Companies

Leighton’s half yearly results grabbed headlines when they reported a 66 per cent drop in interim net profit to $114.6 million, at the low end of guidance.

For 24 months, we have been warning investors about the company’s difficulties in collecting receivables in the Middle East and the likely writedowns of the Desal Plant in Victoria and the Brisbane Airport Link. And now a string of results are revealing that these issues are savaging the company’s profits which for the most recent half, were down from $340 million in Leighton’s previous first half, the six months to December 31, 2011.

But the problems may not be over. The early traffic numbers out of Airport Link are much worse than expected – even though the opening of the link has allowed drivers on the road for free – the project may go bust like other toll roads before it. We believe Leighton’s have a deferred equity contribution requirement of $200 million that may still be required to be paid.

In the Middle East, Leighton’s has not been paid for a number of projects and they aren’t small. Imagine building an equestrian centre (see image) and failing to be paid. It would send most companies bust.

continue…

by Roger Montgomery Posted in Companies, Insightful Insights.

• 4 Comments
• save this article
• POSTED IN Companies, Insightful Insights

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.

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

• 2 Comments
• save this article
• POSTED IN Companies, Intrinsic Value, Investing Education, Market Valuation

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.

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

• 1 Comments
• save this article
• POSTED IN Companies, Insightful Insights, Investing Education, Market Valuation

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.

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

• save this article
• POSTED IN Companies, Insightful Insights, Manufacturing, Value.able

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

by Roger Montgomery Posted in Companies, Insightful Insights, Intrinsic Value, TV Appearances.

• save this article
• POSTED IN Companies, Insightful Insights, Intrinsic Value, TV Appearances

The Woolworths Food and Liquor Division reported 3.8% sales growth to $37.5 billion for the year to June 2012.  Same store sales growth increased by 1.3% for the year.  For the June Quarter, sales growth was 3.8%, year on year, while same stores sales grew by 1.3%.

In comparison, Coles reported sales growth of 6.1% to $33.7b and same store sales growth of 3.7%.  For the June Quarter, sales growth was 4.6%, year on year, while same store sales grew by 3.0%.

Both organisations reported price deflation of approximately 4% in fresh produce, and this masked both their strong volume growth and the increasing consolidation of the Australian supermarket industry.

The Montgomery (Private) Fund is a shareholder in Woolworths, and likes its 26% average return on equity.

by Roger Montgomery Posted in Companies, Consumer discretionary, Insightful Insights.

• save this article
• POSTED IN Companies, Consumer discretionary, Insightful Insights

As we have been actively commenting since the start of the year, a key thematic concern we hold for investors in both Mining and Mining services businesses was the potential for commodity prices and in particular Iron Prices to begin to fall. In such an environment, falling prices would result in lower profits and cash flows for our miners and hence we could see significant future risk of projects being either scaled back or shelved in future periods.

Our view is anchored by a supply response in two new Pilbara regions coming on stream over the next few years and also falling demand from the world’s biggest consumer of additional supply, Asia (China).

With Iron Ore falling to $123.6/t, down 9% in two weeks; we are now at a critical juncture.

Critical because this is the price considered by many to be the ‘floor’ / the most Iron Ore prices can fall given China’s own estimated cost of production is $120/t. This compares to Australia/Brazil at $40/t and Canada/USA/Europe $65/t. A price lower than $120/t would make China’s Iron Ore production uneconomic and hence, a fall below this level “just cannot occur”.

Our experience with commodity producers is a little different. Our experience tells us that marginal producers are the first to lose when commodity prices fall materially.

And in this light we continue to expect over the coming months and years we will see lower prices and perhaps, marginal / high cost producers suffering and mining services starved of work. Even if they are operating at full steam right now.

To ask a question: is the recent moratorium of all Greenfield exploration activities by BHP a sign that they see the world in a similar light?

by Roger Montgomery Posted in Companies, Energy / Resources, Investing Education.

• save this article
• POSTED IN Companies, Energy / Resources, Investing Education

I thought the downgrade in earnings by a major stockbroker of the Chinese cement stocks by 20-30% for the years to December 2012 and 2013 was revealing.  Anhui Conch, for example, one of China’s largest cement producers, is expecting its sales volume to grow by 17 percent per annum from 158 million tonnes in 2011 to 251 million tonnes in 2014.  While the average selling price per tonne for 2012 is down 15% to 20% on 2011, and the gross margin has halved.  This drives home the cyclical nature of the industry and in the past year the Anhui Conch stock price has also halved to HK$20.

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

• save this article
• POSTED IN Companies, Investing Education, Market Valuation

Roger Montgomery certainly thinks so, and he discusses with Ticky Fullerton how his Value.able investing strategy provides much lower valuations of the current market in this interview on ABC’s The Business broadcast 18 July 2012.  Watch here.

by Roger Montgomery Posted in Companies, Insightful Insights, Investing Education, TV Appearances.

• save this article
• POSTED IN Companies, Insightful Insights, Investing Education, TV Appearances

Roger provides details of the sad decline of Hastie Group (HST) in this Money Magazine article for July 2012.  Read here.

by Roger Montgomery Posted in Companies, In the Press, Investing Education.

• save this article
• POSTED IN Companies, In the Press, Investing Education