Economic Rigor

Been looking at the technical indicators of cab Charge after my ROC checker identified it as possible buy. It has certainly dropped a lot of value so quite a few technical indicators are pointing that it might be undervalued. Firstly, the Bollinger bands...the price is cutting through the bottom band which is usually a buy signal. Then there is the MACD. I have calculated that when the MACD goes through the signal line on the up at any level below -0.2, that is a buy signal. Not quite there, but close. Definitely a watch this space...

Been reading in the press about Freelancer, the short term project resourcing site owned by Matt Barrie. Apparently there is talk that he turned down a $400 million dollar offer to sell from a " Japanese recruitment company". Somehow, I find that hard to believe. Lets look at it from a valuation model. According to the Afr today, the site has turned over $1.2 billion in project costs from 2004. So that is roughly $133 million a year. But the site only sees around 3% of that figure, so revenue per year of the site is actually $4 million a year. Now if we assume the same Ebitda margin as a comparable site, say carsales.com.au of 56%, that leaves us with an ebitda per year of around $2.2 million. Now car sales has a market capitalization of around $2.7 billion, so is trading at a multiple of around 22 times ebitda. If we assume the same multiple, that takes us to a valuation of $50 million, a lot smaller than that $400 million figure that was bandied about. Even if we as...

Been looking at the Australian Internet stocks and their comparative performance over the last three years. Everyone always talks about Telstra and TPG being market darlings, but really it is M2 Communications and iinet that are outperforming, at over 3 times the gains of the ASX200. You would have done well investing in those stocks from 2010!

Still can't believe why Austbrokers (AUB.AX) is neglected by investors. Great final year results (increases in dividends, revenues and profits) and the initial response on the shareprice is to sell??? Sanity prevailed at the end of the session though, when the shareprice went back up to $11.05 (around a 0.35% gain for the day) I still think the price is under what it should be however. According to the offered growth predictions of between 5-10%, I think the price should be around $11.80 (so I think it is trading at a 6% discount or so at the moment). Maybe it is the miniscule dividend yield of 3.2% that is scaring people away. But always remember that a dollar of dividend is exactly the same as a dollar of capital gain. Anyway, the usual disclaimer applies (Not a recommendation to invest/not invest in Austbrokers. Please talk to your financial advisors etc)

Been running the ruler over the FairFax Media results which were released yesterday...still not great. Big problems regarding the revenue at the moment, so much so that I think there is some earnings management going on. Firstly, the 2012 revenues were restated 4% lower (from the original 2.3 billion to 2.1 billion). Secondly, they decided to change the circulation revenue reporting from net (with distribution costs included) to gross, with distribution costs in the Expenses. Not a good look. I think there is a fair bit of pressure for the company to meet their revenue targets. I wonder why companies do this sort of earnings management, as it all is revealed in the cash flow anyway. Cash flow from operations dropped 30% over the year. No joy in regards to making it's cost of capital. I calculated the cost of capital of Fairfax to be around 9% and that is not being hit at the moment. But most of this is already piced in. Currently, I have a pice target of 63 cents a s...

Been looking at the ASX200 index which is currently sitting on 5100 and wondering if it is due for a correction. There does appear to be some indicators that are pointing to a downward movement for the asx200 in the near future First, my Gordon growth model formula. Using the figures from the 1st of August, and the current RBA growth measure of 2.25%, I have the ASX200 at 4880. Secondly, the P/E ratio. According to the RBA, this is at 17.2 for July. Based of the 2.5 year historical average of P/E of 15, again it looks over bought. Lastly, looking at the technical indicators. These aren't two bad, but the price is above the 20 day and 60 day averages, the ROC has just jumped below 100, RSI is heading down, price is at the middle of the bollinger bands and the oscillators are around 50 and heading down. Wouldn't take much for a movement down in my opinion. Disclaimer : Not a recommendation, just an observation. In you want to invest, please see a Financial Advisor...