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ValueLine: D-I-V-O-R-C-E

Media Room, On the Internet | Comments (15)

ValueLine: D-I-V-O-R-C-E

Smart people are capable of not-so-smart things. Consider the marriage of Foster’s and Southcorp. On Friday 29 April 2011 Friday Foster’s shareholders voted in favour of a divorce; on 4 May 2011 the Supreme Court of Victoria granted a decree absolute. Companies considering merging should pay attention to Foster’s experience. The next time the board of a company you own makes a bid for one you don’t, do yourself a favour and send them a copy of Value.able! Read Roger’s comments at www.eurekareport.com.au.

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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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15 Comments

  1. Ivor
    :

    Craig B,

    Not sure how you get your valuation for ZGL.
    ROE 15.3, B/V .26 should give a valuation around double B/V of around 52c at 18% POut. Stock is trading slightly above that level which seems too be about I/V. (Commsec info).
    But I’m fairly new at all this and may be missing something.

    • Nick
      :

      A lot of broker’s research may use ending equity to calculate the ROE, whereas the starting or average equity should be used. The 15.3% ROE figure is a little understated in Commsec’s case.

    • Craig B
      :

      Ivor,

      Equity per share of $0.259.
      ROE of 25% using starting Equity.
      Payout ratio of 20%.

      regards

  3. John M
    :

    Hi Roger,

    Thanks for showing us how to preserve our capital base by teaching us how to spot not so shareholder friendly companies.

  4. Lei Lei
    :

    Not alot has been spoken about Zicom of late.
    I do not hold, but am very interested in this stock, mainly due to my thirst for knowledge. I believe that gaining a complete knowledge of a stock such as this one is a very important stepping stone. This is because of the global approach the company takes, and the fact it reports in foreign currency.

    It reports in S$, and I assume receives its revenue in an array of currency including; thai, sing, US, A$ and yuan….would this be correct? Its hard to find this out…can anyone point me in the right direction?

    So really, as the company is reporting in S$, there is no translation risk to the AU$…however if they do need to convert back to A$ for any reason…they will be paying at least 10% more S$ than before 6 months ago ($1AU was worth S$1.18, now its worth over S$1.30).

    Can anyone with more knowledge shed some light on this…

    As a side note I noticed the latest investor presentation stated that they have investments in biotech/health stuff – is this outside their circle of competence? It really does seem that Asia are leading the way (specifically Singapore) in pioneering futuristic health diagnostic tools (also see AJJ for more in this space) so perhaps this is exactly the right area to be invested in?

    • Craig B
      :

      Lei Lei,

      The Singapore Dollar exchange rate is not free floating like ours, and is managed in a fashion quite unique, I believe, in financial markets. There is an element of inflation management about it. You’ll find more informed comment than mine out there, but I’m personally quite happy to be invested in firms based in Singapore. They have managed their economic affairs well over the years. Indeed I own Zicom shares.

      There is another Engineering firm based there listed on the ASX that I’m very keen on also, however the sell column is empty at the moment, as it should be given the offers currently in the buy column.

      Zicom’s forte seems to be the manufacture of complex electrical and hydrolic machinery and systems. The biotech move means new markets and types of machines but the same thing essentially. That is, the manufacture of complex systems. It sounds very promising. However scary the prostate biopsy machine sounds, it seems to have a market, and to have been successfully trialled by hospitals.

      They have operations in quite a few Asian countries, which is all explained in their Annual Report, so that is your best source regarding the complexity of their exchange rate issues.

      I think they’re an exciting opportunity, and I value them, using Roger’s method, at 68 cents for 14%, and $1.21 for 10%.

      Hope that helps.

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