Another bumper result from David Teoh and his merry men at TPG.
15% growth in EPS, is smack dead on the sustainable growth ratio (with 37% as the new DPO..it was 26%) and an ROE of 24% (Remember the formula for sustainable growth = (1-DPO)*ROE)
Just goes to show how much of a cash machine this business is. Barely any debt and loads of dosh. And management consistently meet their targets. Who cares if David Teoh controls everything. He is the Rupert Murdoch of Broadband!
After the annual report was published in 2013, I was tempted to buy into this company as it appeared it was heavily undervalued. I actually had a price target of around $9 on it...as it's return on equity was around 24% and it's cost of equity (using CAPM) was only 9%...And this was when it was trading at $4.30!
Price is now at $6 and I think the cost of equity has risen a bit. Still, might still be worth while buying in before the end of the financial year. Still, I could be wrong.
NOTE: Not a recommendation for people to buy/not buy TPG stock. Please see your financial advisor.
Wednesday, March 26, 2014
Tuesday, March 25, 2014
Premier Investments - A little too much Smiggling for mine
Premier Investments gave their half yearly results today...a pretty good effort, growing their sales quite well. Congrats to Mcinnes and all the kids.
However, I do wonder about their strategy to expand into the UK using their Smiggle brand, which is the sale of Stationary.
If you look at the results, Smiggle is actually one of the more under performing brands, by store
The order of performing brands is as follows
1. Peter Alexander (sales - 990,000 per store for the half year)
2. Portmans (571,000 per store)
3. Dotti (528,000 per store)
4. Just Jeans (432,000 per store)
5. Jay Jays (400,000 per store)
6. Smiggle (398,000 per store)
7. Jacqui-e (364,000 per store)
So it just strikes me as a waste to go hard on Smiggle in the UK, when Peter Alexander would probably be a better fit. Sleepwear would be a bigger market and would be more profitable in my opinion.
However, I do wonder about their strategy to expand into the UK using their Smiggle brand, which is the sale of Stationary.
If you look at the results, Smiggle is actually one of the more under performing brands, by store
The order of performing brands is as follows
1. Peter Alexander (sales - 990,000 per store for the half year)
2. Portmans (571,000 per store)
3. Dotti (528,000 per store)
4. Just Jeans (432,000 per store)
5. Jay Jays (400,000 per store)
6. Smiggle (398,000 per store)
7. Jacqui-e (364,000 per store)
So it just strikes me as a waste to go hard on Smiggle in the UK, when Peter Alexander would probably be a better fit. Sleepwear would be a bigger market and would be more profitable in my opinion.
Thursday, March 20, 2014
Myer Total Debt/Equity ratio....now close to 3!
Myer results came out today. Pretty underwealming, especially compared to DJ's, its main competitor.
One thing that stands out is that DJ's 38 stores are better at raising revenue than Myers 66 stores...Dj per store revenue is $26.9 million for the half, vs Myers $21.9 million for the half.
And then we get to debt. When you include DJ's non-cancellable operating leases (discounted at 4.4% interest rate) of $1.1 billion to the on-balance sheet debt of $45 million, you get total debt of $1.15 billion. Equity for DJ's is $840 million, leading to a Debt to Equity ratio of 1.37. Not bad
But Myer's non-cancellable operating leases (discounted at 4.2% interest rate) is equal to $2.5 billion. Add on the balance sheet debt of $306 million and you get a total of $2.8 billion! Huge. On an equity total of $938 million, that gives you a debt/equity ratio of 2.9!!!
Maybe that is the real reason why Myer wants to merge with David Jones!
One thing that stands out is that DJ's 38 stores are better at raising revenue than Myers 66 stores...Dj per store revenue is $26.9 million for the half, vs Myers $21.9 million for the half.
And then we get to debt. When you include DJ's non-cancellable operating leases (discounted at 4.4% interest rate) of $1.1 billion to the on-balance sheet debt of $45 million, you get total debt of $1.15 billion. Equity for DJ's is $840 million, leading to a Debt to Equity ratio of 1.37. Not bad
But Myer's non-cancellable operating leases (discounted at 4.2% interest rate) is equal to $2.5 billion. Add on the balance sheet debt of $306 million and you get a total of $2.8 billion! Huge. On an equity total of $938 million, that gives you a debt/equity ratio of 2.9!!!
Maybe that is the real reason why Myer wants to merge with David Jones!
The ABC of wages
With the election of the co-alition government, there has been a focus on Government spending. One of the main focus has been the Government spending on the ABC. I wonder whether the wages bill of the ABC has gone out of control.
So I have crunched the numbers since 2007 (or 6 years).
We have Government Funding growing at around 2% a year during that time, which isn't too crazy. However over that time, the average wage of the FTE (wages bill divided by number of FTE's) has gone from $79,074 to $102,372, an increase of 4.4% a year, far in excess of inflation.
Seems like the ABC could do with some wage restraint. Turn off the tap in my opinion!
So I have crunched the numbers since 2007 (or 6 years).
We have Government Funding growing at around 2% a year during that time, which isn't too crazy. However over that time, the average wage of the FTE (wages bill divided by number of FTE's) has gone from $79,074 to $102,372, an increase of 4.4% a year, far in excess of inflation.
Seems like the ABC could do with some wage restraint. Turn off the tap in my opinion!
Wednesday, March 19, 2014
Virgin Australian debt - Now at 4.8 Billion!
After calculating the Qantas debt, I thought it was time to try and calculate the Virgin Australia total debt, including non-cancellable operating leases. Looks a bit worse than the Qantas story to be fair.
Firstly, we have on-balance sheet debt of $2.15 billion. No dramas there. But buried deep in the 2013 annual report (no mention in the half yearly 2104) we have $3 billion in non-cancellable operating leases. Discounting at the Virgin Australia weighted cost of debt (at 3.3%) brings us to a value of 2.7 billion
So that brings us to a total debt of $4.85 billion. Now you think that is better than Qantas, which it is in value. However Qantas at least has $5.6 billion in Equity to back up it's 8.7 billion in debt (a Debt/Equity ratio of 1.53)
Virgin has an equity value of $1.04 billion...leaving it's Debt to Equity ratio at 4.69!
There is a real danger of Virgin sinking into the mire...no wonder Richard Branson is making noise. Virgin Australia is heavily leveraged. They better start making profits...and soon.
Firstly, we have on-balance sheet debt of $2.15 billion. No dramas there. But buried deep in the 2013 annual report (no mention in the half yearly 2104) we have $3 billion in non-cancellable operating leases. Discounting at the Virgin Australia weighted cost of debt (at 3.3%) brings us to a value of 2.7 billion
So that brings us to a total debt of $4.85 billion. Now you think that is better than Qantas, which it is in value. However Qantas at least has $5.6 billion in Equity to back up it's 8.7 billion in debt (a Debt/Equity ratio of 1.53)
Virgin has an equity value of $1.04 billion...leaving it's Debt to Equity ratio at 4.69!
There is a real danger of Virgin sinking into the mire...no wonder Richard Branson is making noise. Virgin Australia is heavily leveraged. They better start making profits...and soon.
Thursday, March 13, 2014
The KIIS of life - Kyle and Jackie O's $8 million dollar gift to 106.5
Read with interest the first radio ratings of 2014 for the Sydney Metropolitan area and the effect of Kyle and Jackie O's defection from 2DAY FM to KIIS. Was a huge result for KIIS with the ratings going from a 4.9% share to an 8.8% share, mainly due to the increase in Breakfast listener's. And I was wondering, what sort of money might that bring into ARN, the owners of KIIS.
Firstly, according to the the Commercial Radio Network statistics, the NSW Metropolitan Radio advertising market was worth $209 million in the year 2012/2013. Not bad for an industry that gets a lot of flack for being outdated.
Secondly if we assume that the advertising is dependent on the share of ratings, we have KIIS originally getting 4.9% of that share, which works out to be around $10.3 million a year.
Provided Kyle and Jackie keep their audience over the year, the increase in market share to 8.8% means that KIIS's share of revenue is now $18.5 million. That's $8.2 million coming into the company coffers, based on grabbing the high profile crew.
Even if the company is paying out $2 million to the presenters, and $1 million in production costs, that still means a nice profit of $5 million or so for the recruitment, which is a real coup for the Australian Radio Network. Well played.
Firstly, according to the the Commercial Radio Network statistics, the NSW Metropolitan Radio advertising market was worth $209 million in the year 2012/2013. Not bad for an industry that gets a lot of flack for being outdated.
Secondly if we assume that the advertising is dependent on the share of ratings, we have KIIS originally getting 4.9% of that share, which works out to be around $10.3 million a year.
Provided Kyle and Jackie keep their audience over the year, the increase in market share to 8.8% means that KIIS's share of revenue is now $18.5 million. That's $8.2 million coming into the company coffers, based on grabbing the high profile crew.
Even if the company is paying out $2 million to the presenters, and $1 million in production costs, that still means a nice profit of $5 million or so for the recruitment, which is a real coup for the Australian Radio Network. Well played.
Wednesday, March 12, 2014
Qantas total debt...now at $8.7 billion. Definitely not $12 Billion
Was reading Plane Talking, the usually reasonable aviation blog on Crikey and hit an article that mentioned Qantas was $12 billion in debt. A bit high I thought, so I crunched the numbers from the half yearly figures.
Firstly, we have on balance sheet debt of $6.2 billion. No dramas.
Secondly, we have non-cancellable Operating Leases, (which are debt by any other name) of around $3 billion. Now the usual method of accounting for the Operating leases is to discount them to Present Value at the Cost of debt Capital. Using the Qantas costs of debt capital of 7%, it turns out the 3 billion is more like $2.5 billion.
So that leaves us a total of $8.7 billion. High, but not crazy high
Firstly, we have on balance sheet debt of $6.2 billion. No dramas.
Secondly, we have non-cancellable Operating Leases, (which are debt by any other name) of around $3 billion. Now the usual method of accounting for the Operating leases is to discount them to Present Value at the Cost of debt Capital. Using the Qantas costs of debt capital of 7%, it turns out the 3 billion is more like $2.5 billion.
So that leaves us a total of $8.7 billion. High, but not crazy high
Monday, March 3, 2014
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