :

      I posted this earlier now not here so I am repeating

      Nath
      You say “So ive gone through all Rogers A1 companies and the ones that I have found at a discount are:-
      I say here are a few of my calculations of IV ignoring if at a discount,
      intrinsic(current share price) My IV
      LYL $6.34($4.01), $5.13
      FGE $9.16($3.78),
      MIN $14.32($10.50), 15.90
      KAM $0.86($0.60),
      ACR $9.08($2.24), 3.59
      ISS $0.61($0.18),
      TGA $1.93($1.49), 1.16
      KRS $0.53($0.34),
      EZL $1.89($1.28), 0.82
      FRI $2.04($1.04),
      MCE $8.39($4.62),
      RHD $0.90($0.74)
      MND ………….. $8.60

      “How does everyone elses valuatins compare??” See above
      These are just 2010 values, I have not taken into account future valuations as yet. Same goes for me.

      Just more wondering if im on the right track. So am I
      Have fun
      Russell

      • Ashley Little
        :

        Hi Guys,

        For what it’s worth I get the following

        Code year IV

        ACR 2011 13.35
        ACR 2012 10.50
        ACR 2013 10.56

        ARP 2011 8.50
        ARP 2012 8.65
        ARP 2013 8.70

        BGL 2011 0.31
        BGL 2012 0.37
        BGL 2013 0.51

        BKL 2011 22.11
        BKL 2012 23.54
        BKL 2013 26.99

        CAB 2011 6.07
        CAB 2012 6.37
        CAB 2013 7.15

        CGS 2011 0.19
        CGS 2012 0.22
        CGS 2013 0.36

        CJM 2011 1.59
        CJM 2012 1.85
        CJM 2013 2.20

        COH 2011 51.76
        COH 2012 59.48
        COH 2013 67.63

        CST 2011 1.40
        CST 2012 1.53
        CST 2013 1.93

        CRZ 2011 4.12
        CRZ 2012 5.11
        CRZ 2013 5.55

        DCG 2011 2.96
        DCG 2012 3.08
        DCG 2013 3.39

        DTL 2011 12.52
        DTL 2012 13.92
        DTL 2013 13.75

        DWS 2011 1.92
        DWS 2012 2.19
        DWS 2013 2.64

        EZL 2011 1.00
        EZL 2012 1.00
        EZL 2013 1.00

        FGE 2011 5.58
        FGE 2012 6.00
        FGE 2013 7.20

        FPS 2011 1.65
        FPS 2012 2.06
        FPS 2013 2.54

        FWD 2011 9.53
        FWD 2012 9.88
        FWD 2013 9.89

        GUD 2011 7.82
        GUD 2012 8.61
        GUD 2013 9.33

        HHL 2011 3.33
        HHL 2012 3.83
        HHL 2013 4.42

        IRE 2010 6.52
        IRE 2011 7.02
        IRE 2012 6.11

        JBH 2011 24.16
        JBH 2012 28.28
        JBH 2013 31.94

        KAM 2011 0.61
        KAM 2012 0.67
        KAM 2013 0.73

        LYL 2011 2.87
        LYL 2012 2.98
        LYL 2013 3.97

        MCE 2011 8.81
        MCE 2012 11.85
        MCE 2013 8.70

        MIN 2011 7.00
        MIN 2012 15.05
        MIN 2013 24.65

        MND 2011 13.84
        MND 2012 14.42
        MND 2013 15.11

        MRN 2011 0.67
        MRN 2012 0.71
        MRN 2013 0.98

        MOC 2011 1.52
        MOC 2012 1.59
        MOC 2013 1.30

        NVT 2011 2.12
        NVT 2012 2.55
        NVT 2013 3.10

        ORL 2010 8.18
        ORL 2011 11.70
        ORL 2012 13.48

        PTM 2011 4.72
        PTM 2012 5.00
        PTM 2013 6.46

        REA 2011 10.43
        REA 2012 14.00
        REA 2013 14.82

        TGA 2011 1.85
        TGA 2012 2.13
        TGA 2013 2.65

        WEB 2011 2.27
        WEB 2012 2.72
        WEB 2013 2.83

        WTF 2011 5.81
        WTF 2012 6.35
        WTF 2013 6.98

      • Greg Connors
        :

        Hi

        I am trying to repeat what Ashley Little has done re values for 2011,2012,2013 but I am finding it difficult to get EPS & DPS forecast data. Neither ComSec or Etrade provide this dat for all stock. Could you please direct me to EPS & DPS forecast data.

        Thank GC

      • peter bryan
        :

        Greg,
        ETrade provides data under “earnings and Dividends forecasts” for the current year and 2011 and 2012, but not 2013. Select Profile which is next to the “enter Code” box, and skim down to the “Earnings and Dividends forecast” group of numbers.
        Peter B

      • peter bryan
        :

        Hi Ashley,

        Using a required return of 10%, I get the following for JBH:

        2010 $19.45
        2011 $21.82, and
        2012 $24.55.

        Where did you get the values to calculate 2013 IVs? I do not see them on ETrade – which only gives data for current, 2011 and 2012.

        Currently, I am working on a method, and reason, to determine a value for Required Return – other than 10%. Anyone that can help or provide ideas would be most helpful.

        Peter B

  23. ric
    :

    Hello there..Hoping someone can help me with NPAT..With Woodside I got an NPAT from Commsec of $1824million….This gave me a seemingly very high IV of about $53….I hear this is about double other peoples IV.

    When getting NPAT from the Interim Annual Report. Is the NPAT (in this case 901million) for the year to date. ie 6 months? Or is it projected NPAT for the year?…Probably a really stupid Q, but I’m struggling to work out where I went wrong to get such a high IV for WPL…My ROE was 27% using Commsec’s NPAT of 1824million…

    I’ve since gotten over WPL but want to know where I went wrong.

    Thanks very much.

    • Nath
      :

      Mate

      Using 27.5% ROE and 12%RR I get $42.71 IV I like to be a little more conservative and use the average of the 2009 and 2010 equities, which will give me $31.81 IV.
      Figures I used were-
      2009Eq $6705, 2010Eq $9865, NPAT $1824 Shares 748.6 Payout 56%

      Hope this helps, but im on my L Plates myself

    • Russell
      :

      Regarding (WPL) Woodside Petroleum Ltd. I am just a learner in calculating an IV but using data that was current I got an IV of $37,04.
      The NPBT was 1824 Tax was at 36.2% so tax was $660,288 hence NPAT was $1163712000
      The source of my data was E*Trade their source is AspectHuntley.
      They say ROE was 13.9% I calculated ROE as 18.5% and Payout Ratio they state as 56% but I calculated PR as 45%.

      The current price of WPL was $43.21 a week or two ago when I did my calculations,
      The 12 month LOW price was $39.60. The HIGH was $53.87
      Seems to me you might have to wait a long while to buy at the IV price.
      There are some very larg contracts under consideration and if they go ahead the market price may go up.

      I note the statistics for many companies are being updated at this time of year and that causes variences. I suspect preliminary data previously posted is under constant update.

      Good luck when you decide on the IV please post it. I will be most interested.
      I hope my figures help you DO NOT use my figures until you check them.

      I do not have access to COMSEC nor do I know their source of data. I would not be surprised if it is the same as E*Trade
      .

    • Raymond
      :

      I too got NAPT = 1,824m, my ROE = 14.8%, IV = 23.07 next year (Dec2010, IV = $24.40 following year $35.17 (unfortuately I have not had time to check my calcs seem to be very high).
      Also Current shares 749, EQPS = 13.18, POR = 56.4%, Prior Yrs Equity = 6,705

      Gearing has increased to 42.35%
      Used RR = 10%

      Never done this before, so not surer whether the above is helpful.

      Cheers,
      Raymond

  24. Ashley Little
    :

    Hi Roger and fellow bloggers

    The quality of the Blogs have been super,

    I went back and read some Blogs from late last year and the names remain largely the same but what we all say has improved dramatically.

    everyone has learned something

    Keep up the good work

  25. Brad
    :

    I’ve been looking at Seymour Whyte (SWL). IMHA it clearly has honest and able management, a solid balance sheet and is trading at a reasonable price.

    However, does the company possess a sustainable competitive advantage?

    They say it’s their people.

    Does that alone cut it, Buffett & Munger style?

    • Roger Montgomery
      :

      Hi Brad,

      If the people are truly the competitive advantage then you need to understand their loyalty, incentives, salary structures, and above all the culture of the company. These are the things that determine whether the competitive advantage stays put.

  26. Jim
    :

    Hi Roger

    Read your fantastic book while holidaying in Kauai overlooking Hanalei Bay at the end of August. Was hard to put down even though I was in such a magical place

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