Tuesday, December 13, 2011

Meeting 41 Cochlear


Google finance

Cochlear Limited (Cochlear) operates in the implantable hearing device industry. The Company operates in three geographic segments: 

  • Americas, 
  • Europe 
  • Asia Pacific. 
Cochlear has established special purpose entities (SPEs) for trading and investment purposes. The Company’s Cochlear Nucleus 5 system includes a cochlear implant, a sound processor, including an automatic phone detection feature. 

Annual Reports

Our Analysis - Read Only (use link I emailed to edit)

Thursday, October 6, 2011

Meeting #40 Valuation Invocare


" InvoCare owns and operates funeral homes, cemeteries and crematoria around Australia, New Zealand and Singapore. InvoCare is well known for its commitment to family care, community engagement and investor value."

Valuations can be found here

For date of meeting see the calendar at the top

Thursday, September 1, 2011

Meeting #39 IRI

Prognosis  IR is a leading global provider of high-definition performance monitoring, diagnostics and reporting software. IR is the the creator of award-winning Prognosis® and PowerMinder®

Design, development and sale of systems and applications management computer software for business-critical computing and Internet protocol (IP) telephony networks.

The Company’s PROGNOSIS product range is an integrated suite of monitoring and management software, designed to give an organization’s technical personnel operational insight into their HP NonStop, Windows, uniplexed information and computing system (UNIX) and Linux servers, and IP telephony environments and the business applications that runs on computer software. PROGNOSIS is used in automated teller machine (ATM) and Electronic Funds Transfer at Point of Sale (EFTPOS) transaction systems, Web applications and telecommunications systems. It services customers in more than 50 countries. The Company generates the majority of its revenue from upfront license fees, recurring maintenance and recurring license fees.

Data from Reuters

The Meeting
Thanks for Gilles, Tom,Mark, Cameron and Camerons Brother for coming on Wednesday.

The company routinely has a high profit margin and return on capital in the mid 20's it has no long term debt and consistent earnings there is also very little share dilution and little options. The MD has been with the company for along time and he hold a good chunk of shares and also the company is in a space (IP telephony) that could make it a takeover target in future. On the negative side the earnings are flat (falling just short of inflation).  The dividend payout is routinely 90% of the yearly earnings.

Special thanks to Cameron for driving a truck through my incorrect valuation method! My flawed valuation came up with a valuation of $1.05, both Cameron and Mark came up with around 18 cents. Tom came up with more (about 60 cents - I think)

Valuations spreadsheet will be found here

Next Meeting

We will be submitting valuations of Invocare

Wednesday, August 24, 2011

Meeting #38 - MTU

M2 Telecommunications Group Limited is engaged in the supplying of fixed line voice, mobile telecommunications and broadband data services within the Australian and New Zealand markets through its retail and wholesale operating divisions. Retail business segment offers unique packaged telecommunications services, targeted particularly to small and medium sized enterprises, offering fixed line voice services, including line rental services, mobile voice and data services, information technology (IT), terrestrial dial-up and broadband Internet services, as well as mobile telephone hardware. Wholesale business segment offers a full suite of fixed-line voice services, including line rental services, mobile voice and data services, terrestrial dial-up and high speed broadband Internet services, and mobile telephone hardware. On August 3, 2010, People Telecommunications Pty Ltd, wholly owned subsidiary, acquired Bell Networks Voice ; Data Pty Ltd (Bell Networks).

Results Of Our Analysis

Find Our Valuations here

Notes about the Meeting

  1. We should look into Excel functions that automatically calculate an initial price from an final price & interest rate, instead of implementing an iterative solution (ALL);
  2. We should look into implementing checks to ensure our calculated growths are feasible. Possible things to include on checks are the current size of the sector (or whole economy), factored over 10 years for typical population growth & inflation. This needs to be dicsussed further if we are to come up with a workable check we all agree on (ALL);
  3. We should also look at whether or not a company has previously grown by acquisition. If this is the case, there may be a limit on future growth. We should flag this in future calculations, and should certainly be implemented in Point 2, above. (ALL)
  4. Roys should evaluate gearing as Gearing=Debt/Assets, which is preferable to my current system of years to pay off debt (ROY)
  5. Roy should include Interest Coverage Ratio (ROY)
  6. Roy shouldn't calcualate growth as an average value, but use at Growth Rate =(final  - initial)/No. years  (ROY)
  7. Roy should divide EBITDA by the net assets to evaluate the amount of assets in the business that are being used to generate profits (ROY)
  8. Next Meeting: Present analysus of IRI  & Discuss the assessment of many companies. (ALL)

Saturday, July 9, 2011

Meeting #37 Evaluating Cardno


"Cardno Limited is a provider of professional services in physical and social infrastructure. The Company has three business segments: Professional Services Australia and New Zealand, Professional Services Americas and Software, and International Development Assistance. Professional Services Australia and New Zealand provides consulting engineering, planning, surveying, landscape architecture, environmental services and geotechnical services. Professional Services Americas and Software provides services in the Americas and software sales globally. International Development Assistance manages aid projects on behalf of unilateral and multilateral government agencies and private clients."

is an interesting company with a soaring stock price

All our analysis can be found here

Thursday, June 2, 2011

Meeting #36 ARB Deep dive

We have previously analysed ARB and thought it was worthy of a second closer look. So our task for the next meeting is to really get under the hood with ARB and develop our understanding that we had from meeting 34

The Meeting
Attendees: Mark, Tom, Gilles and Paul

We basically confirmed our previous analysis that ARB is a stellar company. The question is this growth cannot continue like this forever. Priced at a 16 x multiple of earnings it is expensive compared to other engineering stocks. However it has shown extremely consistently high performance However we all do think it is a bit expensive right now we have bandied about prices of between 4.50 and 5.50

Analysis will be being put on the spreadsheet here

Next Meeting
We will be evaluating Cardno

Thursday, April 21, 2011

Meeting # 35 SDI Valuation

This meeting is due to occur in the future in May 2011 (see calendar above for exact date).

SDI is a company that operates in the research and development, manufacturing and marketing of dental restorative materials. SDI’s products include alloys, etchants, glass ionomers, sealants, cement, equipment, tooth whitening, composites. It operates in Australia, Europe, the United States and Brazil. The Company’s subsidiaries include SDI (North America), Inc, SDI Holdings Pty Ltd, Southern Dental Industries GmbH, SDI Brasil Industria e Comercio Ltda and SDI Dental Limited.

The share price has taken a hammering recently with the high price of silver and high Aussie dollar. At this time of wring the share price is 17 cents.

Discussion points prior to the meeting
In the last valuation we found some descepencies with what comsec claimed the debt levels were against what was in the annual report. For this valuation I did some cross verification and was supprised to see the cash in the annual report to be 875,000 but in comsec it was 3,406,000.

ThenI realized that the 3406 is for the consolidated entity not the company (we'll need to discuss this)

The Meeting
Attendees Paul, Mark, Justin, Tom and analysis was sent from Roy in the UK

As a value investment it was not good and the inconsistent earnings have made it a difficult company to value. Return on capital is also not good.

Click Here for our Valuations

Meeting # 34 ARB

This meeting was to present our findings on ARB 
Thanks to Mark Justin for attending and Roy for sending in analysis (despite not being able to attend as he was in the UK.

Our analysis varied in values from $3.30 to $17 most of the reason for the difference was around the margin of safety we employed. Both Justin and Paul missed the high level of debt (%35 of total assets) from looking at the figures from commsec. Mark has calculated a more accurate earnings figure by basing his figures on a free cash flow. Mark and Paul got earnings growth at around 35%. Justin was around 8%.

Spreadsheet of our analysis can be found here

Tasks for next meeting
We will all analyse another very interesting company called SDI which is a dental company that has been hammered recently on the share price. Go Forth and Value!

For everyone could we please base our valuations on beating a 12% bank return. Roy asked me to do this so the valuations can be more easily compared

Wednesday, February 23, 2011

Where did the $9 trillion go?

In the quite amazing videos from May - June 2009 being questioned around the 2009 bailouts and where the money went.
  • The Inspector General of the Federal Reserve
  • The Chairman of the Federal Reserve
  • The Chairman of the Federal Housing Committee
#1 Alan Grayson vs Elizabeth A Coleman  
Inspector General of the Federal Reserve

She is asked where the $9 trillion went that has disappeared in the last 18 months. To put that in context the GDP of the US is about $12 trillion, the yearly US tax income base is about $3 trillion.

#2 Alan Grayson vs Ben Beranke 
The Chairman of the Federal Reserve Bank of America
Ben Bernanke getting very nervous trying to explain a $550billion entry on the balance sheet

#3 Alan Grayson Vs James Lockhart 
Chairman of the Oversight Board of the Federal Housing Finance Agency

James has some very nervous looking body language trying to explain how $1 trillion of derivatives were used to hedge a $200 bad million loans and ultimately resulted in a $100 billion bailout.

Where did the 9trillion dollars go?

Those videos above were made 2 years ago and since then there have been actions that have taken place to start to get to the bottom of the situation
After the passing of Federal Reserve Transparency Act of 2009 (H.R. 1207)
The Federal Reserve was forced to publish where the money went and did so in December 2010


[when I find the actual data I will put it here]

Monday, January 31, 2011

Meeting #33

The meeting was to present our further analysis of JBHIFI
It was a very interesting meeting thanks to Roy , Justin and Mark for coming. A few items were discussed that I found very interesting

  • How significant the stock options value are
  • Margin of Safety
  • Using 6 monthly financial reports

Stock options can cost 50% of the Annual Gross profit
If you look at a companies annual share volume and it steadily increases by a small number each year then the directors are probably giving themselves stock options. The value of these options is often significant. In JBHIFI it was worth about 10% of the revenue. The value is often between 10 to 20% of the gross profit.

Margin of Safety (10-17%)
To calculate the return I was looking to calculate  price for JBHIFI I used 10%. This resulted in a price of around $25 for JB. Mark used a figure of 17% which together with a discount for the value of the stock options resulted in a value of around $12.

We also discussed the benefit of using the 6 month data instead of just the 12 months data

Our Analysis of JBHIFI can be found here 

For Next Meeting

  • We will tidy up our analysis for JBHIFI  can be found here 
  • We will start analysis of a new company 1300 SMILES
  • We present our analysis at our next meetup