• Check out Roger's recent interview on the Fear & Greed podcast about small caps to watch this reporting season listen here



    What are Russell Muldoon’s latest insights into Australian residential construction?

    Russell Muldoon
    August 30, 2012

    Do Gerard Lighting Group (GLG), Woodside Petroleum (WPL), Vocus Communications (VOC), CSL (CSL), Credit Corporation (CCP), Silex Systems (SLX), Boart Longyear (BLY), Mineral Holdings (MIN) and NRW Holdings (NWH) make the coveted Skaffold A1 score? Watch this edition of Sky Business’ Your Money Your Call broadcast 25 July 2012 to find out, and also learn Russell’s thoughts on the state of the Australian residential construction market. Watch here.

    by Russell Muldoon Posted in Companies, Insightful Insights, Intrinsic Value, TV Appearances.
  • Reporting Season – Emerging Conclusions

    Tim Kelley
    August 30, 2012

    Reporting season is a busy time for us at Montgomery Investment Management. Studying results announcements is one of the ways we try keep on top of what is happening in the market and identify economic trends and investment opportunities.

    We do this in a fairly systematic way.  Every day we review, evaluate and catalogue every last results announcement made that day.  As I write, we have reviewed several hundred sets of financial statements and the accompanying commentary, representing around $700B of aggregate market capitalisation, with many more still to come.

    This analysis draws our attention to individual companies that are performing well, and complements the automated stock screening tools we use, including Skaffold.  It also gives us a sense of broader economic trends and the relative health of different parts of the economy.


    by Tim Kelley Posted in Companies, Insightful Insights, Market Valuation.
  • China Rongsheng Heavy Industries (CRHI), Part 3

    Roger Montgomery
    August 27, 2012

    Earlier this month we warned readers of the highly attractive pre-delivery finance CRHI was offering customers to win market share. The downturn in the Chinese shipbuilding industry and slippage in vessel delivery saw the Company, for the 6 months to June 2012, report an 82% decrease in net profit on a 37% decline in revenue to RMB5.5b (US$865m). The deterioration in CRHI’s finances over the past eighteen months has been extraordinary: net debt/ equity has jumped from 40% to 143% (US$3.55b/$2.5b), receivables have risen dramatically to RMB4.4b (US$700m), while receivable days have increased from 10 days to 125 days. Over one-third of the receivables are past 180 days, and half of this is past 360 days.

    With its eroding credit worthiness, China Rongsheng Heavy Industries has seen its share price decline from HK$8 in late-2010 to HK$1 and it is now selling at 40% of its book value. We will be closely monitoring other Chinese-based steel, cement and shipbuilding companies, especially in the context the iron ore price has just breached the psychologically important US$100/tonne.

    by Roger Montgomery Posted in Companies, Insightful Insights, Manufacturing.

    Good things to come at ASR?

    Tony Featherstone
    August 24, 2012

    Like many Australian industries, the share registry sector is dominated by two giants: Computershare and Link Market Services. The much smaller Advanced Share Registry (ASR) barely rates by comparison, but is well positioned for faster growth when the sharemarket recovers.

    A weak sharemarket is a big headwind for share registries, which update and manage company share registers. Fewer initial public offerings (IPOs) and corporate actions, such as rights issues and meeting notices, means less demand for additional share registry services.

    ASR’s challenge is compounded by its exposure to smaller resource companies. The Perth-based share registry might struggle if more listed explorers go into their shell, to preserve cash.
    Share registries can be great businesses. Computershare’s return on equity has averaged 28.1 per cent over its last four financial years and it is capitalised at $4.2 billion, Skaffold data shows. However, its average annual total shareholder return over five years is negative 3.2 per cent.


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    by Tony Featherstone Posted in Companies, Whitepapers.
  • Reporting season avalanche turns up another gem

    Roger Montgomery
    August 21, 2012

    Since reporting season rolled into full swing, we have covered 130 individual annual reports of companies we like to varying degrees.
    Twenty-four of those have made the grade for further research and modelling. Some of them we have purchased in the past few weeks and some we have already been holding for a while. This update concerns one of Montgomery’s holdings McMillan Shakespeare (ASX MMS).  

    Management just reported (after the market close) NPAT of $54.3m – up 25% from last year and diluted earnings per share (EPS) growth of 21%.  This is significantly ahead of market expectations for the full year and management’s focus on Salary Packing and Fleet Management Services continues to pay off.

    by Roger Montgomery Posted in Companies, Market commentary.


    Many investors think about investing ‘tactically’, by waiting for a recession or some sort of economic setback before proceeding. But this is not required with private credit. Our latest whitepaper reveals why protection is more important than recession for a fund earning monthly income.

  • Australian Bank results show 1 Speed Aussie economy – SLOW

    Roger Montgomery
    August 20, 2012

    The full year result by CBA recently was a good reflection of the level of growth Australia is currently experiencing – low. The banks reported cash NPAT was up just 4% for the full 12 months or $278m to $7.1b. However, if we back out the 15% reduction in loan impairment expenses, $191m, despite the oligopoly the big 4 have in Australia, the best they could manage was growth overall of 1-2% in banking, funds management and insurance. The 15% improvement in credit quality was definitely a surprise in the result given the scores of jobs losses recently. A development we continue to monitor closely.

    by Roger Montgomery Posted in Companies, Market Valuation.
  • Reporting Season Update

    Roger Montgomery
    August 18, 2012

    Over the past week more than 100 companies have reported their full year results. These results have begun to flow through Skaffold, resulting in the changes listed below for each company. A membership to Skaffold ensures you are constantly up to date with changes to the quality and valuations of every Australian listed company.

    To become a Skaffold member and start taking advantage of market inefficiencies that may transpire during reporting season CLICK HERE

    And here’s a list of the elements in Skaffold that change automatically as companies report:

    1. Earnings and Dividends, Capital History and Cash Flow Evaluate screens updated with 2012 figures
    2. New 2012 Skaffold Score
    3. 2012 Intrinsic Value – Actual
    4. 2013, 2014 and 2015 Intrinsic Value forecasts

    by Roger Montgomery Posted in Companies, Investing Education, Market Valuation, Skaffold.

    Exactly how clever is Texas Pacific Group?

    Roger Montgomery
    August 15, 2012

    With the recent bid announcement regarding Billabong, Roger Montgomery discusses with Ross Greenwood how clever he believes TPG is, particularly as it relates to the long-term performance of entities they sell.  Listen here.

    This discussion was broadcast 25 July 2012 on Radio 2gb.

    by Roger Montgomery Posted in Companies, Insightful Insights, Radio.

    What are Roger’s latest insights into Leighton’s and NAB?

    Roger Montgomery
    August 15, 2012

    Roger provides his Value.able insights into Leighton Holdings (LEI) and National Australia Bank (NAB) to Ticky Fullerton in this edition of ABC1’s “The Business” braodcast 14 August 2012.  Watch here.

    by Roger Montgomery Posted in Companies, Financial Services, TV Appearances.
  • JB Hi-Fi Full Year Results for 2012

    Roger Montgomery
    August 13, 2012

    JB Hi Fi today reported its full year results. Revenue of $3.13b was 6% higher than FY11, but NPAT was down 4.6% to $104.6m. While this was the first decline in JB Hi-Fi NPAT since it listed in 2003, it was slightly better than the market had anticipated and, as I write, the share price is up over 6%.

    As value investors, we are more concerned about the long-term than the intra-day outlook, and the question exercising our minds is: to what extent are the current headwinds cyclical vs. structural?

    JB Hi-Fi believes that most of what is happening is cyclical, and there is some evidence that can be marshaled to support that view. However, it can also be said that retailers who previously competed locally must now compete with the best in the world. In this context, retailers that must pay Australian prices for rent, staff and utilities have some relatively big hurdles to clear.

    Investors should also be aware of two interesting financial developments. Looking at the Profit & Loss statement you will see EPS has risen from 101.76 cents to 105.93 cents.

    But the charts of EPS in the remuneration section reveal a very different picture. You see, the P&L includes an abnormal loss of $33 million associated with the Clive Anthony’s ‘restructure’. Take the abnormal loss out and the continuing operations made EPS of $1.247 in 2011 against this year’s $1.059. If it was ok to use $1.247 for the execs in working out their incentives, it should be ok for shareholders to use to compare this year’s P&L!

    And for those investors enamoured with cash flows, don’t get too excited by the cash flow from operations jumping to more than $215 million from $105 million last year. You see, there’s been a $100 million blow out in payables. In other words JBH appears to have held off paying its suppliers a little longer.

    by Roger Montgomery Posted in Companies, Consumer discretionary.