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  • David Jones: Non retailers distracted by a takeover?

    Roger Montgomery
    September 21, 2012

    This week David Jones announced their 2012 results and reported a 40% decline in profit. The only positive was that 4th quarter sales fell by just 1% on pcp whereas 1st quarter sales had fallen 11% on pcp. Actually there was another positive; the 35% decline in earnings per share was inline with expectations.

    Separately the company also provided an update to its property strategy. Investors should understand that anything DJS does with its properties is simply a takeover defence against private equity (or Premier Investments perhaps) pulling off the same stunt that was done on Myer. That is; launch a takeover, succeed, sell off the property portfolio and get the business cheaper. if DJS shows it is proactive in this area it becomes much harder from Private Equity to argue that they are “adding value”.

    DJS intrinsic value (see Fig. 1) has now not increased since 2004 and according to Skaffold.com DJS’s intrinsic value is not expected to rise at all over the next two years.


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

    Have we finally reached the bottom of the market?

    Roger Montgomery
    July 30, 2012

    And what are Roger Montgomery’s Value.able Insights into the latest market developments? Learn more in this edition of ABC1’s “Inside Business” broadcast 29 July 2012.  Read/Watch here.

    by Roger Montgomery Posted in Energy / Resources, Intrinsic Value, Market Valuation, Takeovers, TV Appearances.
  • Selling the farm

    Roger Montgomery
    July 28, 2012

    Shareholders in the 135 year old London Metal Exchange (“LME”) voted overnight to sell to Hong Kong Exchanges & Clearing for US$2.1 billion.  The LME will help the HKEx, whose focus has until now been almost exclusively on equity markets, challenge the Chicago Metals Exchange (CME) and the Intercontinental Exchange (ICE) for dominance in commodity markets.

    The CME and ICE and the NYSE Euronext were all trying to acquire the LME in a wave of consolidation that has swept the global exchanges industry.

    The concept of traders gathering in the coffee houses in the City of London (in 1877) with an open outcry system is rapidly being taken over by 24 hour electronic trading!

    by Roger Montgomery Posted in Insightful Insights, Investing Education, Takeovers.

    Will Fairfax Media’s restructure provide real profitable change?

    Roger Montgomery
    June 18, 2012

    Fairfax Media’s restructure announcement has been welcomed by the market, but what prospects does their revised business model have for future profitability?  Roger Montgomery provides his Value.able insights to ABC1’s Ticky Fullerton in this edition of ‘The Business’ broadcast on 18 June 2012. Watch here.

    by Roger Montgomery Posted in Insightful Insights, Takeovers, TV Appearances, Value.able.

    Can Fairfax Media’s board-representation snub to Gina Rinehart be sustained?

    Roger Montgomery
    June 15, 2012

    Roger Montgomery discusses why he foresees Gina Rinehart’s substantial shareholding will deliver her board representation in Fairfax Media (FXJ) in this interview with Ticky Fullerton from the 15 June 2012 edition of ABC1’s ‘The Business’. Watch here.

    by Roger Montgomery Posted in Takeovers, TV Appearances, Value.able.


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    When is an offer too good to refuse?

    Roger Montgomery
    May 1, 2012

    Roger Montgomery discusses why the Spotless (SPT) board has finally accepted a Pacific Equity Partners takeover offer in this Sydney Morning Herald article published 1 May 2012. Watch here.

    by Roger Montgomery Posted in Companies, In the Press, Takeovers.
  • Can relationships be the foundation of business?

    Roger Montgomery
    May 13, 2011

    Back on March 10 here at my Insights blog I pieced together a little jigsaw puzzle that served as a warning to Value.able Graduates researching Carsales.com.au:

    “…Relationships it seems, matter. And so they should.

    “In the end, it is not cars, boats and planes that bring joy, but the quality of the relationships you develop.

    “This week (commencing 7 March 2011) I read that Carsales.com.au had been sold out of Nine Entertainment Co, the rebadged PBL Media (which is owned by CVC Asia Pacific).

    “Reading Terry [McCrann’s] article caused a rumour I heard last year to become louder in my mind.

    “The rumour was that a group of customers of Carsales.com.au (ASX:CRZ, MQR:A1, Value.able Margin of Safety; -24%) were thinking of leaving to start a rival that would be funded by News. You could understand News’ interest, given it is losing the online automotive classifieds race to Drive (Fairfax) and Carsales.

    “If this is true, and if Terry is also on the mark with the intimacy of the relationships amongst Australia’s media barons, both individual and corporate (excluding Fairfax), then it would be reasonable to assume that the status quo should be maintained until after Carsales had been spun out of the former PBL, finding itself completely owned by institutions and private investors.

    “Now that hurdle is out of the way, let’s see if Carsales does lose any major customers.”

    That was the crux of my 10 March blog post – that Carsales’ biggest customers were about to leave to start a rival with Newscorp.

    Just 2 months have passed and if you didn’t already know, guess what? Splitsville.

    The Carsguide brand, owned by News Limited and a consortium of foundation dealers that includes Automotive Holdings Group Limited, A.P Eagers Group and Trivett, plus a few other dealerships representing a quarter of Australia’s car dealers, will hop into bed together in a joint venture and share Carsguide’s revenue.

    Chairman and chief executive of News Limited John Hartigan told one journo, “We will be investing in the new company, doubling the number of staff and throwing our combined resources and expertise behind the joint venture, with the intent of aggressively growing the business.”

    Please refrain from posting any banter as comments, just your highest quality thoughts and experiences investing in online businesses. How have you faired investing in online businesses?

    Posted by Roger Montgomery, author and fund manager, 13 May 2011.

    by Roger Montgomery Posted in Consumer discretionary, Insightful Insights, Takeovers, Value.able.
  • Are we in bubble territory?

    Roger Montgomery
    May 11, 2011

    Less than an hour ago, Microsoft Corp. agreed to buy the Internet telephone company Skype SA for $8.5 billion. The company was started by Niklas Zennstrom (who remained CEO until September 2007) and Janus Friis (one of Time Magazine’s 100 Most Influential People 2006) in 2002 and they sold it to eBay in 2005 for $3.1 billion.

    eBay bought Skype in 2005 for $3.1 billion and sold 70% to private equity for $2 billion in late 2009. Up until yesterday, it was owned by private equity, the Canadian Pension Plan Investment Board and eBay. Now Microsoft is buying the company for three times what private equity paid —an increase in value of more than $5.5 billion in about 18 months. Skype’s original founders also ended up in the syndicate through their company Joltid.

    It is the biggest deal in Microsoft’s history. Some of that 36-year history includes a friendship between former CEO Bill Gates and Warren Buffett. One wonders if Warren was consulted because the initial metrics are staggering. Some may argue the high price is because Microsoft was competing against an imminent IPO. With more than $50 billion in cash (much held offshore for tax purposes), Microsoft merely needs to beat the aggregate cash return, which in the US is somewhere just north of zero.

    Skype’s ‘customers’ made 207 billion minutes of voice and video calls last year – up 150% on 18 months ago. Most of those calls however are free. Less than 9 million customers per month, or a little more than five percent, paid Skype anything.

    The company did produce revenue of $860 million last year, but Skype lost $7 million. $8.5 billion is quite staggering. I think Skype is great and I know many who use it to avoid paying anyone for phone and video calls.

    You may recall Microsoft has previously bid $47.5 billion for Yahoo Inc. Yahoo rejected Microsoft’s advances and Microsft dodged a bullet; Yahoo is now available at half the price.

    Perhaps we are not in bubble territory? Perhaps it all works out? Perhaps its just a repeat of Foster’s purchase of Southcorp – on a much grander scale? Or perhaps Microsoft will start charging everyone for a call? A charge of 1 cent per minute – and no loss of customers – would be worth $2.07 billion in revenue… What percentage of Skype’s free riders do you think would submit credit cards etc. to subscribe and be willing to be charged?

    Posted by Roger Montgomery, Value.able author and fund manager, 11 May 2011.

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