Wednesday, February 28, 2007

Market Stumble...

I apologise by the lack of posts recently but I have been extremely busy.

But I still thought I should jump on and mention the impending stumble that should happen to the ASX today after the China and US markets took a dive last night.

Will the dive be as much here in Australia ? Probably not as I expect today's drop to be around 3-4% and it will continue to slide till it is off around 10% in the next few months. Its hard for the market to drop too much due to the amount of superannuation money being put into it.

Anyway good luck and I hope you have been waiting for this as I have. There will definitely be some buying opportunities coming up for those who waited for the inevitable drop.

Good Luck.

Monday, February 19, 2007

Shareholder Benefit Updated

Just to let you know I have added more shareholder benefits to the Shareholder Benefits Blog

The following shares have been updated or added:

  • ANZ Banking Group Limited (ASX:ANZ)

Good Luck Investing

Etrade buyout offer

Etrade Limited (ASX:ETR) has either just suddenly acquired knowledge of a takeover talk or they were not telling the truth to the public back on the 16th Jan. See my article here on the inital gossip that takeover talk was underway at etrade.

ANZ Banking Group Limited (ASX:ANZ) plans to beef up the offerings of online broker ETrade Australia if its $268 million bid for the rest of the shares it doesn't already own is accepted by shareholders. ANZ, which owns just over 34 per cent of ETrade, says it is the natural owner after putting forward a $4.05 per share offer.

I also had an article here on how ETrade was going to boost the profit of ANZ and that ETrade might be a good acquisition.

Good Luck Investing.

Funtastic trying to hide takeover talks

There was some news today on Funtastic Limited (ASX:FUN):

Toy company Funtastic says it has received an approach that could lead to a takeover bid. Day care chain ABC Learning says it has been approached by a third party regarding its stake in Funtastic. Any takeover would have to be approved by ABC Learning. It says the plans are in the early stages. ABC Learning has also reported a 57 per cent increase in after tax half-year net profit to $64 million.

Another article says :

When it came to playing down a takeover approach, Australian toy company Funtastic took no chances. In a mastery of understatement, the company confessed it had received a “confidential, preliminary, incomplete and currently unfunded,” proposal. So top secret and confidential was this approach that Funtastic shares, which fell sharply in November after the company predicted that its results would not meet expectations, jumped more than 5 per cent on Friday, prompting a query from the stock exchange regulator. The shares traded up almost 10 per cent further on Monday to A$1.94. So preliminary, that the company’s biggest shareholder, ABC Learning Centres swiftly followed with a statement that it too had been approached about its 18 per cent stake in Funtastic but that no decision had been made. And so incomplete, that they’ve already got round to talking funding. In fact, this approach was obviously so trifling that, more than five hours later, Funtastic’s statement was still strangely absent from the ASX announcements section of the company’s website. A.B.C, Australia’s top childcare centre operator, said it had not made a formal approach to Funtastic itself but had been approached by another party.“A.B.C. has been approached by a third party in relation to a joint transaction which, if implemented, would result in a change in control of Funtastic,” A.B.C. said in a statement.
Looks like Funtastic has finally got a move on. I have been preaching the value in this company in various posts such as here, here and here.

It has been a main part of my portfolio for a fair while now and I have made gains from $1.20 up to the current price of $1.90

I believe the price on offer if it comes will be in the $1.90 - $2.10 range although it may even be higher. The prospects for this company are being driven by the current baby boom occurring around Australia due to the baby bonus being offered by the federal government.

I am interested in seeing the price that may be offered but at this stage it is still in very early dealings and the whole thing may fall through. It is interesting to see the understatement being made on the takeover. It may be looked into in the future by regulators as directors not making all information available to the public timely is rather reckless.

This is one to watch in the next few weeks.

Good Luck Investing.

Friday, February 16, 2007

Market Above 6000

I know this is a late post but congratulations to traders for pushing the market over 6000.

No matter where you look these days analysts are stating that the market is approaching full value, is fully valued or is overvalued. I am one of the analysts saying the market is definitely overvalued.

The market is trading at a PE of 17 which is higher than the adjusted ( for booms, crashes) PE range of 14.5-15.5. This means the market is overpriced by at least 9.6%

I have also been reading that people were amazed at how quickly the market shot up 1000 points. This is only 20% and the last year has been a good year for the market. It took 11 months to make the range.

Anyway lets hope for some sideways movement or even a bit of a decline as the market is defying gravity at the moment. And as they say the further it goes up ... the further, and quicker it drops.
Good Luck Investing

Tuesday, February 13, 2007

Launch of Share4holder Benefits Blog

How many times did you look for shares that gave you that bit extra, or as a superfund how many times have you had to be careful on the shares you are purchasing as they have additional shareholder benefits that can cause legal issues ?

Well here is an easy way to find out those shares that have an extra bit of punch for the shareholder. I have launched my shareholder benefits blog and I hope to add 1-2 shares per week to the blog analysing the benefits which are currently offered.

I have launched the blog with an analysis of two companies that offer discounts to hotels and theme parks.

Please come and visit and gain some insight into those shareholder discounts and shareholder benefits you never really hear about but always wanted to know about.

Good luck Investing.

United Group results look satisfactory

Engineering firm, United Group Limited (ASX:UGL), has performed satisfactory in the first half of 2006-07. It posted a net profit of $35.3 million, which was actually slightly lower than the same period from the previous year due to an $18.1 million write-down. But fortunately EBIT improved 23% to $62.3 million and revenue increased 18% to $1.3 billion.

United Group predicts growth to be strong in the second-half of 2006-07.

United Group is sitting on a price earnings (PE) ratio of 19 and a dividend yield of 3.3%. This is fairly standard in the market and unless they can find more growth in the second half of the year I don't see any value in the company. The $18.1 million write off hurt the result significantly but it does show the underlying fundamentals of the company are sound. My only concern with the company fundamentals is the 50% debt to equity. This is fairly high and a downturn in the industry will be a major issue for the company.

At this point of time I say wait for a better price.

Good Luck Investing.

Coles still a takeover target

Analysts from Investment banks are convinced that a further takeover proposal for Coles Group Limited (ASX:CGJ) will be forthcoming.

The retail group's management is adamant it will maintain an integrated company with stores rebranded to Coles, but many investors are hungry for a split of assets. Such a sale could attract up to $20 billion, with the supermarket section itself worth $A13 billion.

Coles is due to release its half-year profit figures in March and there is speculation that this may be the trigger for takeover movement. The recent takeover bid was $15.25 per share and even then the board's position was that it undervalued the company. Since the takeover rejection the Coles share price has slowly risen to $14.70.

As far as valuing the company, it is currently sitting on a PE of 23 with a PEG ratio of 2.28. These are fairly high but are lower than its major competitor Woolworths Limited (ASX:WOW) which sits on a PE of 26. Analysts expect Woolworths to make a gain of 30% on its EPS in the next two years while they are expecting Coles Group to make a gain of 31%. Based on these figures you have to think that Coles is slightly underpriced to its major competitor but is still overpriced based on conventional fundamental techniques.

I suspect analysts are expecting Coles and Woolworths to continue to make profits from the alcohol and petrol stores. They may also be gaining a slight market share from some independent grocers. They could also expect that the companies might get into the pharmacy business which could offer a large growth area. Inflation might also add 4%-5% to the EPS but truthfully I think these estimates are too high. Yes Coles and Woolworths are good companies but you need to get them at a much lower PE ratio if you expect to make a good gain ( double figures in percentage points) you need to get them at a reasonable price.

Good Luck Investing.

Fairfax Record first half profit

Fairfax Media Limited ( ASX:FXJ) has produced a stunning result by reaching $1 billion in its first half year profit. The results were strong except for a poor result in advertising revenue from New South Wales.

The Chief Executive Officer (CEO), David Kirk, informed the market that there had been a great fluctuation in advertising revenues between the different states. He also comment on rumours that Fairfax had received takeover approaches. He denied that they had been in talks with anyone but did mention that the business was very interested in moving into regional radio.

Within the last two years, permanent costs have been reduced by $44 million. The Age building is also up for sale with a potential price tag of $60 million.

This result shows upper management finally making some nice gains for their hard work. In particular I was impressed with the reduction in costs. I was also impressed at the diversity of the company where they were still able to make a record first half profit despite a poor result from NSW advertising revenues.

Fairfax is currently sitting on a PE ratio of 20 with a dividend yield of 4%. Analysts expect profit to grow in the next two years to 29 cps compared to the current 24 cps. There is a built in premium to this share as it is a potential takeover target and it has a good management operating the business. They are positioned well for the future and if you can pick them up at a PE around 15 you will be getting a good business at a reasonable price. A price earnings ratio of 15 would require a share price of $3.60. Using the future estimated EPS for next year of 27c the PE ratio of 15 would require a share price of $4.05. Still a long way off from the current share price of $5.00

Good Luck Investing.

Amcom admits to talks with Telecom NZ

As I reported earlier Telecom Corporation of New Zealand Limited (ASX:TEL) has been on the acquisition hunt with the cash they are expecting to receive from their sale of the New Zealand Yellow Pages business. Amcom Telecommunications Limited (ASX:AMM) has admitted that they have had discussions with Telecom Corporation of New Zealand (NZ).
The small Western Australian telco confirmed that industry rationalisation had been discussed with the NZ group. Acquisition of Amcom would give Telecom NZ a controlling stake in Internet service provider, iiNet, as well. This is indeed an added bonus on this purchase. However, any deal will depend on rural company, Futuris Corporation Limited (ASX:FCL), which holds a 47 per cent stake in Amcom. Telecom NZ has also made a $A320 million bid for PowerTel Limited (ASX:PWT).

As I have said earlier I think this could be a good buy for Telecom NZ. The more I think about this deal the more I like it. I think getting iiNet thrown in will be a short term cash earner. Telecom NZ has not had to take the major risk of turning iiNet around (it is slowly happening) as it is a more stable company today then it was several months ago. My preference (and probably Telecom NZ's management) would be to wait till iiNet builds up their subscriber base again and then sell it to a competitor. I don't think Telecom NZ want to be in the business of an Australian Internet provider.

Overall Telecom NZ's management has done well in the face of regulatory issues and is building value for its shareholders. As a longer term share I am wary that further regulatory problems could arise so I don't think it is a great buy at the moment.

Good Luck Investing.

Monday, February 12, 2007

Uranimum mine more than 5 years off ....

Experts are estimating that the next uranium mine in Australia will take five to seven years to bring into production. Greg Hall, managing director of Toro Energy Limited (ASX:TOE) and a former mine manager at Ranger and Olympic Dam, believes the Australian Labor Party will reject its three-mines policy at its national conference in April 2007, and this will clear the way for a resurgence of uranium exploration activity around Australia. He said additional requirements from China and India would ensure continuing global demand for uranium.

Uranium is the hot stock at the moment and companies that are even mildly associated with it are taking off. Definitely a place for the contrarian fundamental investor to be cautious.

Toro Energy is focused on Uranium Exploration in South Australia. The Companys tenement interests cover in excess of 26,000 square kilometres in the Gawler and Curnamona Cratons. Projects include Kingoonya Project, Narlaby Project, Yaninee Project, Roxby - Acropolis Project, Pandurra Project, Mount Woods - Warriner Creek Project, Radium Hill - Bonython Hill Project, Lake Frome Project and Nonning Project.

It is always a place for speculators though and every investor may want to speculate now and then.

Good Luck Investing.

McGuigan Simeon Wines using muscle

It seems like McGuigan Simeon Wines Limited (ASX:MGW) want the best of both worlds. Allegations that McGuigan Simeon Wines may have taken advantage of its market position are continuing to be investigated. By 12 February 2007 the Australian Competition & Consumer Commission (ACCC) had interviewed dozens of winegrowers.

Relations between the company and growers have been rocky since early 2006 when it suspended supplier contracts due to an oversupply of grapes. Now the impact of the drought has reversed the situation and McGuigan has demanded the suppliers provide grapes under the contracts. The rub is that spot market grape buyers are paying around $A400 per tonne and McGuigan is offering only $A200 per tonne.

The ACCC action is seen as the last hope for grapegrowers to combat the supply and cost imposition.

What does this mean for investors ? Well if McGuigan get there way then they will be able to increase profit margins but if they don't it could be very costly to them. One thing management shouldn't do is burn your suppliers.

McGuigan is overpriced on any future earnings. Given that management is also creating poor relations with suppliers I would stay clear of the company.

Good Luck Investing.

Thursday, February 08, 2007

Tax changes cause concern for some shares

You will have surely heard already about the tax changes for non-agricultural schemes. If not I have added an excerpt below :

The ending of tax concessions for Australian agricultural schemes has angered MPs and the agribusiness industry. The Federal Government has decided that the Australian Taxation Office (ATO) can cease lucrative tax deductions for the managed investment schemes. The ATO will be allowed to run a test case against the industry. There will be no transitional arrangements to allow restructuring, leading to predictions of job losses. The announcement prompted investors to desert the sector, with the three largest listed schemes losing over $A400 million in value on 7 February 200
This is affecting some of the major players which have alternative investment schemes. Another quote on the shares affected is below :

The Australian Government's decision against non-forestry managed investment chemes (MIS) has caused the shares of several companies to fall. Both Great Southern Plantations and Timbercorp shares dropped sharply in response to the withdrawal of tax concessions on 7 February 2007. Great Southern closed $A0.34 lower at $A2.19 and Timbercorp plummeted $A0.77 to $A1.94. Non-forestry products, including wine grapes, olives and cattle, constitute up to 30% of Great Southern's sales. Companies that use MISs for forestry-related enterprises have not suffered
I have never said that Great Southern Plantations Limited (ASX:GTP) or TimberCorp (ASX:TIM) were good selections as they have always been overpriced compared to their peers in a very competitive marketplace. I have on the other hand considered Forest Enterprises Australia Limited (ASX:FEA) and TFS Corporation Limited (ASX:TFC) as excellent buys. Both of these stocks have performed well due to the undervalued nature of the investments. TFS is uniquely positioned in a profitable niche market that should guarantee success. The only issue I can see is that their location makes them prone to cyclone damage.

Still I have to think the government has the right idea here. People do not understand what they are doing when they invest in these schemes in the hope of saving some tax. While I don't see cattle or grapes as a terrible investment I do see olive farming as purely horrendous.

So lets look at this from a fundamental perspective. How can we make a profitable opportunity out of this ? Firstly stay away from those companies that are focused on olive farming, cattle and grapes. That's easy. But where is the profitable position that can arise from this ? To find the profitable position we need to see where these products were used. The easiest ones are cattle and grapes.

Cattle are sold for meat and thus less people investing in these forms of investment will push up meat prices again (and the drought will also help with this). If you can find a company that uses and sells cattle. Graincorp Limited (ASX:GNC) is one example but it is overpriced at the moment. We need to also find a sector which is depressed.

Grapes are used mainly for wine. The wine industry has recently been struck by a glut of grapes causing unprofitable situations. This should now start to be relieved and we should see the wine companies coming into a boom time in the next few years. This sector is currently depressed so we should be able to get a bargain. Take a look around and see what you can find , you may even find those companies providing services to the wine makers are at a bargain price. One that comes to mind is Challenger Wine Trust (ASX:CWT).
Good Luck Investing.

Telecom NZ on the prowl

Telecom New Zealand Limited (ASX:TEL) is rumoured to be negotiating a takeover with Amcom Telecommunications Limited (ASX:AMM), which would also net it iiNet. The speculation is that unofficial discussions have been occurring on an $A80 million deal since December 2006. A further rumour says Telecom NZ will purchase PowerTel (ASX:PWT), but the Amcom deal is seen as more likely. Telecom NZ does not need to rush any takeovers, as it anticipates $A2 billion in June 2007 from the sale of its directories business.

This could be a win/win situation for Telecom New Zealand. They are selling out of the directory business at a great price and they may be able to pick up a profitable company (Amcom) at a reduced price. Amcom is sitting on a price earnings ratio of 13 at the moment but this is sure to shoot up today given the speculation.

Telecom NZ itself is sitting on a deflated price earnings of 13 due to thoughts it has limited growth potential. It doesn't help that its debt, while reducing, is very large. The high debt puts any investment into this company risky.

Good Luck Investing.

Wednesday, February 07, 2007

BHP Record profit - I picked it weeks ago.

BHP Billiton Ltd (ASX:BHP) has reported a record first-half profit of $6.17 billion. It has also stated that it expects China to continue to drive global demand for commodities.

Net profit was up 41.3% on the $4.36 billion posted for the same period the previous year. Strong demand, high commodity prices and solid production had allowed it to achieve record results in all key earnings measures.

You can probably include India as another place that will continue to drive the demand for BHP Billiton commodities. BHP Billiton has been on a low P/E yield recently and this has driven the price higher as it should from a top notch company.

It has risen more than 15% in recent weeks as it should. At its lowest point it was sitting on a PE ratio of around 8 times earnings. Check out my recent post on BHP and check the date and price. The article is available at http://asx-investing.blogspot.com/2007/01/bhp-set-to-rise.html or try using he link in the side menu for all posts on BHP.

You will notice in my recent article that I saw BHP as a fundamentally sound company at a good price. I also said "I believe (BHP Billiton) is set to take a substaial move in the right direction."

Good Luck Investing.

Carnival Time again

Here is another carnival with great ideas for investing.

Good Luck Investing.

Portfolio update

There has been some significant movement in some of the shares of the portfolio so I thought I better update the current position.

Positions Changed:


Current Position:

RHD Bought at 65c now trading at 76c for a PROFIT of 11c (17%)
SCV Bought at 80c now trading at 82c for PROFIT of 2c (2.5%)
FEA Bought at 63c now trading at 81c for a PROFIT of 18c (28%)
CKL Bought at 59c now trading at 53c for LOSS of 6c (11%)
MCP Bought at $2.65 now trading at $3.05 for a PROFIT of 40c (15%)
ASU Bought at 3.3c now trading at 3.3c for BREAKEVEN (0%)


Cash : $51,066
RHD : $11,992
SCV : $10,250
FEA : $12,857
CKL : $ 8,983
MCP : $11,509
ASU : $10,000

Total : $116,657

Monthly Performance

Month 1: Profit of $4,688. Annualised this is a gain of 56%.
Month 2: Profit of $6,844. Annualised this is a gain of 78%.
Month 3: Profit of $5,125. Annualised this is a gain of 61%.

Closed Trades :

ITD Bought at 41.5c SOLD at 57.5c for a PROFIT of 16c (38%)
AVE Bought at $2.19 SOLD at $2.65 for a PROFIT of 46c (21%)
MPH Bought at $0.225 SOLD at $0.34 for a PROFIT of 11.5c (51%)


I am very skeptical of this as I am finding it harder and harder to find profitable positions. Whenever I feel I have found one these days it has just moved to far before I can enter. For example I was looking at entering IMD earlier this week and it has moved 10% since I started looking into it.

Good Luck Investing.

Tuesday, February 06, 2007


Now that you have read some interesting articles from my own site, why not go and read some great articles from the carnival of investing. Once again I have an article featured in this interesting social idea.

This edition features some interesting articles on:

  • Investing with a low budget
  • Asset allocation
  • Portfolio rebalancing
  • Dividend investment
  • Plus many more stock analysis articles
Good Luck Investing

Sunday, February 04, 2007

Analysis of Shares from 10c - 20c with a Price to Earnings ratio under 10

Topic Discussion

This is the second article in a series of articles that give my quick perspective on a number of stocks. They will be very brief but hopefully I give you a quick rundown on the stocks and why I would or would not look further into them.

The only criteria is that the stocks need to have a PE or 10 or less.

ASX:BPK - Bremer Park Limited - This company focuses on the manufacture of timber products. it is going through tough times and I see no reason they can turn this around. Decision : Not worth looking into further.

ASX:TMR - Tamaya Resources Limited - This company is is an Australian mining company primarily involved in the production of copper and gold in Chile. They are burning through some cash flow but they are also making some earnings. Resource stocks are always risky and this stock is no exception. It is a possible takeover target for its assets but this is not a reason to buy the company. Decision : Not worth looking into further.

ASX:COM - Comops Limited - This company makes its money from the licensing of the five software products owned and developed by COM and to provide professional and support services to new and existing customers. It is sitting near its year high at the moment yet is still sitting on a P/E ratio of 5.5 This stock got my interest but after reviewing the quarterly report I have a few questions about it. The most important is that the company has dramatically increased staff costs but has not increased revenue. Decision : Wait and see if Revenue Increases or staff costs are reduced before analysing further.

ASX:EZE - Ezenet Limited - This companies aim is to develop and supply digital movie services to the hospitality and mining industries in Australia. They have recently became cashflow positive (before capital expenditure) and it is increasing every quarter. They have a strong pipeline of work according to management. While the company looks like they are on track they are more than likely not going to match the profit from last year. Decision: Wait for profit guidance or report before deciding on valuation.

ASX:AIG - Aircruising Australia Limited - This company operates special interest tour programmes under the Bill Peach Journeys brand, both within Australia and to other global regions. The tour programs are separated into three categories: Air cruising, Australian Expeditions and Rail Cruises Australia. The tour programs are targeted at small groups, with all tours including accommodation and meals. They are currently going through tough times but they have been able to increase NTA backing and profits. Management seem to be confident in the company after reading the reports. Decision: Wait for profit guidance or report before deciding on valuation.

ASX:RPC - Repcol Limited - This company is a specialist manager and purchaser of debt ledgers acquired from Australian credit providers. The company provides an end- to- end service with operations in Perth, Brisbane and Bangalore, India. RPCs competitive advantage is its low cost business model with operations ramping up in Bangalore, India. They will be making a loss this year hence the decline in its price. But it has gone about restructuring the business and expect an increase in profit in future years. This stock has declined from 70c to 12c. Decision : Wait to see if restructure has fixed costs before analysing further.

Well that is a few more shares covered but unfortunately there were no possible buys found in this range. There were a number of "wait and see's" though and those that like to gamble might take a stake in those companies. Personally though I like to make sure the company is sound before I buy into a company.

Good Luck Investing

Saturday, February 03, 2007

Positions Update Early February.

Time for an update this month.

Positions Changed:

I have sold out of MPH at the current closing price.
I have bought into ASU at 3.3c for $10,000.

Current Position:

RHD Bought at 65c now trading at 77c for a PROFIT of 12c (18%)
SCV Bought at 80c now trading at 80c for BREAKEVEN (0%)
FEA Bought at 63c now trading at 77c for a PROFIT of 14c (22%)
CKL Bought at 59c now trading at 54c for LOSS of 5c (-9%)
MCP Bought at $2.65 now trading at $2.89 for a PROFIT of 24c (9%)
MPH Bought at $0.225 now trading at $0.29 for a PROFIT of 6.5c (28.8%) -- SOLD
ASU Bought at 3.3c now trading at 3.3c for BREAKEVEN (0%)

Cash : $51,066
RHD : $11,846
SCV : $10,000
FEA : $12,222
CKL : $ 9,152
MCP : $10,905
ASU : $10,000

Total : $115, 191

Month 1: Profit of $4,688. Annualised this is a gain of 56%.
Month 2: Profit of $6,844. Annualised this is a gain of 78%.
Month 3: Profit of $3,659. Annualised this is a gain of 43%.

Closed Trades :
ITD Bought at 41.5c SOLD at 57.5c for a PROFIT of 16c (38%)
AVE Bought at $2.19 SOLD at $2.65 for a PROFIT of 46c (21%)
MPH Bought at $0.225 SOLD at $0.34 for a PROFIT of 11.5c (51%)


WOW ... I can't believe the run I am having this year, if it keeps at this pace I will return a result of approx 60% this year. I am very skeptical of this as I am finding it harder and harder to find profitable positions.

Good Luck Investing.

Friday, February 02, 2007

End of January - Portfolio update

Well time for the monthly update for January. How did we go ? Its an impressive result if you ask me especially considering only 60% of the available money is invested.

End Of Jan Position:

RHD Bought at 65c now trading at 73c for a PROFIT of 8c (12.3%)
SCV Bought at 80c now trading at 80c for BREAKEVEN (0%)
FEA Bought at 63c now trading at 73.5c for a PROFIT of 10.5c (16.6%)
CKL Bought at 59c now trading at 54c for LOSS of 5c (-9%)
MCP Bought at $2.65 now trading at $2.82 for a PROFIT of 17c (6.4c%)
MPH Bought at $0.225 now trading at $0.29 for a PROFIT of 6.5c (28.8%)

Cash : $45,955
RHD : $11,230
SCV : $10,000
FEA : $11,666
CKL : $ 9,152
MCP : $10,641
MPH: $12,888

Total : $111, 532

Month 1: Profit of $4,688. Annualised this is a gain of 56%.
Month 2: Profit of $6,844. Annualised this is a gain of 78%.

Closed Trades :
ITD Bought at 41.5c SOLD at 57.5c for a PROFIT of 16c (38%)
AVE Bought at $2.19 SOLD at $2.65 for a PROFIT of 46c (21%)

The return this year is 11.5% for this portfolio. Still I stress that there is not many shares to buy which may mean that the portfolio could become stagnant in the next few months while I am searching for undervalued shares. I will also post an updated version of this for Feb this weekend as I have decided to sell out of MPH at the current price.

I should also have bought into PBA but forgot to add it to the portfolio on the day. I won't be adding it at the current price but I am happy to say it is in my portfolio of stocks that I currently hold.

Good Luck Investing.

Thursday, February 01, 2007


I bought PeopleBank Australia Limited (ASX:PBA) today after some research last night. I spotted it due to its dramatic fall in the last few days and its subsequent rebound. There was also a good review on Grow your Egg which follows:

Peoplebank (ASX: PBA) is a technology contracting and placement company which
has been listed for around a year. Its share price was near an all time high and
there was no warning of bad news to come. It announced yesterday that because of
changes in product mix, its performance for 1H 2007 would be impacted. The
announcement was a little light on detail and the stock got hammered. They were
forced to put out a second announcement which tried to reassure the market that
they were still on track as a solid growth company.

The company is is engaged in the provision of information technology and telecommunications (IT&T) contracting and recruitment services. Contracting services represented 97% of the Company's revenue during the fiscal year ended June 30, 2006 (fiscal 2006). These services entail the provision of IT&T contractors to the Company's clients under labor hire contracts for an average length of 3 to 6 months. Typically these contracts are renewed depending on the length of the IT Project, with many contractors remaining with the same client for 18 to 36 months. Recruitment services, being the traditional placing of permanent staff with clients for a placement fee, represented 3% of the Company's revenue in fiscal 2006.

There were some interesting statements in the second announcement which included :
  • The primary contracting business grew approximately 15% in the 6 months to 31 December 2006 with a very high quality customer profile.

  • The combined NPAT as a result is expected to be about $1.85 million, 5% less than comparative 31 December 2005. (Yet the share price fell 30%. Overreaction ... you decide!!!!)

  • Projections are for a stronger second half of the fiscal year.

  • Director forecasts and market conditions indicate full year profit results will be ahead of last year.

  • Peoplebank has a strong balance sheet, and anticipates no changes to its dividend policies. (Dividend yeild is 4.9% fully franked)

  • Peoplebank considers itself very well positioned within its industry and is actively pursuing opportunities.

  • The Directors confidently consider Peoplebank to be a growth stock and are committed to delivering quality earnings to shareholders.

Along with the low P/E of 11.5 at this level. Its earning growth last year was 20% and while I expect it to be a lower increase this year I still expect it to continue to grow for future years.

My initial stock price target for this stock is around $1.50. When it hits this level I will reevalue my holdings.

Good Luck Investing.