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By David Press on
3/8/2012 8:04 AM
Some say change is like a holiday, however given my last 18 months or so, I can comfortably say a good long holiday will bring about just as much change. Having spent 6 months backpacking and skiing the alps of Western and Eastern Europe, then settling back into life in London and a job in one of the worlds largest and most infamous investment banks, I'm now back to sunny old Australia and a very different life/career indeed.
Thankfully my passion for investment hasn't changed in any way, meaning it was only a matter of time until I started sharing my views on this site again. An awful lot has happened in the time I was away, with the companies I follow having their up's and down's, as we have come to expect post the GFC. Highlights include some very strong profits on Maverick Drilling (MAD) which we have held for some time now (although we have now exited), strong performance from Hansen Technologies (HSN) and the continued strong operational performance of the Nick Scali Group...
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By David Press on
4/5/2011 8:26 PM
Having read QBE's ( QBE-ASX) AGM presentation today, I have to say that I feel pretty comfortable with my decision to hold and buy more of this stock in the last 12 months or so. Despite the fact the share price has underperformed significantly compared to the overall market, the underlying performance of the insurance business has been quite strong, giving me the feeling that at current share prices, this company ticks the boxes of a quality value investment.
To understand why I think QBE offers good value, you need to understand the business and how they derive a profit. To put it simply, QBE derives income from two main sources. The first is the insurance profit they make on writing insurance, that is, the difference between insurance premiums received and insurance claims...
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By David Press on
3/8/2011 4:10 PM
Having made my way through a number of half yearly reports in recent weeks, Hansen Technologies Ltd's ( HSN-ASX) performance is a real stand out and sets the company up for a fantastic full year result.
I discussed Hansen in the latter part of 2010 ( blog here) and formed the opinion that the company looked to be trading at a slight discount to it's intrinsic value. Having continued my research into the roll out of smart meters in the US and the technology required, I felt that due to Hansen's product and service offerings and market position in the US (particularly after the NirvanaSoft acquisition), the company was poised for strong growth in coming years. With an exceptionally strong balance sheet and apparently very capable management team, I took my first position in HSN in the low to mid 70c range. ...
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By David Press on
2/6/2011 8:22 PM
Earnings before interest, tax, depreciation and amortisation (EBITDA) is a very common measure used by many listed companies in their earnings reports, guidance announcements and other public announcements (often in reference to mergers and acquisitions made as well as divestment). Analysts and investors also use the measure in a variety of ways in their analysis of both private and public companies in order to make investment decisions. Although it certainly has it's place, particularly when used as a measure of a companies ability to finance debt (debt coverage ratio), I am always concerned by the overuse and misuse of it as a measure by investors, leading to miscalculation of a company's worth and potential loss.
The major risk associated with long term investors using EBITDA as a measure of cash flow, is that in reality, tax and interest (assuming...
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By David Press on
1/19/2011 10:07 PM
Strike Energy ( STX-ASX) announced early this week, the sale of a number of their onshore gas producing assets in the USA for $21.7 USD. This strategic move comes as little surprise to those who paid particular attention to the company's AGM presentation, at which the management team hinted at a change in the company's strategy. Managing director, Simon Ashton, believes the sale now gives Strike Energy a 'war chest' of cash to explore it's high impact US and Australian targets and is a clear indication that STX's management prefer to unlock value than dilute share holders holdings with capital raising into low share prices.
According to Strike's public announcement, the sale of their Rayburn and Mesquite interests has netted the company $21.7m USD and equates to $2.63 USD per Mcfe of 1P reserves. The cash will be used to pay down existing debt ($5.8m USD) and close the remaining open hedging positions. The net result will leave STX with cash of just over $20m on the balance sheet, and exposure to their remaining interests, the recent Louise discovery, Steindorf (to be tested early February) and the suspended Muegge well. Additional to the existing and developing US assets, Strike Energy have large prospective CSG acreage in the Southern Cooper Basin and the FutureGas project, as well as their offshore Baniyas project in the north of WA. At a market capitalisation of around $60m at current share prices, it would appear STX offers investors large potential upside with limited downside risk. ...
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By David Press on
12/7/2010 2:35 AM
Having published a number of blogs of late mentioning Return on Equity (ROE) and intrinsic valuations ( HSN and DDT, I thought it a good idea to briefly discuss why we are using ROE as a key measurement of performance.
It revolves around the quite simple notion that a rational investor should desire an adequate return on the money they have invested, to make up for the additional risk they take by investing in a business. The ROE figure reveals the return management have achieved on shareholder funds/capital/equity, and therefore gives a return on what you are...
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By David Press on
11/30/2010 11:28 PM
Management of companies generating strong cash flows, with a strong balance sheet are often left with the difficult task of maintaining growth without squandering shareholder equity in the way of overpriced acquisitions. BHP comes to mind when I think of such companies (one need only look at their attempted acquisitions of Rio Tinto and Potash Corp. of Saskatchewan Inc). Shareholders often desire the excess cash be distributed rather then see management pay excess sums for acquisitions, resulting in lower returns on their equity, and it often shows in share price weakness whenever such large scale announcements are made (NAB and BHP being recent examples). Hansen Technologies Limited appear to be a company who deal with this conundrum...
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By David Press on
11/15/2010 11:05 PM
Aptly named Bright Star Resources (BUT-ASX) is yet another basket case shell company turnaround with grand hopes on the back of a surging gold price. Formerly known as Tasman Goldfields, a management shake-out has resulted in the company now being in the hands of Warren and Geoffrey Gilmour of Andean Resources fame. With the Andean Resources phase now over (Andean was recently taken over by Canadian company Eldorado Gold Corporation), the Gilmours' have now moved onto Tasman Gold, and in line with their planned turnaround and hopefully bright future, they have re-named the company Bright Star Resources.
Since taking over management of the company, the team have moved swiftly to revitalise the company's direction. First steps included, recapitalising the company with a $5m raising and divestment, liquidation or release of non-core projects and leases....
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By David Press on
11/4/2010 4:34 AM
DataDot Technology Limited (DDT-ASX) may be a company many have not heard of, however I'd suggest anyone experiencing high levels of theft in their neighbourhood and or anyone with a taste for high ROE growth stories, should keep an eye on this small cap Australian company.
Thou shall not steal has been a commandment ignored by far too many for far too long, but it is from this that DataDot have developed a suite of property protection, identification and authentication products, most of which are covered by intellectual property laws. Their flagship product (which has been on the market for a number of years) is their DataDot technology. For those who haven't heard of the product, it is a microdot technology that is applied to items before, at or after purchase which provides the product with it own identity, somewhat similar to engraving the product. The obvious...
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By David Press on
9/5/2010 2:26 PM
Having had the pleasure of watching a fair few programs on the Sky network's business channel featuring Roger Montgomery, when I heard of his book I very quickly visited his website and made what I believe is a purchase many may find invaluable. His published book Value Able...
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By David Press on
7/6/2010 9:04 PM
Time is flying by and June 30th been and gone. As such I thought it fit to revisit the article I wrote at the start of the year discussing whether cash had overtaken equities as the investment of choice for 2010. While Europe's debt woes, the United State's slow recovery and China growth concerns have thrown oversize spanners in the works for equity investors (some may say these spanners only unlock great bargains), the effect on wholesale funding for banks has resulted in a continuation of great returns for cash investors, albeit at a slighter lower rate of return in some cases.
At the start of the year we were in the middle of a “perceived” rapid recovery with expectations of continuous rate rises and many an economist predicting a cash rate of 5% or more. Earnings too were expected by many to be on the rise, leaving many discussing whether to invest in cash or equities in 2010. It took only months however for the world economic concerns mentioned above to change the perceptions and expectations of must pundits. ...
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By David Press on
3/30/2010 12:39 PM
Benjamin Graham's The Intelligent Investor is as Warren Buffet puts it "by far the best book on investment ever written". The book, often referred to as an investment bible, explains the strategy of buying stocks priced below fair or intrinsic value and holding for the long term. It follows from his previous book titled Security Analysis, written with fellow author David Dodd. The basic principle behind value investing as explained by Graham, is that the market is not efficient and that it suffers wild fluctations which result in companies being grossly overvalued and incredibly undervalued depending on market moods. These "moods" are often referred to as "Mr Market" throughout the book.
In more recent editions (there have been several editions since it's first in 1949), there have been additional prefaces and footnotes, notably from Warren Buffett and Jason...
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