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theSMSFreview.com.au reviews Value.able

In the Press, Media Room | Comments (71)

theSMSFreview.com.au reviews Value.able

Editor of www.thesmsfreview.com.au, Graham Parkes, shares his thoughts on Roger Montgomery’s Value.able.

“I’m somewhat of a minimalist and love it when I get a book where it makes me feel like I can throw away all the other books I have on a subject – this is such a book”.

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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71 Comments

  1. John A
    :

    Hi Roger (and everyone),

    I have a quick question. I remember reading somewhere that Buffett likened interest rates to gravity. With interest rates likely going up in the future, should we be globally increasing our required returns across all the companies we value? Therefore doesn’t each step up in interest rates decrease the value of all companies?

    A big thanks to you and all the contributors who make such a great blog.

    Cheers

    John A.

    • Roger Montgomery
      :

      Hi John A,

      I am pretty sure Buffett said that at the July 2001 Allen & Co Conference in Sun Valley. (Its quoted in Snowball and the December 2001 issue of Fortune magazine as well). “…Investing is laying out money today to receive more money tomorrow. That gets to the first of the economic variables that affect stock prices [in the two periods] – interest rates. In economics, interest rates act as gravity behaves in the physical world. At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset.” If you believe that QE will lead to inflation (don’t fight the FED) then higher rates will happen and yes, so will the required rates you are using.

  2. fred
    :

    Hi Room,

    Diversified Metals & Mining, the government should lower the tax because the one’s that make it should get a pat on the back!

    I did pick 19 from the sector but when I properly scrutinise them there might be 5 or so.

    Diversified Metals & Mining in my opinion also is NOT the sector to be in.

    Thank’s room and Roger…………

  3. Ashley Little
    :

    Hello fellow blogger,

    For the IDL lovers please have a look at the stock exchange annoucement on 18 october regarding a capital raising and how they are going to use the funds.

    Please then go back to Rogers book and reread the section about capital rasings to pay down debt and how wealth destroying they are for shareholders.

    I would also suggest everyone redo thier valuations taking this capital raising to account.

    It would be nice to have Rogers MQR score so that we can all concerntrate on A1 , A2 and B1 businesses but we don’t.

    That said IDL is clearly a C class business.

    No advice here guys (seek professional advice) but if you are thinking about investing in this company go have a look at the stock exchange announcements over the last few months. Particularly the one on 28 Septemeber and how diametrically opposed it is to the announcement on 18 october.

    Remember guys you are trusting these guys to run your business. Trustworthy management is vital.

    In my opinion IDL gets a 0 out of ten in this regard.

    If management tell you something then 3 weeks later do the opposite then I personally would RUN

    There plenty of good businesses run by people who will to destrot your wealth so why be in one that will.

  4. Gale
    :

    Hi All,

    Thanks Roger for the tip about refreshing the page. I had been wondering whether there had been any response to mine of 18 Oct. and now I’ve found them I am v. grateful for the trouble people have gone to.

    Ken, my CST inputs were:
    Equity $29.93
    Shares 96.1
    EQPS $0.31
    NPAT $8.25
    Divs. $4.8
    POR 58.18%
    LY Equity $22.23
    ROE 37.11 %

    Some of the differences from your figures seem to have come from my confusion over different sets of figures in the annual accounts for “Consolidated Group” and “Parent Entity Financial Information”. Which should I have gone with?

    The different dividends came from inclusion of the latest dividend which was declared after FY end but to be paid out of 2010 net profits. All guidance, particularly on reading annual accounts, would be gratefully received.

    Regards,
    Gale

    • Ken Milhinch
      :

      Gale,

      The Equity figure is on P20 of the Annual Report and it is 27.31, not 29.93. Your shares figure is correct (mine was wrong). Your NPAT figure is correct. The dividends figure is in Note 7 on P31 of the Annual Report and the figure is $3.363 not $4.8. (Dividends paid out after the year end are actually paid out of the following year’s profit.) Your LY Equity figure is correct also. I think if you correct the equity and dividend figures, you will end up with an ROE of about 33% and POR of 41% and that will give you the IV .

      As for Consolidated Group & Parent Entity numbers, I always use the Consolidated Group figures. (They are the higher numbers.)

      Regards, Ken.

    • Matthew
      :

      Hi Ken,

      I see you use a slightly different input for your dividends paid. I’m always interested in how others do their calculations and especially when it differs from my own.

      Personally I like to calculate the exact dividend that was paid out of that years profits. This means I take the interim div that was paid and add the announced final div that is yet to be paid. I do this because I think it probably more closely follows the profits of the business each year.

      This seems to me to be the most accurate method but is there something I am missing?

      Over time of course consistency is more important than pin-point accuracy but I am one for the details.

      • Ken Milhinch
        :

        Matt,

        My point is that although the final dividend relates to the trading year just ended, it is declared after year end and paid after year end. It is not included in the year end accounts, and furthermore, it is not accounted for in the NPAT figures at year end. By definition, it is not “paid for out of that year’s profits”, it is, in fact, paid for out of next year’s.
        I presume you take out the final dividend from last year and add in the final for this year to make an adjustment to the NPAT figure doing it your way ?

        Perhaps Roger will advise us of what he feels is correct here, because it can sometimes make a difference to the IV – though not always.

        Regards, Ken

      • Roger Montgomery
        :

        Hi Ken and Matt,

        I use the numbers that affect ending equity such that my numbers reconcile with the balance sheet. The Statement of Changes to Equity (usually appearing after the balance sheet) make sense because its these numbers that will result in your starting and ending equity figures reconciling with those published. Whatever method you choose to use, as long as you are consistent, the only difference will be a timing one – sometimes one method will work better and other times the other. Over time it will even out.

      • Matthew
        :

        Thank you Roger for your reply

        There are a lot of permutations to account for when calculating POR the different ways. I am enjoying the mental workout! I will continue to ponder this one.

        Ken – I’m not an accountant but I don’t think you’ll find dividends paid on common stock affect the income statement. They do however affect the cash flow statement (under financial cash flows), the balance sheet (twice, under current liabilities and under equity) and the statement of changes in equity.

        However, dividends on preferred stock do affect the income statement. Just like interest on a loan to a bank is a cost that reduces income to the common stock holders, so is a dividend paid to holders of preferred stock.

  5. fred
    :

    Hi Roger,

    Tonight I am doing Diversified Metals & Mining, as you know that is a big one. ………I am on holidays and a little bored !

  6. Ken Milhinch
    :

    Roger,

    I have noticed that most of the cases where your disciples are arriving at quite different IV’s, it can usually be traced to one or more of the following.

    1. Not excluding abnormals from NPAT.

    2. Calculating NPAT by multiplying earnings per share by the number of shares. This often gives you an incorrect figure.

    3. Calculating dividend payout by multiplying no of shares by the dividend per share. This almost always gives you an incorrect figure.

    4. Some use LY Equity, some use TY Equity and some use an average of the two. Each will give a different answer.

    5. Choosing the RR%, which is a personal choice and will significantly alter the result.

    My suggested solutions are as follows;

    1. ALWAYS read the annual report comments on the revenue and profit figures at the front of the report. (I confess to not having done this myself and tripped myself up in the process.)

    2. ALWAYS take the NPAT figures from the annual report.

    3. ALWAYS take the dividends paid figure from the notes to the financials in the annual report.

    4, What equity to use is a matter of choice, and I know Valueable talks about using LY as that is the equity used to produce the NPAT. Personally, I use the average of the two except where the equity has increased or decreased significantly (>+/- 25%) and then I use the current equity, because I believe that provides a more accurate base upon which to compare the forecast of next year’s numbers. Like I said, a personal choice.

    5. Another personal choice, but one which we need to be very careful of. A tendency to use 9% or 10% for everything is asking for trouble I think. Both my spreadsheet and my database are set up to apply a percentage allocated to the GICS Sector in which the company is classified. This means that all banks get the same %, all capital goods providers get the same rate and so on. I can change that globally and it recalculates the 300 companies I have in my files now. I don’t suggest that is the perfect answer, but at least it provides a consistent approach for like businesses.

    I welcome comments or feedback.

    Regards, Ken

    • Roger Montgomery
      :

      Hi Ken,

      I for one am delighted you have put a summary together. You should note in my book I discuss both LY and average equity. You can even weight the average. As I have previously mentioned in my post about calculating future equity, using 10 per cent for all companies will not be appropriate. And don’t forget that rate is an after company tax rate. If you personal tax rate is higher, you will need a wider margin of safety.

    • Ashley Little
      :

      Hi Ken,

      Love your work.

      I agree with your thoughts on different sectos have different risk profiles. We only diverge slightly as I believe that different companies in a sector should have different weighting. For example my required retrun for NAB is higher than CBA due to demenstrated track record. Also, my RR would be higher for IDL than FGE due to debt levels.

      Apart from that I agree entirely.

      BTW you are doing well to track 300 companies. How do you do it. I have not counted mine but would guess about 80 and that is enough work for me

      Great stuff Ken

      • Ken Milhinch
        :

        Ashley,

        I take your point, and I would agree with your reasoning. I can always override the percentage level for a particular company, but I try to restrain myself in order to be consistent. With regard to debt levels and the like, I have a system (KQR – Ken’s Quality Rating) which awards a point score for things like debt/equity, level of intangibles, interest cover etc etc. and that would filter out the IDL’s of the world hopefully.

        Thanks for your feedback. (I manage to do 300+ because I am retired.)

        Regards, Ken

    • Roger Montgomery
      :

      Hi Fred,

      Ten is a C5 and valuation currently is 66 cents going to 86 and 98 over the next two years. Generates 11-14% ROE over next three years (with JP shaking it up). Earned $79 million in 2004 with $491 mln of equity and $434 million of debt. Forecast $99 million with $806 million of equity and about the same debt. Unsurprisingly share price of $1.55 today is lower than TEN (pun intended) years ago when it traded at $1.93 (haven’t checked for share splits and the like…).

  8. fred
    :

    Hi Roger,

    Not saying that I would be buying NCM at the current price, just that it is that it was a good business .

    Thank’s Roger

  9. fred
    :

    Hi Greg,

    To me IDL’s financial statements do not seem to be a good model for a great business.

    Share holder’s increase every year ! WHY ?

    For me to enter into IDL @ the current price they would have to improve there financial position.

    Greg you may see something that I don’t so I hope it goes up & up

    see ya

    • Ashley Little
      :

      Hi Fred,

      Looks like IDL’s bankers have the same view.

      refer stock exchange annoucement 18 October 2010

  10. MattB
    :

    Hi Roger,

    I notice a dip in the oil price as China ups their interest rate. Does anyone have an thoughts on how much the oil price would have to drop to hurt MCE? – granted that any reduction isn’t ideal.

    • Roger Montgomery
      :

      Hi MattB,

      A slowing Chinese economy is not going to change the long term increase in demand for oil or food. Sure the path to higher prices will not be a straight line, but long term we will see higher prices. That will result in more exploration and more rigs which mean more business for the pick and shovel makers. Of course short term anything is possible and prices for commodities and stocks could halve. I simply don’t know what short term prices will do.

      • Lloyd Taylor
        :

        The business MCE is involved in is built around long term deep water oil and gas developments. Lead times can be up to a decade for these developments. So short run oil price volatility is absolutely immaterial to MCE’s business performance.

        Market sentiment is a different matter, but the short-term knee jerk reactions of Mr. Market to oil price changes have absolutely no relevance to the assessment of the long run value of most businesses, let alone MCE. So when Mr Market sells off MCE on the basis of short term oil price movements, its time to consider the merits of the long term value of the business compared to its sold off price.

        Regards
        Lloyd

    • Ashley Little
      :

      Hi MattB,

      MCE have a preso of their AGM on friday,

      please give this a read.

      My view for what it is worth is that this preso puts me in a much happier place then concerning myself about what will happen to the price of oil.

      Hope this helps

  12. fred
    :

    Hi Room,

    From the GOLD company’s in my opinion NCM, KCN pass the value able guidelines for a good company. Same second class GOLD company,s in my opinion are MML and TBR. I have not gone thru the annual report’s of the mentioned company’s but the GOLD sector as a whole did NOT get me excited.

    Thank,s

    • Roger Montgomery
      :

      Hi Fred and Room

      This will be an interesting one to watch. Four days ago a strategist I respect told me that NCM was about to commence a large correction. Now you all know I have no ability to predict short term share price movements so don’t bother, but it will be interesting to see if he’s right.

  13. Wayne Groomes
    :

    Hi Rodger,

    Thank you for the work and detail you put into your book. I’ve read most of the books related to Buffett and found that your book helped me to understand the how to value as much as the why to value.

    My question is do you use the june 10 outstanding shares and equity and the est. june 11 EPS and DPS?

    thank you
    Wayne

    • Roger Montgomery
      :

      Hi Wayne,

      June 2010 is part of the calc for the ROE for 2011. Thanks for your kind words about my book. I am delighted it is having a positive impact too. Have a hunt around here on the blog and you will find a recent post about estimating future equity and intrinsic value.

  14. fred
    :

    Hi Roger,

    I just finished researching the gold company’s and I don’t think I will be doing them again for a long long time. I will pick the best 4 or 5 and post them anyhow!

    Thank’s for all your help alway’s

  15. Lloyd Taylor
    :

    Roger,

    Causes me to ask: What are the investment books/authors on the top shelf of the Montgomery library?

    Regards
    Lloyd

  16. Lachlan
    :

    Hi Roger,

    I have just finished Value.Able and I can not speak highly enough of it. You have done a fantastic job and for a young and new entrant into the share market that has read numerous other books on share investments, I found yours the easiest to understand and put into practice, as well as getting my head around.. You have created a book that will undoubtedly educate many other investors in the future.

    Keep up the good work.

  17. Wayne
    :

    Hi Roger,

    Firstly i’ll start by saying Value.able is a great read!
    I have a quick question on IV’s though after viewing a recent half year profit announcement from CDD highlighting an expected record NPAT of $29-31m. How do you go about calculating the valuation of a business after such an annoucement, i light of consenus/broker estimates not yet catching up to the new data?

    Regards

    • Roger Montgomery
      :

      Hi Wayne,

      SImply use the company guidance to increase the equity and to generate the estimated ROE. Of course be sure that number is representative of what is sustainable.

  18. Rob Walker
    :

    Hi Roger,

    RE PTM
    I have noticed my IV (2011) is a long way from yours, could you or
    fellow valueites please comment.
    EPS :- 0.292
    DPS:- 0.253
    Shares Issued :- 561,036,000
    NPAT :- $ 163,822,500
    Divs :- $ 141,940,000
    Payout Ratio :- 86.64%
    Average Equity :- 236,330,000
    Roe Calculated :- 69.32%
    Roe Used :- 60%
    RR Selected :- 11%
    Table 1 :- 0.441
    Table 2 :- 21.192
    My 2011 IV = $ 3.33 on Valueline yours is $ 4.95

    Regards
    Rob Walker

    • Ashley Little
      :

      Hi Rob,

      Using 60% ROE instead of 69% or 70%( Which is not available in the tables) will make a big difference.

      Also If you want to try and match Rogers figures your required return should be lower. After all fund managers make money even when you lose money for their clients.

      Try using 33 or 34 as your mutiliplier in table 2 and a required return on 10% and see if you get closer.

      • Rob Walker
        :

        Hi Ashley,

        Thanks for your reply, I have tried your suggestions and I does bring me
        a little closer. Normally it does not bother me to have a different IV, but in this case it was well out !!!
        Perhaps we will be able to have the formula for table 2 on CD soon, nudge nudge wink wink Roger.

      • Mick
        :

        Hi Rob

        If your RR is 11%, the multiple from Table 1 should be 5.455 (0.441 would assume ROE of only 4.85%). Not sure if your figure for Table 1 is a typo?

        Here’s my effort…rough as guts though! :)

        My consensus forecast data says 27.5cps, so with 561m shares that makes NPAT 154.3m; using DPO 85%, Divs will be 131.2m, RE 23.1m. 2011 starting equity was 225m, add RE to that and end equity is circa 248m, and av equity 236.5m; ROE 65ish%. Also being safe and saying the 25m options will be taken up and # shares at end FY2011 will be 586m, so EQPS 42.3cps.

        Using RR 10% and Table 11.1 produces $2.34; Table 11.2 I’ve guessed as 30, producing $1.90, so IV = $4.24. Using 9% RR and 34 for Table 2, I got $4.75. If I play with DPO and # shares, I can get it pretty close to Roger’s IV, but doesn’t mean the way I got there is right!

        I found the # shares a bit tricky; not sure what the ‘629m consolidated’ figure mentioned next to the ‘quantify’ column of 561m shares is and how it could affect things…not to the mention the options. (Roger and Room?)

        I’d say Roger has a lower RR, he’s probably done something clever re the # shares, and as Ashley highlighted, the excess ROE (above 60% in the tables) will also make your IV lower than Roger’s.

    • Matty
      :

      Hi Rob,

      From 2010 report I had a valuation of $3.63 on EPS of $0.23

      EqPS 0.38 PayO 82% ROE 65.2% ROE Sel 60% RR 10% (Using avg. ROE on TYE and LYE)

      Based on Comsec’s 27.5 cps earnings for 2011 I got a value of $3.66 Not accounting for any shares/options that may be issued/paid in. Not a big jump in IV.

      I am not confident in going lower on the RR% because I am uncertain how big the moat is on a funds management business. I am no expert on how sticky the funds and fees are when the market turns. This is where your judgement call can make a big difference on your valuation just with the RR.

      This is where a novice like me is questioning the 10% min. RR on a company like CST (in above post). I have $1.78 IV on RR 10% basically the same as Ken’s numbers but with 32.5% ROE selected.

      Is there a case for lowering the RR on a company with current market penetration very low for a new, unique technology replacing and bettering a 107 year old test. Maybe the moat can be so big on a new business that the growth through the years makes up for your early call. But then again, you have to be turning Mr Market off and be sure that no other new technology comes along to knock you off. But being 107 years since the last technology breakthrough this seems one to have another look at to me.

      • Ashley Little
        :

        Hi Room,

        Kerr Neilson is a much repected figure and I doubt think thier would be too many finacial planners in Australia who hae not used the Platiinum funds for their clients. I dont use low RR very often but in this case it is justified.

    • Rob Walker
      :

      Thanks Mick and Matty, yes it was a typo, the .441 was actually the eqps, I did use the correct value from table. I also use commsec data, I have noticed the eps forecast can change sometimes daily. The number of shares used could be the answer, thanks again
      Regards
      Rob W

  19. Mark H
    :

    Hi Gale and Vic,

    I ran some numbers from Commsec on the companies discusssed above.

    Gale,
    For CST, I got a 2010 IV of $1.04 using the inputs below. Using your 10% Investors return (RR) assumption, I got $1.35 (very close to your estimate). I tend to use higher RR’s in my calculations.

    (EqPS=$0.26, ROE=32.5% (using average Eq over 2 yrs), DPS=$0.05, EPS=$0.085, PR= 60%, RR=12%).

    The IV drops to $0.91 when you use RR=13%. I couldnt find any earnings growth estimates (the company has only been profitable since 2008). Even with the highest RR, it’s trading well above my IV (at $2.56) so no opportunity.

    Vic,
    My 2010 IV for IDL is $0.98, so not far off yours ($0.78 with a higher RR=14%). I think if you use average equity, we’ll match quite closely. My assumptions are below.

    (EqPS=$0.21, ROE=30% (using average Eq over 2 yrs), DPS=$0.013, EPS=$0.061, PR= 20%, RR=12%).

    EPS are forecast 7% lower in 2011 and rise by 12% between ’12 and ’11. Todays price ($0.445) represents a good margin of safety below my estimates. Roger may have used a high RR and lower ROE (2009 ROE was 11%) so this may be factored in too.

    Hope this helps with your Qual research.

    Cheers,
    Mark H

  20. fred
    :

    Hi Vic,

    I am not one of those graduates yet but I have noticed that your equity figure may be incorrect and if it is then your ROE would also be incorrect.

    • Ashley Little
      :

      Hi Fred,

      Mate you have put in an invalu.able contribution to the blog and even if you don’t consider yourself a graduate i certainly do

  21. Vic Ciscato
    :

    Hi Roger,
    On one of your recent panel discussions a caller wanted to know your thoughts on a company IDL. In your response you indicated that the IV of the company was about $0.42 . In 2010 the company made a net profit of $62.0m and an equity of $240m with a ROE of 26%. On my calculations the IV is about $1.17. Why are we so far apart on this one.

    Cheers, Vic

    • Roger Montgomery
      :

      Hi Vic,

      The source of the differences in our valuation is a difficult question to answer without knowing your inputs. If you would like to provide your inputs, I am sure there are a bunch of Value.able Graduates who can help out.

      • nevbenno
        :

        Yes Vic, I had the same result to a greater degree. I used same figures except for the ROE of 38% (using rogers method – 2010 profit over 2009 equity) resulting in IV of $2.17. However, if the total debt of $186M is taken off the $240M of equity and calculations done on $54M equity the result was an IV of $0.48. Maybe roger might comment about this ?

      • nevbenno
        :

        Sorry if my comment about taking total debt from equity was a bit confusing. I used the $54M to arrive at an equity value (book value) of 5.65 cents per share. Please tell me if this is WRONG. I not sure if the 2010 equity of $240M has taken the total debt of $186M into account. Debt to equity of 77% is very high and a $50M cap raising was completed yesterday !!

    • Ken Milhinch
      :

      Vic,

      I have their NPAT at $49.12, whic excludes significant non-recurring items. That is probably the more appropriate figure to use. Their ROE is then approx 20.5%.

      Regards, Ken

    • Greg W
      :

      Hi Vic

      I have calculed IV for IDL as follows:
      2011 – $0.53
      2012 – $0.59

      If you read the annual report a comment is made about one off revenue of $20m so I have I have assume the net adjusted profit for 2010 is $49m instead of $60m. The difference of $11m is the NPAT effect of the additional one off income of $20m.

      I know this is a little inventive but think it paints a better picture of the companies actual earnings.

      I am a shareholder and bought in around $0.35 but think this company is definitely going somewhere and continues to sign good size contracts eg BHP $35m the other day.

      Hope this helps.

  22. Gale
    :

    Hi Roger,
    I can only echo Graham Parkes’ and the other bouquets you have been getting for providing in Value.able a logical and balanced process for company assessment.
    With training wheels still firmly attached, I have been trying it out on CST.
    Comsec etc analysis seems only to be available to customers so I have been using CST’s latest annual report. I am not good at reading these things and would appreciate your and others comments on whether IV of $1.42
    using RR of 10% is anywhere near the mark.
    Regards
    Gale

      • Craig
        :

        Hi Gale,

        Using a ROE of 25%, a required return of 10%, and a payout ratio of 50%, I estimate CST to be worth $1.07 per share.

        Given they’ve only been profitable for a couple of years I’ve been a little conservative perhaps, using 25% rather than around the 37% and 30% comsec says they’ve achieved the last 2 years.

        Hope that helps.

    • Ashley Little
      :

      Hi Gale,

      I think your efforts of valuing CST using 10% rr gets a big tick.

      Well Done

      What you now have to consider is whether 10% is appropriate. If you can get Woolworths or CST at a 10%rr which would you own.

      The answer to this is easy it is WOW because it’s earnings are much more easier to predict

      Given the nature of the business I would suggest using a much higher RR for CST

      Hope this helps

    • Ken Milhinch
      :

      Gale,

      We need all of your inputs to check completely, but my numbers are as follows;

      Equity $27.31
      Shares 96.6
      EQPS $0.28
      NPAT $8.25
      Dividends $3.4
      POR 41.2%
      LY Equity $22.23
      ROE 33.3% (Based on the average of LY & TY Equity)
      RR 13% IV = $1.16
      RR 12% IV = $1.31
      RR 11% IV = $1.51
      RR 10% IV = $1.77

      Hope this helps.

      Regards, Ken

      • Roger Gibson
        :

        I agree with all of the above except the POR. The dividends provided for against the earnings for the same period were 5.0 cents for 96.9M shares or $4.83M or 58.5% as stated on the Commsec site. The fact that the payment of 3.5 cents/share against the 09/10 earnings didn’t happent until Sept 10 shouldn’t matter, otherwise the earnings and dividends are out of allignment when you calculate the payout ratio.

        I hope I can convince you Ken otherwise I’ll have to alter my database to cross financial years when working out payout ratio.

        Regards, Roger G

      • Ashley Little
        :

        Hi Roger G,

        I am in agreement with you on this matter.

        However if Ken is happy with this and is consistent over time it wont matter much.

        The only propblem a can see in doing things the way Ken does it is that you will get valuations on the high side when a company starts ramping up it’s payout ratios.

        That said, I think Ken uses high RR and has a big MOS so this wont hurt him

      • Ken Milhinch
        :

        Gents,

        I understand where you are coming from. I assume you are recalculating the NPAT to accomodate your method ? My approach is that we are dealing with numbers relating to a specific year and it is not appropriate to include something that will not be paid until next year and ignore something that was paid this year. I can see the logic of your approach, but it simply does not match with the company accounts, so I must disagree with you.

        Roger, referee please !!!!

        Regards, Ken

    • Benjamin
      :

      Hi Gale,

      I have an IV for CST of $1.61 for the 2010 FY using an ROE of 33.54% and a RR of 10%.

      Regards

      Ben

    • Simon
      :

      For 2010 I get IV of $0.70 for CST, taking a more conservative approach with this one is recommended.

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