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.
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Credit Corp (ASX:CCP) has just reported their FY12 results, announcing a NPAT of $26.6m versus market forecasts and company guidance of $25-28m.
The company increased its 2H12 dividend to 16 cps and most analysts were expecting 15 cps forecast. The 16 cent dividend takes the full year dividend to 29 cents, which is 45% higher on the previous year. The company has talked down the forthcoming year and cited increasing competition resulting in higher ledger purchases. Investors need to accept this at face value rather than continuing to assume the company will upgrade again at the next half year (as they have done consistently in the past). FY13 guidance for NPAT is $27-29m and DPS of 29-32 cps. Based on an estimated 50% payout and an estimated 22% ROE our valuation is further estimated (estimated being the operative word here) to remain well above the current price. The comments here are for educational purposes only and not a recommendation. Be sure to seek and take personal financial advice prior to engaging in any securities transactions.
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When pop singer Madonna wrote Material Girl in 1985 I suspect she wasn’t thinking about BHP or FMG. But nearly thirty years later that is exactly the material world that will determine whether you retire materially well-off or not. BHP’s share price has fallen 30 per cent in the last twelve months so it’s easy to say the shares are now cheap but does BHP represent value or is it a value trap? What I can tell you is that consulting geologists who spend their days planning exploration programs for large miners are in no doubt about whether we have seen the peak of the resources boom.
Six months ago these experts were being told by their major-miner clients that money is not an issue, that the issues were resourcing – labour and drill rigs. “Just make it happen” the geologists were being told “there’s $80 billion of planned infrastructure spending in the pipeline”.
Over the next 20 business days, approximately 1,250 ASX listed companies will be reporting their full year (or interim) results to 30 June, 2012.
Twelve months ago, the consensus forecast for the year to 30 June 2012, was for 20% growth in earnings per share.
Over the past twelve months that number has been progressively downgraded to nil, nought, nothing.
For the year to 30 June 2013, the consensus forecast currently stands at 15% growth in earnings per share.
Insights from the outlook statements will be interesting and it wouldn’t surprise us to see consensus earnings per share growth forecasts for the year to June 2013 to follow the same downtrend as those for the year to June 2012.
At Montgomery, we will be using our proprietary fact-based investment process to analyse the results.
We hope this reporting season will alert us to some new companies which own extraordinary businesses trading at a discount to their estimated intrinsic value.
Roger Montgomery discusses how the latest data reveals that the mining boom has ended, and he discusses the implications of this on mining stocks with Ticky fullerton on ABc1’s The Business. Watch here.
This program was broadcast 1 August 2012.
We had a wry smile this morning after reading Macquarie Equities daily newsletter.
China Rongsheng Heavy Industries’ net earnings have been downgraded by 37% in 2012, 68% in 2013 and an astonishing 79% in 2014. Forecast 2014 profitability is now one-sixth of the the level recorded in 2011.
A significant factor which had come to light is the fact that Rongsheng has provided highly attractive pre-delivery finance to customers to win market share.
As Rongsheng has had operational (and credibility) issues, it has had to increase its working capital and gearing to meet expenses during during the shipbuilding construction period. With the fast decline in their order book, from US$6.6 billion in 2011 to an estimated US$3.6 billion in 2014, cash flows are under pressure.
The extraordinary rise and fall of Rongsheng and the outlook for the Chinese shipbuilding industry lends support to Montgomery’s caution with respect to the materials industry.
We will become more positive on materials stocks when the outlook from the Chinese steelmaking, cement and shipbuilding industries is less pessimistic.
Do Newcrest Mining (NCM), Breville Group (BRG), Commonweath Bank (CBA), Westpac (WBC), Wotif.com (WTF) and CSL (CSL) make Roger’s coveted A1 grade? Watch this edition of Sky Business’ Your Money Your Call broadcast 1 August 2012 to find out, and also learn Roger’s current insights into the Mining Services sector. Watch here
