Peter Holmes a Court - Who says you can't make money out of Sports Teams?

So its official. James Packer is buying Peter Holmes a Court's stake in the Souths Rugby League club for $12.5 million.


Not a bad return for Peter. He and Russell Crowe paid $1.5 million cash each (as well as taking on 8 million in debt between them).


So you can roughly say, they paid $5.5 million each for their stake in the Rabbits.


8 years later, Peter gets 12.5 million (cash), but has to write off excess debt of 4.5 million owed to him. But that still works out at a nice $8 million return.


Now, I'm not sure how much else was injected by Peter over the years...but if we just look at the initial capital, compounded over the years, the investment was worth 10% a year. Not bad when you look at the fact that this was during the GFC.


So you can make money out of Sports Club ownership! It's just that it isn't a particular liquid investment.


But selling after the Rabbits had just won the Premiership is surely selling at the peak! It can't get any better than that.


Well played Pete!

Participation Rates Australia - still above average

Had a look at the unemployment figures that came out today...6.1%. Not great. Especially with a participation rate that continues to decline. So I was curious...are we turning out to be the US with a participation rate hitting below average.
Well apparently not. In fact, our average since 1978 has actually been 63.1% so at our current rate of 64.5% we aren't going too bad.

But a more detailed look at the participation stats gives us a little more insight into where the problems are, if you call them problems.

It's actually in the young areas where the participation rates have been dropping.

Averages (Feb 1978-Aug 2014)
15-19         20-24     25-34     35-44        45-54      55-60      61-65       65+      All Ages
58.8%       81.6%     79.5%    80.9%      77.2%     60.1%    36.8%      6.8%      63.1%


Current values - Aug 2014  
15-19        20-24     25-34      35-44        45-54      55-60      61-65       65+      All Ages
52.1%       76.5%    82.5%     83.5%       83.0%    74.2%    54.5%     12.9%     64.7%  

So as you can se, its only in the youngest groupings that the current values are below trend. So either more people in education (labor's interpretation) or more people doing cones and playing Xbox (Liberals)   But what I find interesting is the huge increases in the older age groups. I wonder just how bad these guys got hit in the GFC. And its true that since the GFC (2007), the rate of increase per year in the participation rate across the last three age groups are:-  

55-60      60-64     65+
1.22%    2.31%    5.38%  

A lot of people lost their retirement savings I think, causing them to go back into the workforce. Not great.  

BTW, here is a graph showing the historical rates of Participation over the years.    

Woolworths Undervalued....not quite yet

Had a look at the Woolworths stock a couple of days ago and wondering if it was undervalued.

Not quite yet. It is making it's cost of capital, unlike Westfarmers (one to avoid if my calculations are correct), but I have a price target of 29.50 on it. At the Woolworths current price of 35.00 its still a little over valued for mine. But one to keep an eye on if the correction comes.

MYER in trouble....doesn't look great

Been running my eye over MYER after the full year financial report yesterday...doesn't look good.

Even with the reduced dividend, it is pretty much paying out it's entire profit, so growth without debt and equity doesn't look good.

And when you look at the debt, it's a shocker, especially when you include the non cancellable Operating leases. I don't see them being able to borrow much more than they can at the moment...so that means equity injections, all of which will be shocking for the share price.

In fact, by my calculations, I have a price target over the next 12 months of only 95 cents, way below the current price of $2.

Good candidate for shorting though (though before you do this, please see your financial advisor)

Did the Private Equity company owning Spotless raid the piggy bank on the way to the sale?

Just been looking into the financial report behind Spotless. Found two interesting items that happened in late November 2013, before it was floated.

We have this (on page 14)

paid $301.5 million in a return of capital to shareholders on the 22nd of November 2013 (0.477 per share)

We have this (on page 15)

paid $148.5 million in dividends to shareholders on the 22nd of November 2013 (0.2359 per share)

All this before float mind you.

That's a cash out of $450 million to PE shareholders. (Private Equity Partners)

Then you have the sale

$1.60 offer price, 596,000,000 shares offered - Revenue of $953.6 million to PE shareholders (Private Equity Partners)

Grand total to PE of $1.4 billion

PEP spent $723 million in taking it private in 2012, assume 10% restructuring costs a year ($71.3*2 = $142.6 million)

So Net Investment = $865.6 million over two years

Net Return to PEP = $534.4 million

ROE per year (compounding) : 27.2% a year.

Not bad when you consider the ASX200 over those two years (including dividends) was around 15.64% a year.

Those PE guys know how to make a buck. Pity about the current shareholders however who start their journey with $450 million less in liquid capital.

JB Hi Fi - Feeling unloved

Jb Hi Fi came up on my ROC tracker last night. Yep, the share price had lost over 10% of its value over a 12 day period, which I thought was a little over the top.

So what if Dick Smith had a good year. Jb Hi-Fi is still kicking a lot of goals...Return on Equity over 40% and meeting its cost of Capital of 20%.

I calculated a price target based on its free cash flow and i have a target of $19.55, which is above the current price of $16.75. (by 17% no less)

The technical indicators look sound as well; the Bollinger Bands, Scholastic O and RSI look compelling.

Could be a buy in my book (though as always, please seek your own financial advice before making such a decision)

Qube Logistics worth a buy....might surprise on the upside

Been looking through some logistics stocks and for mine, Qube logistics looks undervalued.

Currently at $2.27 but my price target is a solid $3.39 based on a fairly low cost of equity of 7% (it has a 7.1% ROE in 2013).

While it has a fairly high debt of around $700 million in total so it is looking at Debt to Equity ratio close to 0.7, it is not in the scray zone as yet.

But we will see...the Financial full year report is out in August. Might be worth while to thow some dollars in to see what happens.

Not: Not a recommendation to invest/not invest in Qube. If pain persists, please see your investment professional.