# ABS - ABC Learning Centres



## Lucstar (1 October 2004)

Hi guys, is ABS an attractive stock. What is ur views?? I know the 12 month share target price is $4.40 (as at 2 September). But its reached that price so early. Would this stock run out of steam?? Or is this just the start??


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## RichKid (7 October 2004)

*Re: ABS*

There would have to be profit taking and a slowdown at some stage. Price targets can be tricky as different people put different values and stock prices tend to have a mind of their own.

The synergy from the merger apparently wont come through for a year or two so maybe it's best to wait for weakness. It's one I've got my eye on too but as you suggest it's probably hit full value by now and there's no point buying expensive stocks. But it depends on your investment style- long term this looks good.
It's also one of many stocks that'll do well regardless of the election outcome.


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## RichKid (10 October 2004)

*Re: ABS*



			
				Lucstar said:
			
		

> Hi guys, is ABS an attractive stock. What is ur views?? I know the 12 month share target price is $4.40 (as at 2 September). But its reached that price so early. Would this stock run out of steam?? Or is this just the start??




I'm not actively following the stock at the moment but ABS has been involved in some sort of share placement recently- it was oversubscribed from memory. Might be worth a look if you're really keen on it. Articles should be in the FinReview, SMH etc from last week.


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## Afterglow (22 October 2004)

*Re: ABS*

Hi to all, as I have stated in other threads I am new to this, and am starting to get more  and more interested and involved as the weeks go on. There is a hell of a lot to learn. 

During yesterdays lul  [21-10-04 ]
I bought some shares in ABS at $4.75 and now have a couple of questions.

 As settlement has not taken place, Will I be eligible to take advantage of the offer announced today?

And What affect will the offer do to the share price??????

The following is a link to the announcement.


http://imagesignal.comsec.com.au/asxdata/20041022/pdf/00470700.pdf


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## Joe Blow (22 October 2004)

*Re: ABS*



			
				Afterglow said:
			
		

> Hi to all, as I have stated in other threads I am new to this, and am starting to get more and more interested and involved as the weeks go on. There is a hell of a lot to learn.
> 
> During yesterdays lul [21-10-04 ]
> I bought some shares in ABS at $4.75 and now have a couple of questions.
> ...



Afterglow,

I am sure you will be able to take up the share offer as you were a holder at 7:00pm on October 21 which is the deadline according to the announcement.

As for what will happen to the share price it's hard to tell, and especially hard for me because I am not familiar with ABS. Although, often when offers like this are announced the share price will tend to drift down closer to the placement price (in this case $4.00).

Perhaps someone with a more intimate knowledge of ABS can offer an opinion?


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## Afterglow (24 October 2004)

*Re: ABS*

Thanks Joe Blow , I am considering selling tomorrow and taking up the offer.


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## Long Shot (7 April 2006)

*ABC learning...*

Hi, just wondering what people think of ABC Learning...
Surly they are on the receiving end of some bad publicity. However the company’s position in both domestic and global market is strong… Once it’s US arm is fully integrated, there is a lot more room for profit upgrade in the future.
I got some ABC at a bit over 7 dollars,,, do you guys think there may be a reentry point soon?

cheers


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## twojacks28 (11 April 2006)

Hi guys, ABC learning centres are at a high price now but considering they have the best man in australia and possibly the world running the centres it is likely to be a great stock in the long term. In the short term it is not worth buying as it isnt a stock that is highly volatile. ABS is also in the best position as they are dominating in Australia and now are expanding around the world.

twojacks28


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## michael_selway (26 April 2006)

twojacks28 said:
			
		

> Hi guys, ABC learning centres are at a high price now but considering they have the best man in australia and possibly the world running the centres it is likely to be a great stock in the long term. In the short term it is not worth buying as it isnt a stock that is highly volatile. ABS is also in the best position as they are dominating in Australia and now are expanding around the world.
> 
> twojacks28




In trading halt, any ideas? thanks

---------------

Date: 11/4/2006 
Author: Kelly Burke 
Source: The Sydney Morning Herald --- Page: 7 
 The owner of Australian child care group, ABC Learning, claims that his aim is not profit. Eddy Groves told a New South Wales Council of Social Service conference in Sydney on 10 April 2006 that his $A1.2 billion company was a labour of love. He said that the success of the business was due to its public structure, which provided capital for expansion. Groves added that adequate provision of services for the country was only possible through the for-profit and not-for-profit sectors working together 

Date: 3/4/2006 
Author: Farah Farouque 
Source: The Age --- Page: A1/A6 
 There have been some complaints in Australia about the service standards at ABC Learning Centres, a child care group. It is taking legal action in the Supreme Court of Victoria and wants to stop Victorian officials asking for details and documents relating to alleged breaches in child care standards. Two cases involving children in Victoria are central to the case. In one case, a mother picked up her child from an ABC Centre, and her son was screaming. He was found to have a broken arm, but the centre staff just said that no-one saw it happen. In another case, a child at an ABC Centre was lost in a lift, but the staff would not discuss it. The legal case will be heard in August 2006. Some believe that there are tensions at ABC between adequate child care and profits


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## sandik17 (26 April 2006)

twojacks28 said:
			
		

> Hi guys, ABC learning centres are at a high price now but considering they have the best man in australia and possibly the world running the centres it is likely to be a great stock in the long term. In the short term it is not worth buying as it isnt a stock that is highly volatile. ABS is also in the best position as they are dominating in Australia and now are expanding around the world.
> 
> twojacks28





Dominating in Australia?  All I hear is negative things about how they cut costs....not even allowed to buy more toilet paper if they're over budget???


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## RichKid (26 April 2006)

sandik17 said:
			
		

> Dominating in Australia?  All I hear is negative things about how they cut costs....not even allowed to buy more toilet paper if they're over budget???




There was a critical item on the ABC's 7.30 report a few days ago, about claims of negligence at some Victorian centres, legal action pending I think from memory. Groves was interviewed and said it was just a tiny no of complaints but I think they could be in big trouble if more claims surface, class action in the making??? Parents really resent having to fork out lots of money and then seeing it go towards profits rather than the proper care and supervision of their children. On top of that the industry enjoys taxpayer funded dollars.


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## michael_selway (26 April 2006)

RichKid said:
			
		

> There was a critical item on the ABC's 7.30 report a few days ago, about claims of negligence at some Victorian centres, legal action pending I think from memory. Groves was interviewed and said it was just a tiny no of complaints but I think they could be in big trouble if more claims surface, class action in the making??? Parents really resent having to fork out lots of money and then seeing it go towards profits rather than the proper care and supervision of their children. On top of that the industry enjoys taxpayer funded dollars.




Australian Broadcasting Corporation
TV PROGRAM TRANSCRIPT
Broadcast: 24/04/2006

*Parents question quality of care at ABC Learning Centres
Reporter: Natasha Johnson*

MAXINE McKEW: Welcome to the program. Among working parents today,the topic of child care is a hot issue. It's cost, its availability and its quality. At the core of the system is a particular duty of care - that children will be looked after in a safe environment and that if something does go wrong, then parents will be informed. But that hasn't been the experience of some users of the world's largest listed childcare company, ABC Learning Centres. These parents have questioned the quality of care and transparency at some centres after incidents which saw a baby becoming dehydrated, a toddler suffering a broken arm and a child being left in a lift. ABC Learning Centres is now a billion dollar business and has enjoyed spectacular growth since listing on the stock exchange five years ago. It now controls one in five childcare centres in Australia. The group defends its practices but is also using its considerable financial clout to take the Victorian Government to court. In effect, it's challenging the Government's right to demand answers about its complaints handling procedures. Natasha johnson reports. 

JOANNE GOLDING: When I picked her up from the centre she was very blue, and she was very floppy. It was like she was asleep, and I couldn't wake her up. 

EMMA KENWORTHY: I got to the creche and I could hear him screaming from the carpark. Within half an hour of the X-rays, he was in surgery. 

KRISTEN RAVEST: My son told me that he was stuck in the lift and that he was going up and down, up and down and "I was too little and I couldn't reach the buttons." 

NATASHA JOHNSON: The experience of Elizabeth Golding, Todd Kenworthy and Brock Ravest at two ABC Learning Centres didn't live up to the promise of the slick advertising for the world's biggest publicly-listed child care operator. 

ADVERTISEMENT: And you'll find we constantly upgrade our facilities, ensuring a safe and secure environment for your child. 

EDDY GROVES, CHIEF EXECUTIVE, ABC LEARNING CENTRES: I won't comment on the individual cases, but I will say this, I really don't think there's things going wrong. We have 40,000 children going through these centres a day. And every day is a new day in child care, so that's 200,000 children a week, or 10 million a year. That's a lot of children and the number of incidents that we have is very, very minor. 

NATASHA JOHNSON: Elizabeth Golding, Todd Kenworthy and Brock Ravest attended Learning Centres in East Melbourne and Bendigo, which are currently under investigation by the Victorian Department of Human Services. But ABC is fighting the department with an unprecedented challenge to its right to ask questions and seek documents relevant to complaints. 

SHERYL GARBUTT, VICTORIAN COMMUNITY SERVICES MINISTER: This is the first time anyone's ever challenged our regulations. Most centres are very happy to cooperate. 

EDDY GROVES: I just believe that ABC is smart enough to understand that there's a whole process of law in place. I think for many years the small independent operators have been stood over in some of these cases. And I know that there's a letter of the law we all have to follow. ABC is expected to follow it, I believe the department is expected to follow it, and that's all I want. 

NATASHA JOHNSON: ABC founder Eddy Groves says the litigation is about protecting staff. 

EDDY GROVES: We try to provide independent legal advice for those centre staff so they know what their rights are. 

NATASHA JOHNSON: Well, why wouldn't they answer the questions? 

EDDY GROVES: Because at the end of the day I think people have to know that they don't have to answer questions if they don't want to answer questions. 

KRISTEN RAVEST: If they knew that they had nothing to hide they would answer the questions. 

NATASHA JOHNSON: It was Kristen Ravest's complaint that triggered and court action. In December 2004, her three-year-old son Brock was left in a lift at this East Melbourne ABC centre and found in the building's carpark by a stranger, who returned him to the centre. 

KRISTEN RAVEST: If he'd have got out on ground floor he would have got out onto the road. That man could have taken him away if he was a bad man, so to speak. He could have got run over in the carpark. My son is affected by it now. He still freaks out a bit when we go in a lift and he remembers it. 

NATASHA JOHNSON: Kristen Ravest says that she and her husband only found out about the incident when told by their son - not staff. 

KRISTEN RAVEST: They definitely have like a big responsibility to report to you everything that has happened to your child. Even if it's good or bad. But obviously if it's something like that, you would hope that you would be finding out about it from them, not from your child. 

NATASHA JOHNSON: Lawyer Joanne Golding has made a series of complaints about the East Melbourne ABC. Most seriously, that in November 2004, her daughter Elizabeth - then six-months-old - became dehydrated and was taken to hospital after a day in care. 

JOANNE GOLDING: When I collected her that afternoon she was visibly blue. I took her to the children's hospital and when we arrived at the children's hospital they took a look at her, and the nurse and the doctor both confirmed that she was showing the early stages of dehydration. 

NATASHA JOHNSON: Baby Elizabeth recovered the next day, but Joanne Golding says ABC didn't call her to tell her the baby was unwell and not feeding properly. 

JOANNE GOLDING: I can understand that things can happen, children can get sick, but I think that we had the right to get an explanation and to be told what had happened and what their version of events was. To this day, we still haven't heard from the ABC centre about it. 

NATASHA JOHNSON: In February last year, Emma Kenworthy was called by ABC Bendigo because her teo-year-old son Todd wouldn't stop crying. She took him to hospital and it was discovered he had a broken arm. 

EMMA KENWORTHY: As soon as they said that he had to go into surgery. When he went into surgery, I was straight on the phone to ABC Learning asking questions of what had happened, that my son was in surgery having his elbow now operated on. 

NATASHA JOHNSON: She's been told he tripped in the playground. But Emma Kenworthy says no-one can explain exactly how the accident happened and she's angry no-one realised how seriously injured he was. 

EMMA KENWORTHY: All they've said is they've seen him on the ground crying and he had a scarred knee and that's all they thought that had happened. For the state he was screaming, they should have called an ambulance straight away and taken him to Emergency. They had to sedate him at the hospital because he was just in so much pain. 

NATASHA JOHNSON: ABC won't discuss the detail of these cases. But Eddy Groves says he's confident correct procedures were followed and he has documents signed by the parents. 

EDDY GROVES: If I showed you the documentation with those parents' signatures on it when the accident and incidents had taken place I could do that, but I will not comment on individual cases. 

NATASHA JOHNSON: Well why don't you release the documents showing the parents' signatures? 

EDDY GROVES: Because at the end of the day that is private, confidential information between that child, that parent. 

NATASHA JOHNSON: But if the parents are happy for you to release those documents to us, why don't you? 

EDDY GROVES: Because that's private confidential information. We're bound to privacy laws. I will not do that. 

NATASHA JOHNSON: But if they give you permission, you're not bound anymore. 

EDDY GROVES: I will not do that, Natasha. We're not trying to hide anything. At the end of the day, it is very important to us to protect the information. 

NATASHA JOHNSON: Kristen Ravest and Joanne Golding say they did not sign any documents, while Emma Kenworthy released this incident report to us, which records an accident in which her son's knee was injured, but nothing about his broken arm. The East Melbourne centre is currently operating on a limited six-month licence. As well as the probe there and at Bendigo, three other Victorian ABC centres are currently under investigation. One complaint concerns a missing child at the same centre where ABC has previously been fined over a runaway toddler. ABC is currently awaiting the outcome of an appeal against that decision. Eddy Groves believes the department is picking on ABC, a $2.3 billion corporation which now controls 20 per cent of Australian child care centres. 

EDDY GROVES: Because of our size they have to prove that they're harder on us than anyone else. 

SHERYL GARBUTT: It doesn't matter what company it is, or whether it is a community-based centre. We will investigate all complaints and take the appropriate action. Nobody is on a pedestal and no-one is excluded. 

ADVERTISEMENT: One, two. At ABC Learning Centres, you'll find qualified, dedicated professionals...


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## michael_selway (26 April 2006)

NATASHA JOHNSON: While Eddy Groves believes he's getting a tough time from the Victorian regulator, the not-for-profit community operators believe he should be getting a tougher one, particularly from the Federal Government, considering 46 per cent of ABC's revenue, $230 million a year comes from Commonwealth subsidies to parents. 

LYNNE WANNAN, COMMUNITY BASED CHILDREN'S SERVICES: I think there's a fundamental problem when the purpose for delivering your human service to young children is to make profits for shareholders. That is what their prime legal responsibility is. And that means they can't put children first. We need more regulation. We need more quality assurance checks. We need more of those spot checks to make sure things are going well. 

EDDY GROVES: In the last four years, ABC has reinvested $100 million into existing centres, centres that would never have had that money spent on them if we hadn't of bought those centres. This is a very, very strong company based on educational goals and I guarantee you the child comes first every time.

NATASHA JOHNSON: Federal Community Services Minister Mal Brough says he's currently tightening the Commonwealth accreditation system and will introduce spot checks, but there's nothing to suggest that private owners require greater scrutiny than the not-for-profit operators. 

MAL BROUGH, FEDERAL FAMILIES AND COMMUNITY SERVICES MINISTER: I would not segregate or segment this market and say that any particular part of it has a lower standard or a higher standard. The whole sector - everyone - should have confidence in the entire sector, not by the name that's on the organisation. 

NATASHA JOHNSON: ABC's challenge to the Victorian regulations is to be heard in the Supreme Court in August, and either the parents will have their questions answered, or the department will have to find a new way to ask them. 

KRISTEN RAVEST: Any little accident, you want to know. You feel bad enough having to put your children in child care because you're working. 

EDDY GROVES: We have done great things for this industry and it is very disappointing to me that we just hone in on those few incidents. Now they are regrettable, absolutely regrettable and I wish they didn't happen, but at the end of the day, it is a very small number compared to the number of children that come through our centres every single day. 

ADVERTISEMENT: You'll find it all at ABC.

http://www.abc.net.au/7.30/content/2006/s1622919.htm


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## RichKid (26 April 2006)

Thanks for the article Michael, you're way too quick!!


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## twojacks28 (26 April 2006)

abc has hundreds of centres and considering that each centre has from any where between 30-70 children it is going to be no suprise that there will be problems. Eddy installed a system where the centres have allocated toys for onoe year and they dont get anymore until that date the following year. of course there are going to be complaints but in relation to kids this is nothing.


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## Julia (26 April 2006)

RichKid said:
			
		

> There was a critical item on the ABC's 7.30 report a few days ago, about claims of negligence at some Victorian centres, legal action pending I think from memory. Groves was interviewed and said it was just a tiny no of complaints but I think they could be in big trouble if more claims surface, class action in the making??? Parents really resent having to fork out lots of money and then seeing it go towards profits rather than the proper care and supervision of their children. On top of that the industry enjoys taxpayer funded dollars.




Yes, I saw that interview also and thought Eddie Groves was very defensive and didn't come across as being transparent or with the best interest of his customers(do you call them customers?) at heart.

I've been considering adding ABS to my portfolio but will hold off and see if there are any repercussions to  this.

Your points about how parents feel about childcare centres being focused on profit, Rich, are really relevant.  I expect the problem for a lot of parents is that they don't have a lot of choice about where to place their children, given ABC's dominance of the market.

Julia


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## chansw (27 April 2006)

http://www.theage.com.au/news/business/600m-for-abc-learning/2006/04/26/1145861419612.html

$600m for ABC Learning
By Christopher Webb
April 27, 2006


EDDIE Groves' ABC Learning Centres was close last night to raising $600 million for further expansion in the US.

The company yesterday morning asked the stock exchange to halt trading in its shares ahead of its broker Austock doing the rounds of institutional investors.

The company had not by the close of trading announced the results of the book-build or the intended use of the money.

But it is believed it will be used for debt reduction as well as providing Mr Groves with a war chest for more acquisitions of child-care centres in the US.

The book-build is pitched within a $7.10 to $7.60 price range, which compared with a $7.82 last-sale price for the shares.

The tip was that the money would be raised at around the mid-point of the book-build range.

Late last night the share issue was almost done and that was without including any cash from London investors.

Institutional investors have until 10 this morning to respond to the book-build.

The issue adds to ABC Learning Centres' recent cash raisings, which were also done by Austock.

Last December, $260 million was raised through a book-build of 37.2 million shares at $7 apiece.

And in October 2004, $400 million was raised in a capital raising that attracted subscriptions of slightly more than $1 billion.

As well as reducing debt, the latest raising will go towards the acquisition of about $190 million worth of child-care centres in the US, and possibly more.

Last year ABC paid $218 million for the US-based Learning Care Group.


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## sandik17 (8 May 2006)

Interesting story on 60 minutes last night....

hmmmm


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## visual (8 May 2006)

yes,wasnt it!
like how he compared himself to those two women ,who supposedly were in competion with him!wonder who is competion was when he started.

Apart from council run childcare centres at this minute I cant think of anyone else running childcare centres in the fashion that he is doing.Of course you had schools doing it but I`m not sure that there was a big corporation doing what he is doing.

Loved the bit where he didnt want to be held responsable for his staff incompetence,if not him who then?by the same token I suppose he is saying that if he is ever in an accident the other driver would be responsable and not us as taxpayers,through the accident compensation whatever its called.


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## RichKid (8 May 2006)

Julia said:
			
		

> ...... I expect the problem for a lot of parents is that they don't have a lot of choice about where to place their children, given ABC's dominance of the market.
> 
> Julia




Spot on Julia, monopolistic power, that's why these types of stocks are hard to beat down. Far too risky for me to buy now, the chart is very messy in places, if this was less volatile I'd be on it but you can never tell when it might just collapse in a heap (or skip higher!).


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## krisbarry (8 May 2006)

But then again... ABC learning centres are somewhat similar to retirement villages like LVL, VLL, PKF, CLF.

They are very much supported by a mix of private and government funds.

Retirees need affordable accomodation in line with government pensions


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## michael_selway (8 May 2006)

*Transcript: The kid business 
May 7, 2006 
Reporter: Peter Overton Producer: Lincoln Howes * 

PETER OVERTON: Once, it seemed so natural ”” dad went to work, mum stayed at home with the kids. Now it's not that simple. As often as not, both parents have to work just to pay the mortgage. And with that interest rate rise, things just got that little bit tougher. Tougher still if you're trying to find someone to look after the kids ”” there aren't enough places and decent care's far too expensive. With high demand, high fees and high government subsidies, child care's become a growth industry. For one man, it's a veritable license to print money. So why are we taxpayers helping to build his billion-dollar empire? 

PETER OVERTON: Meet Olivia, she's only five weeks old and she doesn't know it, but she's hot property. Australia's children had become big business ”” A sure-fire investment, up there with casinos and mining. Kids are commodities in the brave new world of child care. 

TEACHER: Let's have a look, Tenesha. Can you show me what it is? 

PETER OVERTON: The Government wants women to be in the work force? 

SHANNON COLAK: They do but I don't know how I'm supposed to. I have no option. There is no way I can go back to part-time work now. 

PETER OVERTON: Olivia's mum, Shannon, wants to go back to work. She has a university degree and knows there are lots of jobs available to her. She lives just half an hour from the centre of Sydney. But as one of 250,000 Australian women trapped by lack of child care. 

SHANNON COLAK: It was difficult when I found out I wasn't even allowed to put my name down. The door was shut before I even got to it, basically. I couldn't even go to the centre and see them. They just said, "No, there's no room and you're never going to get a place here." 

PETER OVERTON: The Australian child care system has been described as a shambles. It said 175,000 children like Olivia can't get a place and the cost has risen 62 percent in the last four years. Yet, in the midst of this shambles, some people are making a hell of a lot of money. You must be laughing all the way to the bank? 

EDDIE GROVES: If you do it well, you will make some money. 

PETER OVERTON: Between $250-$350 million. Am I in the ballpark? 

EDDIE GROVES: That's what they say. 

PETER OVERTON: What does Eddie say? 

EDDIE GROVES: It's close. 

PETER OVERTON: At just 39, Eddie Groves is the king of corporate child care. From his Brisbane headquarters, he presides over ABC Learning Centres, the biggest publicly listed child care company in the world. This former milkman opened his first centre in 1989 and has turned it into a global empire worth $2.5 billion. Why did you target child care? 

EDDIE GROVES: When you look at milk, milk was a need industry. This was another industry that you could do very well. Where early childhood education was pretty much needed everywhere. 

PETER OVERTON: So childhood education was like milk, a necessity, a staple in life? 

EDDIE GROVES: It was a necessity. That's where it started from, yeah. 

PETER OVERTON: Eddie's stats are staggering. Soon he'll own 1000 child-care centres across the country, almost a quarter of the entire private sector and he keeps acquiring more. The market loves him. His share price is rocketing like a dot com dream. But Eddie says the kids come first. 

EDDIE GROVES: That is the number-one focus ”” is the child and the family. Always has been, always will be. 

PETER OVERTON: So let me get it straight, you're in it for the love of the children, not for the money? 

EDDIE GROVES: I'm actually in it ”” the number one is the love of the children and to make sure that we provide the right service for the families. 

LYNNE WANNAN: They can't be at the centre of his business. His shareholders are at the centre of his business. For him, the children have got to be a product of how he actually generates money to return to shareholders. 

PETER OVERTON: How many children are...? Lynne Wannan heads the National Association of Community Based Children Services. She says the rot set in to childcare back in 1991 when the Government opened the way for private enterprise. 

LYNNE WANNAN: I don't think it's hard to make money out of child care. You have to scrimp on the service that you provide. I think that's easy to do and I think the corporate companies have realised that you can make money and the Government will guarantee the income and you can make a return to shareholders. But you don't do that by putting children first. 

PETER OVERTON: One of the most strident criticisms of you is that children are simply the commodity and the shareholders are your number one priority. 

EDDIE GROVES: Absolute insult. No-one has ever heard me put the shareholders first, ever. 

PETER OVERTON: So, how do you go when you stand in front of the shareholders and say, "Our number one priority is not you, it's the kids." 

EDDIE GROVES: That's exactly what they want to hear. Because they know, they're smart enough to understand that if we look after the children and the families, they will be well taken care of. And that's exactly what's taken place. 

PETER OVERTON: Eddie Groves and other corporate players have tapped in to a rich seam of tax-payer funding. The Government pays a subsidy to families for child care and that's passed directly to the centre they choose. As much as 44 percent of ABC's revenue is derived from these Government subsidies. It's profit with a Government guarantee. What it doesn't guarantee is they'll bill child-care centres where they're most needed. 

LYNNE WANNAN: In inner urban areas now, land is very expensive. You can't really pay a lot of money for land, put up your building and still make money. 

PETER OVERTON: ABC is accused of ensuring profit by targeting only so-called 'nappy valley' areas, where land is cheap and young families plentiful. 

EDDIE GROVES: Well, I mean that's just incorrect. We always made a guarantee that we would only build where there's need. 

PETER OVERTON: Is this just the company spin you're giving me? 

EDDIE GROVES: No, absolutely not. 

PETER OVERTON: But it sounds like it. 

EDDIE GROVES: It might sound like it, but I live and breathe this every day. Eighteen years I've been doing this. I go into the office and spend more hours at this than I have ever done before. This isn't a company spin. This is a guaranteed. This is what we do. And I am personally involved with every one of those decisions. 

PETER OVERTON: For such a high-profile player, Eddie Groves is intensely private. He does have kids of his own, but we weren't allowed to meet them, nor his wife who shares the business. And we weren't permitted to film children inside his ABC centres. 

MAN: We've probably picked up about another 20 centres in the last few months. 

PETER OVERTON: They call him Fast Eddie because it's the way he does business that has earned ABC such a fearsome reputation. When it comes to competition, Eddie plays hard ball. You're a fierce competitor, aren't you? 

EDDIE GROVES: Absolutely. 

PETER OVERTON: Anyone encroaches on your turf and you're on to them? 

EDDIE GROVES: Um, not necessarily but I definitely am a fierce competitor. 

PETER OVERTON: You'll protect your turf. 

EDDIE GROVES: I will protect. 

TARA ROBERTS: It was Eddie attacking us. It was personal. He didn't like us. We were on the turf. 

PETER OVERTON: Early last year, Tara Roberts and her friend Nicole Manning were set to fulfil their dream of opening a child-care centre. Unfortunately for them, they chose a site not too far from one of Eddie Groves'. 

TARA ROBERTS: If we open, they said, they may have to close their doors because there is no need for child care in this area. 

PETER OVERTON: This is coming from ABC Learning, one of the biggest child care companies in Australia? 

TARA ROBERTS: That's correct. A 45-place centre like ourselves might affect their financial viability and they may need to close their doors. 

PETER OVERTON: Why did you try to shut them down? 

EDDIE GROVES: The question that's posed to us all the time is 'are we building in areas of need?' And we go through a rigorous process. All I'm asking is that same standard applies to everybody else. People object against us, we can object against them. 

PETER OVERTON: Tara and Nicole won their battle but they spent so much money fighting, they say it will be 15 years before they start to see a profit out of their centre. Those women put their life savings into it, they wanted to have a centre there. 

EDDIE GROVES: Peter, I put my life savings into this too. Every single cent. Every single cent that I earned, ever, went into this company. Still does. You know, I'm passionate about it. So therefore I should be able to compete in the same playing field as everybody else.


----------



## michael_selway (8 May 2006)

PETER OVERTON: Yeah, but you're a giant. 

EDDIE GROVES: Yeah, but I wasn't. 

PETER OVERTON: You have power, you have resources, you have money. 

EDDIE GROVES: I jumped through every hurdle that everybody else has jumped through and more. So I guarantee you that I'm in exactly the same position as those two women were, at one stage. 

PETER OVERTON: Are you scared of speaking out against Eddie Groves now? 

TARA ROBERTS: He is scary in only the fact that he has power and that's the only reason that I'm scared of Eddie Groves, is the power. 

PETER OVERTON: He's so powerful, Eddie even took on the Victorian Government. He recently tested Victorian law which makes his company legally liable for the children in his care. Children like little Todd Kenworthy. 

EMMA KENWORTHY: Pulled up at the crÃ¨che and I could hear a child screaming from the doors as I was coming in. And as soon as he seen me, he was just hysterical. 

PETER OVERTON: Todd's mum, Emma, was called to ABC Learning Centre in Bendigo on February 15, last year. Not even two at the time, Todd couldn't say what had happened but his arm was obviously hurting. 

EMMA KENWORTHY: So I've gone straight to casualty here at the base hospital and as soon as they've taken a look at it they've said it's broken. 

PETER OVERTON: But no-one from ABC can tell Emma what happened. 

EMMA KENWORTHY: Nobody will answer any questions. Nobody knows nothing. Nothing at all. He tripped over and hurt his knee. That was it. Scratch on his knee. 

PETER OVERTON: That was their story? 

EMMA KENWORTHY: That was their story. 

PETER OVERTON: Last Wednesday, the Victorian Supreme Court ruled that ABC Learning was criminally liable for the children in its care. Eddie Groves had argued that responsibility for mishaps like Todd's should rest not with the company, but with the staff member.

EDDIE GROVES: The danger with this is, Peter, if someone wants to be vindictive for some reason and just does something intentionally to a child, how can the company be held responsible for that? And that's what they're saying is the case. And I just can't understand that. If someone just wanted to walk out of the centre and leave those children, then they want to hold us responsible. I can't cover that off. 

PETER OVERTON: No, but as a company you have a responsibility, no matter what, to those parents. That I am entrusting my child to you ”” no matter what happens, if a staff member walks out or whatever, you are responsible. That's how I would feel as a parent. 

EDDIE GROVES: And you're right. At the end of the day, we are absolutely responsible. We take incredible measures to make sure we've covered everything off. Our policies and procedures are second to none. But at the end of the day, some things need to make sure that a staff member is responsible as well as the company. 

PETER OVERTON: Liability, competition, profitability, you've really got to stop and remind yourselves, don't you, that we're talking about the care of our children here. But in these days of big mortgages and double incomes, is there something that we're forgetting? 

ANN MANN: We've rushed ahead in the debate to questions of access and affordability when we should take a few steps back. 

PETER OVERTON: Ann Mann has analysed the latest long-term research on very young children in care. It shows that those who spend long periods in care, under the age of three, show signs of the potent stress hormone, called cortisol, in their saliva. 

ANN MANN: Normally, when a child is at home, they will have higher cortisol in the morning and it will decline in the afternoon. Showing that they're relaxed, basically, and not stressed. In child care settings, higher numbers of children show higher cortisol in the afternoon, that is, they're feeling stressed. 

PETER OVERTON: After a day of child care? 

ANN MANN: Yes. 

PETER OVERTON: And she says the effects can be long-term. Aggression, depression and anti-social behaviour later in life. Again, it's the corporate child care giants that are causing most concern. 

EDDIE GROVES: Those studies, all they do again is put fear into parents. I mean, every parent feels this anxiety with leaving their child. Whether it be child care or whatever it is. But, the reality is, parents have to work. You need dual incomes. Why do we want to, as a society, continue to put fear into parents and families that they're doing something wrong with their child? 

PETER OVERTON: Many parents will be watching Tuesday's Federal Budget with an eye on the child care provisions. But Shannon Colak is resigned to being a stay-at-home mum and any thoughts of having a third child have been put on hold. 

SHANNON COLAK: I don't think I could find places for three children anyway. And I don't know if we can afford to support a family of three children on one income. So at the moment we're going to stick with two, I think. 

PETER OVERTON: So costs, lack of availability ”” it's determining the path of your life. 

SHANNON COLAK: Unfortunately, it is. And I hate even admitting that. But at this stage it is. 

PETER OVERTON: Shannon's story is repeated in suburbs across Australia. It's clear our child care system is far from perfect, but Eddie Groves is sick of copping the blame. You have a bullseye painted on you. 

EDDIE GROVES: I do have a bullseye painted on me but I don't understand why. 

PETER OVERTON: Do you see it as a personal attack? 

EDDIE GROVES: I do, because I know what we talk about every single day. We might have made mistakes along the way ”” and that happens ”” but we have never once sat down and said, "We're going to do this," or "We're going to do that." Every single time we make a decision it's in the interests of the child and the family. 

PETER OVERTON: Does it really rankle you? 

EDDIE GROVES: It really upsets me. It probably shouldn't, but it does.

http://sixtyminutes.ninemsn.com.au/sixtyminutes/stories/2006_05_07/story_1639.asp
http://ninemsn.video.msn.com/v/en-a...a934-aff3b81a733d&p=aunews_au60minutes&t=m163


----------



## RichKid (8 May 2006)

Thanks Michael, fast Eddie doesn't sound too cuddly to me, but we'll have to make up our own minds, they guy certainly has made it to the big time.


----------



## RichKid (13 May 2006)

A great article discussing some of the issues surrounding  'the McDonaldisation of child care'. What is it really doing to our kids and society? I like the Swedish model. Some interesting reading for parents and ABS shareholders out there: 

*Mothers know best:
Home-based care, not institutional care, is the best fit for children and working mothers, comments Angela Shanahan  http://www.theaustralian.news.com.au/story/0,20867,19116214-601,00.html*


----------



## ghotib (7 June 2006)

More on ABS from Stephen Mayne and Crikey.com:  


> 5. Eddie Groves sprints from shareholders and The Chaser
> 
> By Stephen Mayne, in a jewellery shop with a net cafe in Brisbane's Queen Street Mall
> 
> ...



I don't hold ABS and I'm uncomfortable with the whole idea of public companies running childcare. But I am looking forward to The Chaser. 

Ghoti


----------



## RichKid (7 June 2006)

ghotib said:
			
		

> More on ABS from Stephen Mayne and Crikey.com:
> 
> I don't hold ABS and I'm uncomfortable with the whole idea of public companies running childcare. But I am looking forward to The Chaser.
> 
> Ghoti




That's a great article Ghoti, thanks very much, looking forward to thechaser episode- Friday night isn't it?


----------



## dennisll (14 June 2006)

ABS intraday low of 6.02 today.  Anybody else think this is a great time for a top-up?


----------



## The Stevedore (7 July 2006)

ABS just announced the purchase of Hutichison Child Care Centres.
Have been watching this stock since last week, & it's a solid performer.


----------



## smoothsatin (29 August 2006)

Rocky short term ahead for this one i think, missed eps expectations and has had some very low intraday lows the last two days, likely to suffer more short term weakness.
Key upside is off course US acquisitions with low multiples....but if you believe the Us and then AUs economies will come off...what do retrenched mummies and daddies do? look after their kids! especially in US where i suspect gov help for childcare costs is less significant than here, can see it below 6 again shortly, but should rally in next 12 months on the back of further acquisitions.......any thoughts?


----------



## eMark (25 September 2006)

As of September 25th, this stock is 5.98, with a very recent 12 month low of 5.91. A lot of the above posts do very well identifying the possible reasons for the stocks poor performance of late. Jeez it was mid 7's only a couple of months ago. Not even recent announcemnets help this stock. There does not seem to be any support at all. 

Time......


----------



## 3 veiws of a secret (25 September 2006)

eMark said:
			
		

> As of September 25th, this stock is 5.98, with a very recent 12 month low of 5.91. A lot of the above posts do very well identifying the possible reasons for the stocks poor performance of late. Jeez it was mid 7's only a couple of months ago. Not even recent announcemnets help this stock. There does not seem to be any support at all.
> 
> Time......




E Mark .....I would strongly suggest you read this thread carefully.Stand back have a short black with no sugar ,and seriously think would you like Chairman Sally-Anne Atkinson to guide your hard earned dollar ? 
 Late last year I was comtemplating this share but  ghotib's post in June  summed it all up for me ,I don't hold this share  ...........


----------



## Chief Wigam (25 October 2006)

Chart looks to be technically sound with nice uptrend.
I got in today at 6.96


----------



## Chief Wigam (26 October 2006)

Fundamentally , looks good too.

ABN have a price target of $9.80.


----------



## bingk6 (13 December 2006)

Trading Halt today - any ideas


----------



## michael_selway (13 December 2006)

bingk6 said:
			
		

> Trading Halt today - any ideas




hopefully not a capital raising!

thx

MS


----------



## Chief Wigam (14 December 2006)

Rumored to be buying La Petite in the US.


----------



## bingk6 (14 December 2006)

Chief Wigam said:
			
		

> Rumored to be buying La Petite in the US.




Is that good news ????


----------



## ekman (14 December 2006)

Ann just released.......
IMO they are on a buying spree but haven't proven that their US operns have been a success
getting too big too quickly


----------



## Devil_Star (14 December 2006)

The market sentiment really confuses me. It seems the market no longer worries about the quick expansion and increasing debt. I just sold 2500 shares and still hold 1500, in case a turnaround at the corner.


----------



## michael_selway (14 December 2006)

Devil_Star said:
			
		

> The market sentiment really confuses me. It seems the market no longer worries about the quick expansion and increasing debt. I just sold 2500 shares and still hold 1500, in case a turnaround at the corner.




so you are bearing on abs?

thx

ms


----------



## scsl (14 December 2006)

michael_selway said:
			
		

> so you are bearing on abs?



MS, do mean 'bearish'? (I apologise if I'm mistaken) I think investors should be very bullish on ABS, particularly with the growth that is to come. 

Looking back, August and September would've been a great time to buy and accumulate ABS shares - I didn't as I was fully invested. But I have to admit that when I had the chance to in October, I didn't, because I was uncertain as to the progress of previous acquisitions and uncomfortable at the speed at which management was growing the business.   

CEO Eddy Groves has a considerable amount of his wealth in ABS (having founded it) and I don't think he would've given the go ahead on today's addition of childcare centres to already existing centres in the US and the decision to enter the UK market if he wasn't confident that previous acquisitions were under control.

Yes, growth via acquisitions cost a lot of money, but I think the strength of their balance sheet and management will see ABS benefit in the short and long run from today's announcement.


----------



## Devil_Star (14 December 2006)

michael_selway said:
			
		

> so you are bearing on abs?
> 
> thx
> 
> ms




Nope, I'm not bearish on abs. I bought the first parcel initially @$7.60 early this year, then average up and down @$7.90, $6.80 and $6.40. I had been watching it down to $5.90 just not long ago. Now the reason I sold down is just for profit taking and risk control (because of the significant volatilty of the stock). Gotta pay down my investment debt to keep my finance healthy, that's it.


----------



## UMike (19 February 2007)

What a fantastic result.

Why then did the sp get hit so hard. Down 4% despite such a great half year result.


----------



## mrWoodo (19 February 2007)

UMike said:
			
		

> What a fantastic result.
> 
> Why then did the sp get hit so hard. Down 4% despite such a great half year result.




Yeah my timing was perfect - Bought these on Thu    thinking they were undervalued. Reading the asx announcement at 9.30 am this morning I was already patting myself on my back 

I don't know what investors were expecting - 64mil half yr after tax profit is good enough for me   

The potential 'joint approach' between ABS and a third party to Funtastic was more proof that I have no idea how the market works.


----------



## UMike (19 February 2007)

mrWoodo said:
			
		

> Yeah my timing was perfect - Bought these on Thu    thinking they were undervalued. Reading the asx announcement at 9.30 am this morning I was already patting myself on my back
> 
> I don't know what investors were expecting - 64mil half yr after tax profit is good enough for me
> 
> The potential 'joint approach' between ABS and a third party to Funtastic was more proof that *I have no idea how the market works. *



LOL same here.

Been watching it closely.

Might jump in tomorra.


----------



## Julia (19 February 2007)

The SP has been rising unusually last week, as if the result was already factored in.  And then there is often the hope that the actual result will be even better than anticipated.  It wasn't.  My guess is that this is why the SP took such a beating today.

When it recovers 10c I'm out of this one.  Not even a decent dividend to make up for its ailing SP.  If we look at a one year chart, the SP has barely advanced from a year ago.  Much better opportunities out there.

Julia


----------



## reece55 (19 February 2007)

UMike
The result wasn't actually that good mate.....

EPS growth for the half year was 7%, this stock is touted as a growth stock but is showing EPS growth like that of a bank, slow........ The analysts expect annual EPS of about 38 cents per share and with only 15.6 for the half, they are behind the mark....... That means they need about 22.5 cents for the next half to meet the analyst forecast, and even this will give them a fairly expensive p/e multiple of about 20.

My take - ABS has run out of steam. The business is now extremely leveraged - the acquisitions of late have been solely funded by debt and cash flow is looking weak. Ultimately, I believe that ABC will be a stock for the future, but now is not a good entry point. 

Cheers


----------



## michael_selway (19 February 2007)

reece55 said:
			
		

> UMike
> The result wasn't actually that good mate.....
> 
> EPS growth for the half year was 7%, this stock is touted as a growth stock but is showing EPS growth like that of a bank, slow........ The analysts expect annual EPS of about 38 cents per share and with only 15.6 for the half, they are behind the mark....... That means they need about 22.5 cents for the next half to meet the analyst forecast, and even this will give them a fairly expensive p/e multiple of about 20.
> ...




Hey check thsi out

*Net Tangible Assets 31/12/06 31/12/05 cents cents
Net tangible assets per share (76.5) 24.1*

NTA negative?

Also check out falling operating cashflow (payment to suppliers) and also high investment cashflow (childcare licenses capatilised but not expensed?)







thx

MS

--------------------------------------

Also quote from anoterh forum



> also a finance grad and though I havent looked closely at the figures , I would assume that a license is an asset and so we debit it on the balance sheet, and thus for this debit there must be a credit on the other side of the equation (Assets=Liabilities+Equity); Ill have a look into it and get back to you.
> 
> Investing activities on cash-flow statement as well as financing activities are not whats important for a high growth company! The OPERATING cash flow is whats important and we need to ascertain 'where' the revenue is coming from? Obviously the revenue would come from the monies the centres make (fees etc); Take away operating expenses (day to day) and we get what the operating (day to day) cash flow is.
> 
> ...


----------



## reece55 (19 February 2007)

Michael
It seems logical that NTA is negative - the money is tied up in Goodwill and Childcare licenses (all intangibles), all of which don't count under the ASX listing rules as tangible assets...... 

There are many other companies out there that have a negative NTA - take ALL for example........ Doesn't necessarily mean there are issues, because you can have a high NTA but still have a sh** business.......

But like I say, their balance sheet is running out of steam....... Wouldn't be investing my hard earned here....

Cheers


----------



## dhukka (19 February 2007)

The analysis on this  website sums up ABC's business. A once good small business has now become a mediocre large business. New capital pumped into the business has exceeded the growth in earnings which means a declining return on equity and a lower intrinsic value, absolutely no margin of safety here.


----------



## michael_selway (19 February 2007)

reece55 said:
			
		

> Michael
> It seems logical that NTA is negative - the money is tied up in Goodwill and Childcare licenses (all intangibles), all of which don't count under the ASX listing rules as tangible assets......
> 
> There are many other companies out there that have a negative NTA - take ALL for example........ Doesn't necessarily mean there are issues, because you can have a high NTA but still have a sh** business.......
> ...




Hi reece, thats true, what about falling operating cashflow compared to the previous corresponding period (25783 from 44670)?

Another point of veiw from anonymous



> Q: So is what you are saying that ABS's aggressive strategy is an attempt to cover up their actual poor performance by using sneaky accounting methods, rather than an attempt to create a market-leading bohemoth that produces superior shareholder returns?
> 
> A: YES, THE AGGRESSIVE STRATEGY ALLOWS THE BOGUS PROFIT NUMBERS TO CONTINUE TO FLOW THROUGH. AS SOON AS THEY STOP BUYING THEY CANNOT MANIPULATE THE NUMBERS. FIND ME ANOTHER CHILDCARE OPERATOR THAT CAN MAKE THE SAME PROFIT PER CENTRE. WHY IS MACQUARIE, JP MORGAN PRIVATE EQUITY AND SO MANY OTHERS SELLING OUT TO HIM. CAN HE REALLY DO ANYTHING SO DIFFERENT TO THEM?
> 
> ...









thx

MS


----------



## reece55 (20 February 2007)

michael_selway said:
			
		

> Hi reece, thats true, what about falling operating cashflow compared to the previous corresponding period (25783 from 44670)?




Hi Michael

Yep, as I said, weak cash flow. This could be seasonal between periods (debtors/creditors can put the mix out sometimes), but certainly prima facie it ain't looking good........

For what it's worth, technically I see the end of a wave five that started back in 2003 here - short is the side of the market I am looking for here..... I think we may head back to previous support at around 5.75 and we will see from there........

Watch for the change in substantial holder notifications......

Cheers


----------



## annalivia (20 February 2007)

dhukka said:
			
		

> The analysis on this  website sums up ABC's business. A once good small business has now become a mediocre large business. New capital pumped into the business has exceeded the growth in earnings which means a declining return on equity and a lower intrinsic value, absolutely no margin of safety here.




Good to see someone here has some sense.
It would appear a brave call to rate a stock trading at about $8 as worth $3 but that's what Clime Capital thinks of ABC Learning.
With most brokers calling the childcare company between $7 and $8, and after a strong share price rise in recent years, Clime says ABC's share price would have to fall about 65 per cent to be of any interest.
Clime's chief criticism involves ABC's diminishing return on equity from 48 per cent in 2002 to below 11 per cent in 2006, during which time equity raised grew from $10 million a year to $330 million.
"If the return on equity remains at 11 per cent and we adopt a 15 per cent required return, the only sensible price to pay for the business is a discount to the equity in the business," Clime writes, adding its estimate of value is "less than $3".
"If ground level represents value, the share price is hovering somewhere in the stratosphere."


----------



## michael_selway (20 February 2007)

annalivia said:
			
		

> Good to see someone here has some sense.
> It would appear a brave call to rate a stock trading at about $8 as worth $3 but that's what Clime Capital thinks of ABC Learning.
> With most brokers calling the childcare company between $7 and $8, and after a strong share price rise in recent years, Clime says ABC's share price would have to fall about 65 per cent to be of any interest.
> Clime's chief criticism involves ABC's diminishing return on equity from 48 per cent in 2002 to below 11 per cent in 2006, during which time equity raised grew from $10 million a year to $330 million.
> ...




Hey I remember reading that, yeah good point Clime has imo.

thx

MS


----------



## reece55 (3 April 2007)

Well, ABC Learning continues it's slide downward.....

After bouncing off the $6.60 level, it has hit a brick wall at $7.40...

Still a short in my mind, but I do note that both JP Morgan and CBA have increased their stakes...... Still feel we will see the $6.00 barrier......

Cheers
Reece


----------



## michael_selway (3 April 2007)

reece55 said:


> Well, ABC Learning continues it's slide downward.....
> 
> After bouncing off the $6.60 level, it has hit a brick wall at $7.40...
> 
> ...




Hi Reece, why are u so bearish on ABS?

thx

MS


----------



## UMike (4 April 2007)

reece55 said:


> Well, ABC Learning continues it's slide downward.....
> 
> After bouncing off the $6.60 level, it has hit a brick wall at $7.40...
> 
> ...




I hope not.

If it does I'll buy more though. (unless there is a good reason for the fall.)


----------



## Portfolio (17 April 2007)

Is Climes comment about ROE really valid for this one?
I agree the ROE has decreased short term due to the fact that they have made acquisitions of centres that arent producing the same amount of ROE.

But isnt that a good thing? The lower the ROE on the acquisitions the more the opportunity to extract value and as they are bedded down provide upside in ROE across the group's assets?


----------



## ekman (17 May 2007)

Soe anyone have an opinion on this one. have there been any reports out lately that you have access to on this stock. I am bleeding


----------



## UMike (17 May 2007)

I wish this stock and CBH wouldn't go up and down at the same time. 

I still feel that ABS will do well longer term.


----------



## reece55 (17 May 2007)

UMike said:


> I wish this stock and CBH wouldn't go up and down at the same time.
> 
> I still feel that ABS will do well longer term.




UMIke
If ABS can't perform in this market, the most liquid, cash filled environment possible, then what makes you think it will do well long term??

I have said it before and I will say it again, this is both fundamentally and technical a weak company...

Technically, lower lows and lower highs.....

Fundamentally, the accounting is shonky and they have really poor returns....

It's a no brainer to me. The only thing I would say is that they have insto support, so this will prevent them from dropping too much.

Cheers


----------



## tdkx669 (17 May 2007)

Its part of ABS movement. Its regualr higher top higher bottom. And comsec put valuation for that at around $9.5. Here is chart i attached for your reference. I found ABS got really good management they always outperform market.


----------



## jchan86 (18 May 2007)

I'm very much back into ABS.

Some whispers in the US market and relatively sound to positive results against tough times over there shall prove interesting.


----------



## UMike (19 May 2007)

reece55 said:


> UMIke
> If ABS can't perform in this market, the most liquid, cash filled environment possible, then what makes you think it will do well long term??
> 
> I have said it before and I will say it again, this is both fundamentally and technical a weak company...
> ...



In short the profits are skewed to the last half of 2007 so they are taking some short term pain for longer term gain. I believe the market has over reacted.

There are so many conflicting opinions (Some that I value) about the value of this company that I won't go too far into it.

insto support is a real positive imo.

Mike


----------



## ekman (22 May 2007)

phew! today's ann is a real relief. bought them at 7.20 thinking the budget should help them but they went down straight after that. someone in the market seems to know when i buy into a company because their sp goes down straight away


----------



## Sprinter79 (22 May 2007)

I have big moral issues with this company, and having had a closer look at their stafffing policies than most people are able to see, the ways they have achieved their bottom line are not sustainable. They have profited under Workchoices, but the bottom line will suffer under a future Labor Govt.


----------



## UMike (22 May 2007)

Sprinter79 said:


> I have big moral issues with this company, and having had a closer look at their stafffing policies than most people are able to see, the ways they have achieved their bottom line are not sustainable. They have profited under Workchoices, but the bottom line will suffer under a future Labor Govt.



 All Childcare providers pay their staff very little.

Closed at $7.53.

I wonder if it power on tomorrow or give up some of it's recent gains.


----------



## PureCoco (22 May 2007)

I wonder how it will go if they cut the 'baby allowance' in the future?  


UMike said:


> All Childcare providers pay their staff very little.



I believe that the way you treat your staff flows on to the kids.  Just look at the next level up in schools.


----------



## UMike (22 May 2007)

PureCoco said:


> I wonder how it will go if they cut the 'baby allowance' in the future?



I believe most of their earning are from overseas nowa days  



PureCoco said:


> I believe that the way you treat your staff flows on to the kids.  Just look at the next level up in schools.



Having a close connection with childcare centers I reckon some of the loveliest/talented people work in those places. 

Pity they earn less than non-skilled production workers in a factory.


----------



## Sprinter79 (22 May 2007)

UMike said:


> I believe most of their earning are from overseas nowa days
> 
> Having a close connection with childcare centers I reckon some of the loveliest/talented people work in those places.
> 
> Pity they earn less than non-skilled production workers in a factory.





I agree Mike. 70% of their earings are from AU.

Not all childcare centres pay crap, but they all pay as little as they can get away with. You pay peanuts, you get monkeys. 
My gripe isn't just with pay rates, but also with the levels of training and information that they give staff. There are plenty of illnesses that kids carry that are potentially very serious/fatal to pregnant mothers and unborn baby. Their duty of care with regards to infectious diseases is found wanting, but it also varies from place to place.

Another area of concern is the way they acquire new facilities. Quite a number are pre-existing facilities and in some cases old houses. Very little money is spent bringing these newly acquired facilities up to the level of purpose built ones. So if you have a choice, send your kid to a purpose built place!!!!!


----------



## Bazmate (29 May 2007)

Dammitt... I hate surprise share placements... There goes another chunk of value from my holdings..

Trading halt today while they flogg their placement to the big boys.


----------



## michael_selway (29 May 2007)

Bazmate said:


> Dammitt... I hate surprise share placements... There goes another chunk of value from my holdings..
> 
> Trading halt today while they flogg their placement to the big boys.




They are always out of cash!

thx

MS

*Earnings and Dividends Forecast (cents per share) 
2006 2007 2008 2009 
EPS 27.0 35.2 45.7 54.7 
DPS 15.0 18.0 22.5 27.0

 EPS(c) PE Growth 
Year Ending 30-06-07 35.2 20.6 30.4% 
Year Ending 30-06-08 45.7 15.8 29.8%  *


----------



## reece55 (29 May 2007)

Well, it's had another bounce of late after announcing a profit upgrade.....

I still say look at the cash flows - this is a Company writing cheques it cannot pay!!!

And what do you know - in the cookie jar again today I see!! Well, I don't blame them - gotta take your money when the money is there for the taking.... Shareholders are diluted again......

Still a dog in my mind.......

Cheers


----------



## dhukka (29 May 2007)

This truly is turning into an awful business. They continue to raise capital to fund growth and in the process continue to lower returns on invested capital. Looking to raise up to 1 billion of capital ($600m debt & $400m equity) this time around.


----------



## brendan87 (29 May 2007)

ABS has one of the best non-resource stock EPS growth rates in Australia.  My data has it on +60% FY07 and +40% FY08 - so who cares is their equity base increases? Also - the stock is priced to fail. Just look at the fwd PE's. If they pull off their US/UK strategy the stock will be revalued upwards. Just my  worth


----------



## UMike (17 July 2007)

ABS sp has been performing extremely poor recently until Monday. Up over 7%.

Despite NAB and CBA decreasing their share holdings.


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## michael_selway (17 July 2007)

brendan87 said:


> ABS has one of the best non-resource stock EPS growth rates in Australia.  My data has it on +60% FY07 and +40% FY08 - so who cares is their equity base increases? Also - the stock is priced to fail. Just look at the fwd PE's. If they pull off their US/UK strategy the stock will be revalued upwards. Just my  worth




yes but cashflow, there was a danger of itbeing net -ve i think in the last results etc

*Earnings and Dividends Forecast (cents per share) 
2006 2007 2008 2009 
EPS 27.0 34.5 44.4 52.7 
DPS 15.0 18.0 22.5 27.0 

EPS(c) PE Growth 
Year Ending 30-06-07 34.5 19.9 27.8% 
Year Ending 30-06-08 44.4 15.4 28.7% *

Thanks

MS


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## dhukka (17 July 2007)

brendan87 said:


> ABS has one of the best non-resource stock EPS growth rates in Australia.  My data has it on +60% FY07 and +40% FY08 - so who cares is their equity base increases? Also - the stock is priced to fail. Just look at the fwd PE's. If they pull off their US/UK strategy the stock will be revalued upwards. Just my  worth




This would be funny if it wasn't meant to be serious. Put simply the value of a company is the value of it's equity. This equity value is adjusted to take account of future growth and returns to shareholders. A company that has to consistently raise equity to fund growth and which achieves the sub-par returns on that equity such ABS has been doing for some time now is a poor business. 

Also PE's are an indicator of price but have nothing to do with value.


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## Miner (23 July 2007)

Hi
Has any one looked in to the recent purchases by one of the directors on a large volume. Not once but few times.
Does he know something which market does not?
Or was it just to raise market expectation or ramping so that some quick money can be made.
I bought some and it went up in a couple of days. I am thinking to hold and then to loose, or to sell and then repent .
Any advise please?

Regards

Miner


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## brendan87 (28 July 2007)

dhukka said:


> This would be funny if it wasn't meant to be serious. Put simply the value of a company is the value of it's equity. This equity value is adjusted to take account of future growth and returns to shareholders. A company that has to consistently raise equity to fund growth and which achieves the sub-par returns on that equity such ABS has been doing for some time now is a poor business.
> 
> Also PE's are an indicator of price but have nothing to do with value.




Dhukka, the “market” value of a company is the (market) value of its equity. This is calculated by multiplying the share price by the number of shares on issue – so the share price, ceteris parabis, measures ‘value’ as perceived by the market at any arbitrary point in time. But is subject to market failures such that one can argue there is an intrinsic or true value of a company’s equity, which, as you said, takes account of future growth and returns to shareholders. Growth in EPS is important because EPS = earnings/no. of shares on issue. So it in fact fully compensates for more shares on issue. The most recent equity raising was only about 12% of equity. So after the full year perhaps we could reconvene to look at ABS diluted EPS. 

For a company such as ABS, in a fragmented market with high capital expenditure requirements – it needs to fund growth somehow. Debt or Equity? That’s not a question I purport to answer here – but I.M.O. a leveraged balance sheet is a sign of a company that is leveraging its opportunities. In the life-cycle of a business, ABS is still quite young – at the stage where its capital outlays are high, it is raising debt/equity and operating CF’s have not come through strongly yet. 

Now also take into consideration the ABS model – buy the franchise, refurb. the centres, drive down vacancy rates (increase efficiency) then reduce overhead through synergy – don’t pass the cost savings to customers = betters CF’s a margins. This doesn’t happen overnight in any business. I can’t think of any strategy involving rapid and significant expansion into new markets not involving large initial outlays funded by either debt or equity – and no shareholders expecting ambitious growth in earnings without a higher s-t debt burden or EPS dilution. Nor are growth-through-acquisition strategies expected to yield high CF’s in its early stages. Perhaps our difference of opinion is due to differing investment time-frames. I.M.O. if you wait for ABS to become a mature business (achieving high ROE, high operating CF’s, lower debt etc), you won’t be paying under $7 a share. Simple.


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## Bazmate (11 October 2007)

Anyone know what happened to ABS at the end of trade today??

It looks like the share price built up all day, but then the gap in the buys and sells now is $6.60 and $6.80... I don't understand..

Baz


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## Rainmaker2000 (12 October 2007)

Just on ABC guys....terrific growth story.....at the rate they are expanding and the shares they are issuing.......how long do people think this above average growth can last?  Personally, I think there will be one bad half result coming soon when acquisition risk comes home to roost.......just on the quality of the childcare if that matters.....my girlfriend is a group leader and has worked at many ABCs over the years.....for what it matters, she can confirm that they are the absolute worst, worst place to care for your childs needs.......so own the stock but not the childcare place....leave that for the white trash with the govt. subsidy....


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## TheAbyss (12 October 2007)

Growth wont stop for a while yet.

They are now in USA, UK and NZ. Room for growth in those areas yet.

They are also capable of expanding their horizons into other areas outside childcare - Aged care, education etc.

When E Groves retires the growth might stop then.

Regarding the quality of the centres my view is they have grown very fast and the logistics took a while to catch up to the growth so there have been issues which will improve over time. if you look at how they have evolved they are improving all the time. They now have their own training colleges for staff etc.

I might end up with a job in marketing at ABC if i keep going so i will stop now.


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## Rainmaker2000 (12 October 2007)

Funny thing, they pioneered the 'one sandwish' lunch instead of 3 in a community centre for the kiddies.......but maybe as you say, here in QLD they have to at least keep some standards since they are now so big that they have so much to lose from bad publicity.........at the same time, all these Eddie Wannabe centres are springing up around Brisbane own by fridge repairmen and the like and in aspiring to cut costs like Eddie, they serve up even lower standards......it is very much a funny 'industry'........for me, the low hanging fruit has definely been picked and I'm more inclined look for the next growth story.....not that ABC has filled its pond yet


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## hector (12 November 2007)

TheAbyss said:


> Growth wont stop for a while yet.
> 
> They are now in USA, UK and NZ. Room for growth in those areas yet.
> 
> ...




Not sure if there is a change in government policy driving this plummet in SP, or just a retreat to value SP. Whatever, I'm short ABS until this trend reverses.


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## michael_selway (12 November 2007)

hector said:


> Not sure if there is a change in government policy driving this plummet in SP, or just a retreat to value SP. Whatever, I'm short ABS until this trend reverses.




Hi maybe if labour wins, it will affect their earnings?

*Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 36.0 43.9 54.6 61.2 
DPS 17.0 21.5 27.5 30.5 *

thx

MS


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## UMike (13 November 2007)

hector said:


> Not sure if there is a change in government policy driving this plummet in SP, or just a retreat to value SP. Whatever, I'm short ABS until this trend reverses.



I am also a holder and have no idea what is driving this recent downtrend.

Theres some fire around where this smoke is I fear.


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## hector (13 November 2007)

UMike said:


> I am also a holder and have no idea what is driving this recent downtrend.
> 
> Theres some fire around where this smoke is I fear.




Well it's jumped up again. My short stop loss triggered and I'm out. If ABS opens higher tomorrow I might be tempted go long. 

I have no idea why a stock like ABS plummets every day for a week (slight exaggeration) and then stages a huge comeback in one morning. It will be interesting to see if ABS builds higher tomorrow, or if it has merely paused and will resume its fall.

Good luck to all,

hector


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## TheAbyss (13 November 2007)

Two things to consider.

1. Eddie Groves stated that his acquisition program will be reduced for the rest of the financial year so growth will slow for a little while.

Currently they have 1084 centres in Australia and 1015 in US which is a year ahead of their 2006 annual report target so a breather can't hurt.

2. Debt - My guess is that the sell off is due to risk management. ABC do have a lot of debt which isnt a bad thing in itself however the funds provided by UBS  are suffering due to the Sub prime contagion effect in my opinion. UBS are a provider to ABC of funding. See excerpt below of an article in The Australian recently for some insight.

Sharing it around 

SAME deal at home. Although Wesfarmers has been bouncing nicely as it brings home the Coles deal, there is $8 billion in debt yet to be syndicated. The three trading banks that own this debt are looking to syndicate to another five or six, which in turn will sub theirs out to another 10 or so. 

Elsewhere, UBS is said to be struggling to offload its MFS debt, ABC Learning and Terry Peabody's TPI still have big lumps of debt to refinance (although with a window open till next year) and Macquarie has a rash of deals to refinance, including MacMedia's Taiwan broadcasting asset. 

Incidentally, if you were wondering why MFS seems to have gone quiet on the hyped sale of Stella resorts, there has apparently been a lukewarm reception from the private equity players who have run the numbers. So watch for an a flurry of good news about how Stella is going like the clappers, followed by word of a float. 

Just as the investment banks need to recycle capital (deal velocity is the buzzword) the financial engineers need to recycle companies or face the irksome spectre of having to run them and fund them.


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## Rainmaker2000 (23 November 2007)

Ok guys, who's up for some ABC........I've always watched this growth story from afar but I just love a plunging share price especially from a profit downgrade which did not look that material at all........currency and funtastic shares.....that's my kind of profit downgrade........I'm doing a bit of research and hope that the general down beat market will further rip the heart out of the share price.......there's nothing I like more than a growth story at a discount just after they tapped major investors for equity at much higher prices....

Does anyone follow ABC enough to know if the reasons for the downgrade is probably lies and it more relates to its US acquisitions, cause the share price certainly has showed no love at all


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## UMike (24 November 2007)

Rainmaker2000 said:


> Ok guys, who's up for some ABC........I've always watched this growth story from afar but I just love a plunging share price especially from a profit downgrade which did not look that material at all........currency and funtastic shares.....that's my kind of profit downgrade........I'm doing a bit of research and hope that the general down beat market will further rip the heart out of the share price.......there's nothing I like more than a growth story at a discount just after they tapped major investors for equity at much higher prices....
> 
> Does anyone follow ABC enough to know if the reasons for the downgrade is probably lies and it more relates to its US acquisitions, cause the share price certainly has showed no love at all



 To many disappointments over a protracted period of time has caused this Share to lose sustained buying enthusiasm.


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## tronic72 (24 November 2007)

Rainmaker2000 said:


> Ok guys, who's up for some ABC........I've always watched this growth story from afar but I just love a plunging share price especially from a profit downgrade which did not look that material at all........currency and funtastic shares.....that's my kind of profit downgrade........I'm doing a bit of research and hope that the general down beat market will further rip the heart out of the share price.......there's nothing I like more than a growth story at a discount just after they tapped major investors for equity at much higher prices....
> 
> Does anyone follow ABC enough to know if the reasons for the downgrade is probably lies and it more relates to its US acquisitions, cause the share price certainly has showed no love at all




Bad, bad timing. As one poster suggested, ABC could be hit hard if Labour wins the election. The people that work at these centres are on the low side of the the income scale and could be one of the first to cry poor. 

Put it this way, Rudd won't have any incentive NOT to raise their pays and there won't be anyone to stop it happening with wall to wall labour.

IMHO, ABC will be much less attractive and a higher risk under a labour government. We are already seeing large amounts of large scale work being postponed in WA pending the federal election.

My 2c


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## oremo (3 January 2008)

Hi,
I'm just a dumb cluck father whose daughter owns a childcare centre in Sydney.

I thought the whole ABS concept was sound so I bought $12K of shares in ABS that are now valued at $9k. I know you seasoned veterans will laugh but the hammering hurts. Any kind soul out there willing to give me some geniune advice on what to do.

If you feel like giving this beginner a dose of "serves you right" that's ok because I deserve it.

Happy new year


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## Rainmaker2000 (3 January 2008)

Mate Oremo, don't beat yourself up.......we've all had the stock market touch us up for 25% or more and that's on well functioning, profitable businesses........not that long ago, I had a stock which shall remain nameless which I bought at $2.20 and watched it go down to 80cents, bought some more and saw it taken over at $1.75...it was profitable all along.........there's no advice here but we can chat...

The point is less about what the market says or does but whether the stock or company has performed to your benchmarks.........ABS may have had a bit of bad news and there may be some bad news to come but in perspective.....My understanding is that ABC will make money this year......My understanding is that they will make more money this year than last year......my understanding although I don't follow it 'like an owner', is that ABC won't make as much money as they originally planned for.....at current valuation (P/E), each ABC share commands a pretty reasonable chunk of earnings...something like a forward PE of 12ish...the question for each investor to answer is how much will they earn next year and year after and what are the risks

If you need more solice, take it from the Singaporean institutional investor which I can't really remember but I think took 12% of the company at round $8 a share.....they think its a growth story and worth it.......


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## hyperterminal (3 January 2008)

oremo said:


> Hi,
> I'm just a dumb cluck father whose daughter owns a childcare centre in Sydney.
> 
> I thought the whole ABS concept was sound so I bought $12K of shares in ABS that are now valued at $9k. I know you seasoned veterans will laugh but the hammering hurts. Any kind soul out there willing to give me some geniune advice on what to do.
> ...





Im sure no one would take pleasure in the growing hole in your pocket  to what you should do in a second but firstly to ABS itself...


Over the last two years there has been numerous somewhat questionable company practices which raise concern, less than transparent accounting practices complicate earnings projections and add to mistrust in the market. Other Revenue this year will be increased by GBP20m (A$50m) due to a 'discount on acquisition' following the recent Leapfrog UK purchase. This is a large sum compared to the original GBP31m purchase price. ABS is also not as transparent as it might be in relation to related-party transactions with Queensland Maintenance Services (QMS), which is run by Eddy Groves' brother-in-law. QMS carried out $75m in maintenance and development work in FY06 but the value of work in FY07 is not disclosed because this is not required under new IFRS accounting standards. What to think of such party transactions?????? particularly if press reports are accurate, that the work was not put to tender, an overriding concern is the likelihood that further equity will be issued to fund US acquisitions, thereby diluting existing shareholders. Also levels of debt are rising to fund aggresive growth targets, In todays tight credit markets it remains to be seen whether such agressive growth is the right strategy for ABS 


IMHO, I would get out even with somewhat favourable goverment childcare policies, I think ABS will continue to destroy shareholder value...

Cut your losses, deversify across different sectors and dont put all your eggs in one basket next time.... good luck and I hope your next trading experience is better then your first


hyper


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## oremo (3 January 2008)

Rainmaker thank you. 

Kind of you to give me some solace

I will (here's my first attempt at market jargon)...go long...and hold.

Take care and catch you soon. Oremo


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## dhukka (3 January 2008)

oremo said:


> Hi,
> I'm just a dumb cluck father whose daughter owns a childcare centre in Sydney.
> 
> I thought the whole ABS concept was sound so I bought $12K of shares in ABS that are now valued at $9k. I know you seasoned veterans will laugh but the hammering hurts. Any kind soul out there willing to give me some geniune advice on what to do.
> ...




Oremo, 

We all make mistakes so don't beat yourself up about it. It would be interesting to hear why you thought an investment in ABS was sound. As stated on the first page of this thread ABS management have well and truly run this business into the ground. A once very profitable small business has become a large business generating mediocre returns on capital. 

ABS keeps raising extra capital and debt to fund growth and continue to produce incrementally worse returns on that capital. You should take your medicine and move on unless you have good reason to believe the company can significantly raise their ROE. Forget P/E's, they are of no use in estimating the value of a business.


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## Rainmaker2000 (3 January 2008)

Hyperterminal, you raise some interesting issues.......as you can see from previous posts....I considered this stock but its mainly the frequent equity raisings and high level of debt that turned me away...Also figuring in my decision is my chronic distrust and dislike of Eddie and his way of business...I may consider at lower price points however.....hehehe

Bottom line: do your research, don't just trust a broker or someone els's viewpoint........ABS could still be an outstanding performer, but it is certainly not the most conservative stock on the market.........imagine all the people who bought Centro thinking it was just a boring property trust.....ABC is not just a boring owner and operator of childcare centres......for example, I don't know if there are any hard assets on their balance sheet and I do know they run off something like a franchise model


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## Real1ty (3 January 2008)

Firstly.

I used trade ABS a lot and made really good money doing so.

It was quite volatile and made it reasonably easy to trade with a fair degree of confidence.

I got lazy, and got caught with the stock just prior to the profit downgrade.

What i think needs to be addressed so far that hasn't is the following.

The A$ is what has hurt earnings, not lack of numbers or high costs etc etc.

While they did downgrade eps, they have still forecast growth of 15%.

They have also restructured their debt facility for a 3 year period.

They have also hedged a lot more of their earnings 90% of 2008 and 79% of 2009, so this should smooth earnings.

They also have a lot of Funtastic shares, that are on their books at $1.85 but are now trading around .60c odd.

I notice they have purchased more though, so are trying to either average down their unit cost, or possibly are considering a takeover.

Eddie Groves is a continual on market buyer of his stock.

Do you believe in the story long term or not?

How important is that $3,000.00 loss to you?

How much would it hurt if that became $7,000.00?

Are you prepared to take the risk to see your share price slip further this year, as that is the likelyhood, for the chance IF they come out the other end you MAY end up making a profit.

Will the capital loss actually help you elsewhere?

It's all about risk vs reward and ABS are a high risk stock presently.

It's very hard for us to answer your question but i will hold as i believe in ABS.

Good luck oremo


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## hyperterminal (3 January 2008)

Rainmaker2000 said:


> Hyperterminal, you raise some interesting issues.......as you can see from previous posts....I considered this stock but its mainly the frequent equity raisings and high level of debt that turned me away...Also figuring in my decision is my chronic distrust and dislike of Eddie and his way of business...I may consider at lower price points however.....hehehe
> 
> Bottom line: do your research, don't just trust a broker or someone els's viewpoint........ABS could still be an outstanding performer, but it is certainly not the most conservative stock on the market.........imagine all the people who bought Centro thinking it was just a boring property trust.....ABC is not just a boring owner and operator of childcare centres......for example, I don't know if there are any hard assets on their balance sheet and I do know they run off something like a franchise model





haha - yeah everyone has there price rainmaker even if its headed by slippery eddie =) Yes, debt levels are a concern (rainmaker I think the centro analogy fits ) growth, traditionally when soley offering one market service should bring synergies in adminstration, logistics, third party strategic partners etc etc.... therefore further aquisitions should bring increased ROI.... this is something I fail to see as of yet.... and questions Im sure the shareholders would like answers from the board about...


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## oremo (3 January 2008)

Hyperterminal

Open thanks for the sound advice. Different from Rainmaker but also valid. I guess it's a personal decision. I don't feel comfortable with the stock. It makes me sad to log on and see the price constantly see-sawing and trending down.

Made my mind up...I'm getting ou.

Cheers

Oremo


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## Miner (5 January 2008)

oremo said:


> Hyperterminal
> 
> Open thanks for the sound advice. Different from Rainmaker but also valid. I guess it's a personal decision. I don't feel comfortable with the stock. It makes me sad to log on and see the price constantly see-sawing and trending down.
> 
> ...




Dear Oremo

I am not well qualified to advise you on ABS as I saw already there have been good postings at your request by others.
What prompted me to post this is at one instance you have said that you would be holding ABS for long and last posting you said "made my mind and I am getting out". Is your mind following the same volatility as ABS. My candid  advise will be please DYOR. Please also consider if you want to put your hard earned investment on Eddie who has reportedly done a favour to his brother in law by awarding a cleaning contract. When the CEO is not transparent and there is a suggestion to be having party related transaction then I would keep myself away and will not join the club. Personally I have had ABS and even after reading Bell Potter recommendation and other brokers ABS as a buy - I sold it off to cut my losses. I am happy as the share price has gone down by about $1 since I sold at a marginal loss.
I have  the intention to attach two pdf reports (could not do so as each of them 600 kb and there is a limit of 480 kb)  from BPS published in Nov 07 just to help you to read some data. However DYOR again and just DO NOT FOLLOW what Bell Potter said. Often they have turned out to be inconsistent as per my observation.
I would try to post separately.
Good luck

Regards


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## Miner (5 January 2008)

SORRY TRIED TO ATTACH SEPARATELY BUT THE FORUM HAS LIMITATION ON SIZE.
Hello Joe - can you please suggest how to get around it ? It is a pdf downloaded document so I can not truncate it and only 680 kb.

Regards


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## TheAbyss (5 January 2008)

Miner said:


> SORRY TRIED TO ATTACH SEPARATELY BUT THE FORUM HAS LIMITATION ON SIZE.
> Hello Joe - can you please suggest how to get around it ? It is a pdf downloaded document so I can not truncate it and only 680 kb.
> 
> Regards




If you use one of the compression programs you can specify volume sizes(convert the pdf to 2 x files at the ASF max capicity).

Winzip or Winrar will do the job


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## nikki (5 January 2008)

Oremo,

if you decide to sell make sure you know why and not because you are fearful of the SP going below 4.5 or whatever.

i have done exactly what you are considering - with ABC in fact (when it was trading above 7 and would keep falling just below it) - and i sold out without understanding any fundamentals of share investing/trading. this was a mistake because i did the same with another stock the other day and lost money yet again! so i went from 10K to 7K to 5K because i did not learn from my mistakes.

i realised - after selling the other day - that i was buying the stock as an investor and selling them at a loss because i was behaving like a trader by watching it and analysing its day to day movements.

hope my mistakes help you in some way with your choice.


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## Rainmaker2000 (5 January 2008)

The point you make Nikki is exceptional and shows how 90% of people think they are investors and yet the average ASX stock is held for less than 10 months on average....in reality, 90% of people are traders...I find it tough to comprehend.........the purchase of stock is a purchase of part of a business........people usually don't buy real property on impulse or buy a small business without due diligence and yet people buy and sell stocks without such preparation.......stock prices do not always go up but then they are not always a good barometer of business progress either......


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## oremo (8 January 2008)

Hi guys

Appreciate the feedback. 

Saw ABS go down 3 cents, 5 cents and 23 cents yesterday respectively. Glad to say I sold out and missed out on the above losses.

Fells like a win only I still lost. Where do I go from here? keep the cash in the trading account and try to pick up a bargain or tranfer out and put it in the Savings Bank? I'm serious. What do I do?

Thanks in advance

Oremo


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## Rainmaker2000 (8 January 2008)

Even in this overvalued market, there are bargains to be had out there.....far more than say 2 years ago for me....maybe read a few classic books like 'One up on Wall Street' and you'll be ready to pounce.............unfortunately, I don't see much benefit in savings accounts....they don't pay franked dividends, they pay the opposite with no prospect for capital gain........having said that, if rates hit 12%, then I'm into bonds or a savings account........basically, the way our tax system works, I'd be made to have savings accounts...hehehe


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## ROE (8 January 2008)

I personally wouldn't touch this stock at this price dont know why someone would pay $7-$8 for this stock a while ago.

Two column of this guys financial statement is enough to keep me well away.
1. 92% debt level
2. low ROE/ROC and declining.

as US head into recession more people are out of work  ..they wont send their kids to childcare


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## oremo (8 January 2008)

Hi Roe

Gotta contradict you. With domestic debt levels so high more moms are going to get into the workforce to help with debt. Necessitate childcare which is becoming increasingly Govt. subsidised. 

Govt pays their fees every time..on time


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## TheAbyss (8 January 2008)

As i understand it there is some concern that ABS are bidding for another 50 centres in the UK which adds fuel to the fire regarding debt (50 centres to go with the 130 they already have).

You have to ask how they are getting more funding in the current credit climate unless their books are an acceptable credit risk to the lenders. If they can get the funds then that would have to be a positive, dependent on the conditions of course.

CBA also sold down last week which would have caused more downside to the SP.

I am not ignoring the issues also stated by others in this thread however i am willing to stay on board though it is an easier decison when you are free carrying then if you bought in on a higher price.

My opinion is that when we look at ABS in a few years time they will be in good shape so long as EG is still at the helm. The guy has moral fibre and add to that his passion and drive, the future of ABS is solid. Sure he is out for himself first but that is a positive as if he wins the share holders win as he will not let anyone down intentionally.


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## ROE (8 January 2008)

oremo said:


> Hi Roe
> 
> Gotta contradict you. With domestic debt levels so high more moms are going to get into the workforce to help with debt. Necessitate childcare which is becoming increasingly Govt. subsidised.
> 
> Govt pays their fees every time..on time




Not all ABS earning comes from Aus .. the US play a big part, how can people sending their kids to childcare if they don't have a job  .. citigroup about to down size 5-10% of work force...

and their debt level is scary in these environment.....if it's a good business you dont need that much debt...bad business tend to get into bigger and bigger debt and lower and lower ROE

If you have kids, it cheaper for a mother with 2-3 kids not to work and live off the system than working in Australia.


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## dhukka (8 January 2008)

ROE said:


> I personally wouldn't touch this stock at this price dont know why someone would pay $7-$8 for this stock a while ago.
> 
> Two column of this guys financial statement is enough to keep me well away.
> 1. 92% debt level
> 2. low ROE/ROC and declining.




All you really need to know isn't it. Definitely one to stay away from unless they can turn their returns on capital around and reduce their debt


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## tronic72 (10 January 2008)

I disagree. Not with you reasoning but your view it's a stock to keep away from. 

The way I've just looked at it (got in at .455 which is a yearly low). Due to the whole sub prime issue, more and more families will be forced to take second jobs or for both partners to be working. The bottom line for this is more kids in Childcare and ABCs income is virtually guaranteed due to it's close ties with  governments. Sure they have high debt but also have high income.

We'll see.


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## ROE (11 January 2008)

tronic72 said:


> I disagree. Not with you reasoning but your view it's a stock to keep away from.
> 
> The way I've just looked at it (got in at .455 which is a yearly low). Due to the whole sub prime issue, more and more families will be forced to take second jobs or for both partners to be working. The bottom line for this is more kids in Childcare and ABCs income is virtually guaranteed due to it's close ties with  governments. Sure they have high debt but also have high income.
> 
> We'll see.




Agree, different people have different view on stocks and that what make the market ticks. 

for me I have a few simple rules that filter out what I want to buy. 
I usually don't break the rules and breaking the rules usually makes me lose capital  which happen here and there because I'm human. 

one of the rule is High Debt company. In my opinion high debt business are bad business model in the first place. You use leverage to get earning 
so the fundamental of high profit margin and high return on equity is not there so when debt dry up what will happen to your earning? no one really know and that unknown keep me away. I do have exceptions however but again it's something I use when I decided to run my ruler on a stock.


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## Rainmaker2000 (12 January 2008)

I guess ABS is getting a little more scary than I thought it might.......that is a high debt ratio, there is substantial acquisition risk remaining and no doubt some non-cash write downs on intellectual property coming in the future.......does anyone know the stock well enough to know how much real property (real assets) is on the balance sheet......as in, are all the child care centres in a separate property trust?


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## mrgroundwork (23 February 2008)

anyone still watching/holding? never thought it would go sub 4...

i think im going to get back in... might be some short term pain, but to me this has been punished too hard...

i heard a theory that hedge funds are aggresively short selling the stock, as eddie groves has large positions on margin... idea being that if they can get the price to tumble (which it has), force him to sell when he gets margin called, price will tumble further, then they can load up on the cheap... interesting theory...


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## josjes (24 February 2008)

Lazard Asset Management apparently has a lot of faith on this company, increasing its position and has been filing substantial holder notice from $7 down to $4. 

LAM recognized the value of Flight Centre and sticked with it even when its share was in down trend from $16 to $9, and when Graham Turner along with the private equity tried to pick up the company on cheapo for $17, it defeated the scheme of arrangement for the $1.6 billion private equity bid for Flight Centre. Flight Centre has since hit $32 and now is sitting around $26.

I am sticking with ABC for now by following LAM's action, until proven otherwise of their substantial holding notice.


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## reece55 (24 February 2008)

reece55 said:


> UMIke
> If ABS can't perform in this market, the most liquid, cash filled environment possible, then what makes you think it will do well long term??
> 
> I have said it before and I will say it again, this is both fundamentally and technical a weak company...
> ...




Wow, can't believe where this stock has gone since I posted this message.... Even I thought it would find support at $4, and I have been a big bear on this stock for ages.....

I think we were at about $7 bucks when I said this...... This stock is a pure example of when the going gets tough, those with poor fundamental records and positions will be hammered....

I say to anyone who says the following:

* But Lazard keep increasing their holding; 
* It pays a nice dividend;
* But childcare is recession proof; and
* But look how low the price is -

LOOK AT THE CHART....... The answer is already there, even if you don't believe Dhukka and myself when we say the funnymentals are knackered.... Picking bottoms is a poor mans game and ABC Learning Centres is in the mother of all downtrends... You might get a bounce, but this stock has a lot of repair work to do before we get back to $7.00......

Cheers


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## Rainmaker2000 (24 February 2008)

Surely Eddie is not picking shares up on margin surely......I wonder who would be offering lvr on ABS to Eddie.........since its already got the hefty gearing ratio and add another 40%-60% lvr to that for margin....I find this very difficult to believe a lender would be that silly.......since I doubt Eddie has a diversified portfolio, it would be just a house of cards.....very similar to my unsuccessful tilts at stock investment in the game RailRoad tycoon....but I digress


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## mrgroundwork (25 February 2008)

rainmaker - it is not out of the realms of possibility that eddie wanted to diversify away from just ABS, decided he would use his equity in those shares to buy something else... i dare say heaps of lenders would have been happy to arrange this kind of facility last year... 

reece - i would like to hear more about the poor fundamentals..


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## Junior (25 February 2008)

reece55 said:


> Wow, can't believe where this stock has gone since I posted this message.... Even I thought it would find support at $4, and I have been a big bear on this stock for ages.....
> 
> I think we were at about $7 bucks when I said this...... This stock is a pure example of when the going gets tough, those with poor fundamental records and positions will be hammered....
> 
> ...




What about long term fundamentals?  Might be a decent value stock to file away in the SMSF for 10 years.


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## ROE (25 February 2008)

josjes said:


> Lazard Asset Management apparently has a lot of faith on this company, increasing its position and has been filing substantial holder notice from $7 down to $4.
> 
> LAM recognized the value of Flight Centre and sticked with it even when its share was in down trend from $16 to $9, and when Graham Turner along with the private equity tried to pick up the company on cheapo for $17, it defeated the scheme of arrangement for the $1.6 billion private equity bid for Flight Centre. Flight Centre has since hit $32 and now is sitting around $26.
> 
> I am sticking with ABC for now by following LAM's action, until proven otherwise of their substantial holding notice.




FLT is a far better business than this dog and I did buy FLT at $10 or so ..for a start it doesn't have much debt. Two it cost very little for FLT (a few computers and a few staffs) to set up a shop and immediately get a high ROE.. the more shop they open and have customers walk through the door the more cash they make...that why u see FLT in every street corner.

How much does it cost ABS to open a child care centre? and looking at their ROE I said this is a dog business .. I haven't seen anything business that has such a low ROE.

Uncle Warren famous word

"Time is the friend of the wonderful business. It's the enemy of the lousy business. If you're in a lousy business for a long time, you're going to get a lousy result, even if you buy it cheap. If you're in a wonderful business for a long time, even if you pay a little too much going in, you're going to get a wonderful result if you stay in a long time"

and my take if you buy a wonderful business for cheap you going to get extra-ordinary return like FLT


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## reece55 (25 February 2008)

Junior said:


> What about long term fundamentals?  Might be a decent value stock to file away in the SMSF for 10 years.




All depends on your time frame, but then again, why would you waste the capital when you can stick it else where? Looks like they overpaid for their expansion in the US at the wrong time and now they are heavy with a whole pile of debt to service their intangibles. I personally don't put ABS in the value stock pile, at the moment I would say it is appropriately priced.

The half results were lodged right at the close - never a good sign!!! Have a look through, not exactly a good result. Divy maintained at 8 cents, but EPS down 51% and high finance costs associated with expansion.... I will have a better look tonight and explore...

Cheers


----------



## grace (25 February 2008)

We used to own a Child Care Centre.  Sold out for personal reasons.   

Eddie would turn up at our child care conferences with such arrogance and sware all the way through his presentations.   I disliked the man from that point on.  

One thing, if ABC does go broke, there are going to be some well discounted child care centres come onto the market.  It will be like the Centro debacle.  I might be able to buy one back at half the normal price!


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## Rainmaker2000 (25 February 2008)

I broadly concur with the points above, especially like Warren B quote..........I'm not totally convinced ABS is a business with poor economics......I just think that those in charge of the company have no idea about shareholder value.....there is no attempt at all to fund growth with cashflows for example.......it just looks like empire building

Its all just one big debt/equity fest.....ABS should own a stock broking house....for example, there is $6.4 million of costs just for a share purchase plan....that would buy a certain ailing stock broker I know...

Juries still out.....lots of one offs and wasted past shareholder money on 'one-offs'........I don't know how one is meant to understand a business whose EPS is down 50% in a half and then we are told, "Don't worry, its just the change of seasons"

It's pretty much just Reverand Eddie and the former Lord Mayor of Brisbane telling everybody to keep the faith, you'll get your 15% EPS........there's no certainty that won't happen but I do know that's one ugly income statement and one uglier balance sheet.....with all that leverage, they would do well just to predict whether ABS will make a profit or loss


----------



## reece55 (26 February 2008)

And what do you know, down she goes......

ABS opens at 2.05 today, looks like the market just doesn't believe the fantasy that they will be able to maintain 15% EPS growth after a killer half year....

People have to change their mentality at the moment, or your going to lose a lot of money... This is a bear market and stocks with high debt and poor fundamentals will be hit....

My condolences for anyone who is left holding this crappy piece of paper, but it's not like I didn't warn everyone... again and again and again....

Cheers


----------



## dhukka (26 February 2008)

reece55 said:


> And what do you know, down she goes......
> 
> ABS opens at 2.05 today, looks like the market just doesn't believe the fantasy that they will be able to maintain 15% EPS growth after a killer half year....
> 
> ...




Yep, if you bought this, you got what you paid for, a crappy business producing crappy returns, currently $1.35, ouch !


----------



## Junior (26 February 2008)

Junior said:


> What about long term fundamentals?  Might be a decent value stock to file away in the SMSF for 10 years.




Dang.  I retract my earlier statement, could be the next AFG....I wonder if any of the debt facilities have a condition relating to market cap.


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## YOUNG_TRADER (26 February 2008)

Jumping Jimminey Batman looks like there's some real trouble over here,


I heard a rumour it had something to do with hedge fund manipulation and stop losses, including the MD who had a very large geared postion in the company who is being stopped out today

Heard the same thing on AFG 

Seems really dodgey to me


----------



## UMike (26 February 2008)

Whats with the Trading halt.

It's been trading for an hour and on the rise before the halt.
It's not like a reverse speeding fine or anything.


----------



## 3 veiws of a secret (26 February 2008)

Interesting as soon as purchase a few the share shot upfrom $1.29 to $1,45 in seconds somebody has faith in this share ,but I agree very speculative trading going on today ...I'm in with the wolves till I make a few quid !


----------



## josjes (26 February 2008)

3 veiws of a secret said:


> Interesting as soon as purchase a few the share shot upfrom $1.29 to $1,45 in seconds somebody has faith in this share ,but I agree very speculative trading going on today ...I'm in with the wolves till I make a few quid !




Singapore Temasek Holdings has 12% of ABC back when the shares was $7.20 in June. 
Just a speculation, they may still have faith with the underlying business.


----------



## Bolivia (26 February 2008)

Value was obviusly not there at circa $4.00 - but has the stock been oversold here?

They have confirmed no covenants on their debt relating to market cap.

They must be hugely relieved to have refinanced. What does everyone see as the main problem ABS faces? Sure they paid too much for the assets in the USA but are these concerns already factored in to this sell off. This sort of fall seems very much margin related. 

Probably another day of margin selling to go. Mr Groves might be included in that.

Brave to go in today IMHO.


----------



## 3 veiws of a secret (26 February 2008)

Bolivia said:


> Brave to go in today IMHO.




True if your looking at term.......in my case I go in and out like Flynn....unlike Groves.


----------



## Miner (26 February 2008)

*ABC Learning moves to calm investors
Posted 46 minutes ago * 
26 FEBRUARY 08 (EXTRACTED FROM ABC NEWS POSTED IN ABC WEBSITE) 1.16 PM WST 

Childcare operator ABC Learning Centres is trying to allay investor fears after a share plunge today.

Today its shares opened at a six-year low, and have lost as much as 70 per cent.

The company released half-year profits yesterday that were well below expectations, but there was no major movement in the stock.

Today the company's shares are changing hands at a frenetic pace as brokers buy and sell for around $1.90 at about 1:30pm AEDT, which is a 50 per cent fall on this morning's opening price.

Over 100 million shares in the company have changed hands so far on the Australian Stock Exchange and some analysts are questioning the future viability of the business. 

ABC Learning has issued a statement to the stock exchange in response to market speculation, saying the company is trading profitably.


----------



## josjes (26 February 2008)

As at 03:19 pm today:

951 buyers for 7,227,870 units 	343 sellers for 2,035,031 units at $2.12 now. 

I think it is starting to find bottom. Strong support at $2 and above. 
What a scary ride, was $1.15 low this morning. I nearly lose my cool today, and just a second away from hitting the selling button, but that emergency ASX announcement save my day.


----------



## ROE (26 February 2008)

Big drop in profit and no market update leading to the announcement?
Surely they know something as big as 50% drop in the profit.


----------



## Real1ty (26 February 2008)

Miner said:


> The company released half-year profits yesterday that were well below expectations, *but there was no major movement in the stock*.




LOL, I would say there is a very good reason behind the shares having no major movement yesterday.

They released the results after the market close.....


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## 3 veiws of a secret (26 February 2008)

What a brilliant day today ,for those who speculated from early trading to close ......I bagged my profit and it looks like Turkey, Syria , Northern Iraq ,or  perhaps Bulgaria might be on the holiday horizon at the end of the year! 
Those holding good luck..... I'm outta here!


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## grace (26 February 2008)

Story on ABC 7.30 report which I missed but my husband said it all looked doom and gloom for them.  Not online yet.


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## benwex (26 February 2008)

I watched the show and must disagree...

If anything it was a shot at the private sector operating in the child care industry. This is a pet topic that has been dogging ABS and the rapid shift in the industry as consequence of the governments lack of commitment and resources..  

The comments from some lady invertiewed, who is head of some child care association is in no real position to comment on the viability of ABS business model or debt levels.

The analyst had a more intelligent view but still failed to inpress...

A beat up if you ask my opinion and the price drop today was a classic margin call sell.

Time will tell but I think their is going to be some strong support for the stock at $2.00

Eddy Groves is a very smart and cluey guy (Ex Mckinsey) and the rumours of hedge fund shorting it to wash out the large margins on  ABS has merit..

will see.

benwex


----------



## 3 veiws of a secret (26 February 2008)

I just wonder if this was a corporate raid that forced the hand for Groves (into selling ?) ....sort of Warren Buffet wager on the sterling pound that made him a 'billion dollar baby'.
If so ...it was a masterstroke play.....any other companies in the same position that might be targeted must be as nervous as Groves. "Are you Ready Eddy"


----------



## korrupt_1 (26 February 2008)

There are allegations and rumours that some fund managers have been conspiring together to push weaken stocks to ridiculously low prices so they can get them at dirt cheap prices...

I cant find the source,.. but it's posted around here in one of the other threads.

Perhaps ABS was another victim - that got carried away?


----------



## grace (26 February 2008)

Leverage on Leverage, don't you just love it.  Just how much actual personal and company debt exists on those assets (not that ABS is alone in that one, just a sign of the times).

But then, they have plenty of US property that will hold up when being valued!


----------



## roland (26 February 2008)

korrupt_1 said:


> There are allegations and rumours that some fund managers have been conspiring together to push weaken stocks to ridiculously low prices so they can get them at dirt cheap prices...
> 
> I cant find the source,.. but it's posted around here in one of the other threads.
> 
> Perhaps ABS was another victim - that got carried away?




Interesting comment ... I can't help but feeling that there are a group, or groups of investors that are on the hunt for companies that can be negatively linked to the credit crunch in order to push them over the edge on some bad sentiment or negative news.

In our current nervous market environment any hint of credit problems can cause a huge avalanche of selling, driving the SP well below what it is worth.

Now if you were in a position to do this and profit from this, wouldn't you do it?


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## michael_selway (26 February 2008)

michael_selway said:


> Hey check thsi out
> 
> *Net Tangible Assets 31/12/06 31/12/05 cents cents
> Net tangible assets per share (76.5) 24.1*
> ...




Unbelievable today, who woudl have thought!

*Date: 26/2/2008 
Author: Fiona Tyndall 
Source: The Australian Financial Review --- Page: 17 
ABC Learning Centres CEO, Eddie Groves, has dismissed rumours he had to divestshares in the Australian child care group because of margin calls. The marketspeculated Groves faced margin calls when ABC shares were trading at between$A3.50 and $A4. Groves said he has not sold any stock and only faced margincalls at a much higher level than speculated by the market. ABC shares fell$A0.03 to a year-low of $A3.74 on 25 February 2008. The company reported a 42%fall in net profit to $A37.1m for the first half of 2007-08, associated with theimpact of the summer holiday period in the US, but has maintained its forecastof earnings per share growth of 15% for the full year. US earnings will besignificantly higher in the second half*

*Date: 26/2/2008 
Author: Vanda Carson 
Source: The Sydney Morning Herald --- Page: 19 
The profit of Australian child care centre group, ABC Learning Centres, has beenaffected by its US expansion. The company has posted a net profit of $A37.1million for the six months to 31 December 2007, a fall of 42 per cent. It blamedthe drop on the "seasonality" of its US earnings, but also had one-offcharges of $A63 million. The US expansion was attributed with the 62 per centrise in profit in 2006-07 

Back 
Date: 26/2/2008 
Author: Fiona Tyndall 
Source: The Australian Financial Review --- Page: 17 
 ABC Learning Centres has reaffirmed its full-year forecast of 15% growth inearnings per share despite a significant decline in interim profit. TheAustralian child care group has reported a 42% fall in net profit to $A37.1m forthe first half of 2007-08, with the summer holiday period in the US a majorfactor. Group revenue increased 65% to $A1.1bn in the half, with US earningsexpected to be significantly higher in the second half. Shares in ABC closed$A0.03 lower at $A3.74 on 25 February 2008 *


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## annalivia (26 February 2008)

I am not quite ready to completely forgive Roger Montgomery for CCP. However he definitely helped me stay clear of this dog(ABS) a long time ago.
I always had it in the back of my mind to short this stock but whatever...

The following was sent to Stockval subscribers today.

*Today both Eddie Groves’ worst nightmare, and Roger Montgomery’s 4-year prediction, became a reality. The result? ABC Learning Centres’ share price dropped over 60% this morning to $1.40, down from $8.00 in 2006.

As many of you would know, Roger has consistently questioned the impact of ABC’s capital raisings over the past four years on the company's profitability. 

In 2006 the declining profitability saw StockVal place a $3.00 valuation on ABC Learning Centres despite its share price trading at around $8.00. The insanity of such a different valuation to the market and other analysts was not lost on journalists at The Sydney Morning Herald, who on April 14, 2006, wrote; 

"It would appear a brave call to rate a stock trading at about $8 as worth $3 but that’s what Clime Capital thinks of ABC Learning. 

"With most brokers calling the childcare company between $7 and $8, and after a strong share price rise in recent years, Clime says ABC's share price would have to fall about 65 per cent to be of any interest.

"Clime's chief criticism involves ABC's diminishing return on equity from 48 per cent in 2002 to below 11 per cent in 2006, during which time equity raised grew from $10 million a year to $330 million.

"If the return on equity remains at 11 per cent and we adopt a 15 per cent required return, the only sensible price to pay for the business is a discount to the equity in the business," Clime writes, adding its estimate of value is "less than $3".

"If ground level represents value, the share price is hovering somewhere in the stratosphere."

Roger is a firm believer in using StockVal to analyse the entire business and all of its cash flows both in and out. Such a method is not popular amongst private and professional investors, but over long periods of time, should produce results.
*


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## dhukka (26 February 2008)

annalivia said:


> I am not quite ready to completely forgive Roger Montgomery for CCP. However he definitely helped me stay clear of this dog(ABS) a long time ago.
> I always had it in the back of my mind to short this stock but whatever...
> 
> The following was sent to Stockval subscribers today.
> ...




I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.


----------



## reece55 (26 February 2008)

dhukka said:


> I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.




I agree with you dhukka - if he was that confident, why didn't CAM have a short position in the entity - I mean, looking backwards now, it was the trade of the century. It's easy to say what could have been, but harder to say what has come to pass IMO......

Back on ABS - At the open of $2.00, I would have thought this sell if is now over done, low and behold it went all the way back to 1.15. Just looked like margin calls being hit to me, more than anything else. The bar for today is positive, with a large hammer indicating buying support. If you look at CNP and Rams, they didn't have anywhere near the same positive closes when they announced the terrible news. Note that doesn't mean I would buy in yet because fund managers obviously won't want to have a slice of the equity pie for some time to come, but at the end of the day if ABS is still complying with it's debt covenants and has sufficient cash flow to support the debt, then it's probably going to get through the crunch. You may be waiting a very very very long time to get any growth though, the market is always once bitten twice shy....

Cheers


----------



## Rainmaker2000 (26 February 2008)

All this talk of hedge funds and fund managers conspiring to lower the prices of ABS seems a bit far fetched to me.....Why would anyone go to the trouble and risk to pick up a stock which is looking more and more unlike investment grade anyway...this is all just good media at the moment.

No doubt the stock may have been oversold at $1.15 but why is it unreasonable for the market to undervalue this thing in the current climate, especially since Eddie is refusing to tell about a margin call and the market guidance of this highly leveraged story has been well, a little vague

I'm still getting over the prospect of margin loaning a company with already 100% debt to equity.....and I thought I was a thrill seeker......


----------



## dhukka (27 February 2008)

Rainmaker2000 said:


> All this talk of hedge funds and fund managers conspiring to lower the prices of ABS seems a bit far fetched to me.....Why would anyone go to the trouble and risk to pick up a stock which is looking more and more unlike investment grade anyway...this is all just good media at the moment.
> 
> No doubt the stock may have been oversold at $1.15 but why is it unreasonable for the market to undervalue this thing in the current climate, especially since Eddie is refusing to tell about a margin call and the market guidance of this highly leveraged story has been well, a little vague
> 
> I'm still getting over the prospect of margin loaning a company with already 100% debt to equity.....and I thought I was a thrill seeker......




Exactly, this stock is being re-rated where it should be, I wouldn't say sub *$2* is cheap as the company continues to go from bad to worse. 

ABS is actually a perfect case study in how to take a perfectly good small business and run it into the ground by turning it into a large debt ridden low return business. Someone mentioned earlier that Eddy Groves is a very smart guy. Whatever his smarts are, they don't appear to business related.


----------



## hangseng (27 February 2008)

benwex said:


> I watched the show and must disagree...
> 
> If anything it was a shot at the private sector operating in the child care industry. This is a pet topic that has been dogging ABS and the rapid shift in the industry as consequence of the governments lack of commitment and resources..
> 
> ...




The "analyst" Roger Montgomery is one of the best and is worthy of listening to. 

When others were saying to buy ABS at over $6, he was saying stay away and has done for some time. In case you haven't noticed ABS has trended down since December 14 2006 high of $8.62 and has been in steep decline since Sep2007.

He is definately worthy of taking up some of my time and gives sound investment advice.


----------



## Gekko (27 February 2008)

korrupt_1 said:


> There are allegations and rumours that some fund managers have been conspiring together to push weaken stocks to ridiculously low prices so they can get them at dirt cheap prices...
> 
> I cant find the source,.. but it's posted around here in one of the other threads.
> 
> Perhaps ABS was another victim - that got carried away?




I would love to know how these hedge funds knew the directors/founders were levered up on margin loans. From what been spoken, many os funds colluded to short sell and drag down AFG and ABS knowing that founders would have margin calls if falls were large enough. But how did they know they were leveraged up?


----------



## Miner (27 February 2008)

dhukka said:


> I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.




Thanks for the post.
It is nice to see Montgomory's prediction. Why one has to wait 2 years for a catastrophe. Stock market commentary on ANZ by stock val was done at $28. What does Roger's team say about that prediction for ANZ. Wait for 5 years and then say WE SAID IT.

It is a bad sign for many investors to see the share price dived down like that. It is just not the directors but also the accountants should be hung until their brain matter comes more fertilised not to deceive public.


----------



## ROE (27 February 2008)

Miner said:


> Thanks for the post.
> It is nice to see Montgomory's prediction. Why one has to wait 2 years for a catastrophe. Stock market commentary on ANZ by stock val was done at $28. What does Roger's team say about that prediction for ANZ. Wait for 5 years and then say WE SAID IT.
> 
> It is a bad sign for many investors to see the share price dived down like that. It is just not the directors but also the accountants should be hung until their brain matter comes more fertilised not to deceive public.




The true of the fact is no one can predict stock price. You can only buy based on sensible figures... ABS figures is there I can see it doesn't take a genius to work out this is a dog stock.

You don't need to pay someone thousands of dollars to show you some fancy software where all it does is look at EPS growth rate, ROE/ROC rate, Sale figures and a bit of DCF. You can do this is about 5 minutes to see if a stock is worth buying.

All the so call expert they get as much correct pick as any person who can understand the balance sheet. Sometimes you get it right, sometimes you get
wrong


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## annalivia (27 February 2008)

dhukka said:


> I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.




I agree. A little humility after CCP wouldn't have gone astray. However I still think Stockval is a great tool and that Roger Montgomery is worth listening to. I don't have the time to do any decent valuations on companies so this is the best way for me to get some sort of an idea on intrinsic valuations. I think Clime will become a little more diversified after CCP and pay more attention to profit downgrades.


----------



## Real1ty (27 February 2008)

dhukka said:


> Exactly, this stock is being re-rated where it should be, I wouldn't say sub *$2* is cheap as the company continues to go from bad to worse.
> 
> ABS is actually a perfect case study in how to take a perfectly good small business and run it into the ground by turning it into a large debt ridden low return business. Someone mentioned earlier that Eddy Groves is a very smart guy. Whatever his smarts are, they don't appear to business related.






> Exactly, this stock is being re-rated where it should be, I wouldn't say sub *$2* is cheap as the company continues to go from bad to worse.




Traders will probably play with this stock for awhile yet so it's short term price might remain quite volatile.



> ABS is actually a perfect case study in how to take a perfectly good small business and run it into the ground by turning it into a large debt ridden low return business. Someone mentioned earlier that Eddy Groves is a very smart guy. Whatever his smarts are, they don't appear to business related.





Couldn't agree more and there is no doubt Eddie is a really smart guy, as who else could have taken such a promising company and destroyed Shareholder value to such and extent that you could receive a higher return from having your money in a high interest bank account with one of the big 4 banks, he's a genius


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## Prospector (27 February 2008)

hangseng said:


> In case you haven't noticed ABS has trended down since December 14 2006 high of $8.62 and has been in steep decline since Sep2007.




That surprised me too Hangseng - I had thought about ABS for a while without doing the research so hadnt really proceeded further - too many other dramas.  Yesterday I checked the graphs and the story was all there for people to see.  As this is the first thing I do before I actually buy, I would have seen this before committing, but after letting MFS do the same thing to me (and look where that is now) thank god I didnt get into it.

What impact will this have on the operation of all the ABC child care facilities? That will have a huge impact on a lot of young families?


----------



## TheAbyss (27 February 2008)

And what of the 1 in 4 children who go to an ABC Learning centre every week if ABC tumble? Govt would be pretty keen to see ABC stay operational in my view.


Not a holder, just posing a question.


----------



## Prospector (27 February 2008)

TheAbyss said:


> And what of the 1 in 4 children who go to an ABC Learning centre every week if ABC tumble? Govt would be pretty keen to see ABC stay operational in my view.
> 
> 
> Not a holder, just posing a question.




They couldnt do anything to prop it up though - could they?  Probably not worrying too many Government workers, don't they have their own child care arrangements?  It is quite a big story I think and not just the share price either!


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## Aussie2Aussie (27 February 2008)

"Eddy Groves is a very smart and cluey guy (Ex Mckinsey) and the rumours of hedge fund shorting it to wash out the large margins on ABS has merit.."




Maybe smart, but he always reminds me of Carl Williams.


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## benwex (27 February 2008)

This feels like an eternity...

Notice recieved at 9.59, how long before the ASX need to make public???

What drama, as good as any episode of underbelly I have seen.


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## Miner (27 February 2008)

Something very strange.
In Commsec people wanted to sell at 85 cents.
Some one placed an order for 10 million shares at $2.14.
Trading halt without any announcement.

GOK (GOd only knows)


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## TheAbyss (27 February 2008)

Trading halt till friday. Interests in parts of the business, or we don't want to play anymore. Time out while we come up with something.


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## benwex (27 February 2008)

Well there you go...

Trading Halt while they evaluate asset sales or some sort of re structuring the business???

Why dont they just let the inevitable happen and let the market do what the market does, determine the value of a companies....

Lets see what the company can pull out of the fire now..

benwex


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## nioka (27 February 2008)

Why blame Groves for the share price. He didn't set the price,the market set the price and maybe he is right when he says the hedge funds are manipulating the price. It is always easy to look back and see the future but he built a business using credit which at the time was a sound thing to do. I never bought in because I thought the price was too high. I dislike hedge funds, they are parasites manipulating the market for nonproductive gains.


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## benwex (27 February 2008)

Two of the companies directors sold their bundle of shares and got smashed!!!

So lets see Eddy score card....


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## ROE (27 February 2008)

Something dodge going.. did anyone watch Lateline business last night?
Eddie seem very irritated.

He sound so much like Enron chief ..when people start dumping/shorting Enron stocks...he beef it up and said at this price it's a bargain and it's the short seller that drive the stocks down.

I'm not saying ABS is going under but this is how I see things.

If a decent company get hammer I don't know something like WOW, JB Hi-fi, DJS,  AMP their chief would come out and cope it and quietly go on their way making more money for their share holders knowing their company is in good shape.

if something like MFS, Alco and ABS get the quack they blame it's short sellers and all sort of excuses why the share price is doing badly.
Hello!!! how about came out and said we F**K up we leverage too much, we are sorry, we should be sack  let get back to the business of making money for share holders instead of blaming others for their bad judgment.

Amen


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## nioka (27 February 2008)

benwex said:


> Two of the companies directors sold their bundle of shares and got smashed!!!
> 
> So lets see Eddy score card....



 Maybe they had margin calls and had no choice. There was something on the news that Eddy probably had a margin call. Investing with money belonging to someone else has a very high risk as I'm sure many ASFers have found out recently.


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## Prospector (27 February 2008)

nioka said:


> Maybe they had margin calls and had no choice. There was something on the news that Eddy probably had a margin call. Investing with money belonging to someone else has a very high risk as I'm sure many ASFers have found out recently.




Which is why I have said before, Directors of Companies should not have margin calls that impact on the shares of the companies they are directors of.  First MFS, now this.


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## ROE (27 February 2008)

Good no sympathy, greed got to them.
Thinking they can make quick bucks leverage up. 

Leverage works both ways not a one way street to riches.
1 way go to the moon the other way straight to hell 

I do feel for mum and dad investors that got burned ... maybe they can now take conform the directors got burned too and go back to the core fundamental. and in the future stay away from these stocks.


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## nioka (27 February 2008)

Prospector said:


> Which is why I have said before, Directors of Companies should not have margin calls that impact on the shares of the companies they are directors of.  First MFS, now this.



 I definitely agree with you there. They put all the other shareholders at risk. Margin calls on directors shares should be outlawed. I gave it as a REASON for the dramatic fall not as an EXCUSE for the directors. However they acted within the rules as did the hedge funds. The rules are wrong.


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## Prospector (27 February 2008)

nioka said:


> I definitely agree with you there. They put all the other shareholders at risk. Margin calls on directors shares should be outlawed. I gave it as a REASON for the dramatic fall not as an EXCUSE for the directors. However they acted within the rules as did the hedge funds. The rules are wrong.




Sorry Nioka, wasn't having a go at you about that, but yes, the rules are just so wrong and as you say, they put everyone else's shares at risk because of their greed. They are Directors of a Public Company - blind freddy can see this is a huge gap in the law that not only allows exploitation, but opens up huge vulnerabilities to the hapless investor. In one day, both MFS and ABS crashed, absolutely and with no warning.  Fed by margin calls from the Directors.  But the financial media never even seem to question that this is an issue.  We aren't cleverer than them are we


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## ouch (27 February 2008)

HOW is the 2 million share sale on 22/2/08 @ 3.75 by the director legal? --- One might say it was a margin call, we'll never know. However how can a director be allowed to sell shares 3 days before a profit announcement? - Regardless of the mechanisms used to sell the shares its in the prohibited trading period. My worry is that these "margin loan" excuses are just that and the dodgy directors who are already taking too much in salaries will use them to sell shares during prohibited periods........ Can't wait for TWIGGY to catch onto them.... that'll make the FMG tradin gmore lively. (Not that twiggy ever releases negative FMG news anyway.)


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## ouch (27 February 2008)

ROE said:


> Good no sympathy, greed got to them.
> Thinking they can make quick bucks leverage up.
> 
> Leverage works both ways not a one way street to riches.
> ...




And how do you propose to know which stocks have directors that have done this?? By the time you find out its too late. They should be prohibited imo.


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## Miner (27 February 2008)

Aussie2Aussie said:


> "Eddy Groves is a very smart and cluey guy (Ex Mckinsey) and the rumours of hedge fund shorting it to wash out the large margins on ABS has merit.."
> 
> 
> 
> ...




Good point. 

However not every Harvard graduate turned out to be a successful businessperson and conversly not every successful businessman has a degree  and not even ever stepped into Harvard campus. Mckinsey is a great company but the turnover from the company is also very high considering many of the smart people like Eddy goes to market to ruin others.
Bill Gates, Alan Bond, Buffet, Kerry Packer, James Packer, Kerry stokes, Andrew Forest - no one even thought to join Mckinsey in their life time.

So good example but Eddy will be a black spot of McKinsey exits and soon follow the crooks in jail. He will get away only because Australian justice system is very lenient on white collar crime unlike US justice system.

I am wondering what Keith Nelson in his Directors Trading and Insider newsletter will refer to the high vol purchase by Eddy and few others


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## YOUNG_TRADER (27 February 2008)

YOUNG_TRADER said:


> Jumping Jimminey Batman looks like there's some real trouble over here,
> 
> 
> I heard a rumour it had something to do with hedge fund manipulation and stop losses, including the MD who had a very large geared postion in the company who is being stopped out today
> ...




Looks like I heard right,

Amazing, I can't believe this is allowed, its so unfair to the founders, so so unfair, they build an empire and get screwed by ****ing hedge funds,

Well was a good trade for anyone who bought at the lows yesterday


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## Prospector (27 February 2008)

This absolutely stinks for the average investor:

http://www.news.com.au/business/story/0,23636,23284258-14334,00.html

*ABC bosses forced to dump millions in shares*

_TWO ABC Learning directors have been forced to dump millions of dollars worth of shares in the company, before the stock was suspended from trade on the ASX this morning.

In two announcements to the market this morning, ABC director David Ryan revealed he had sold his entire stake of 249,000 shares. 

Board member Martin Kemp offloaded a whopping 7.64 million shares, leaving him with 2.76 million of the company's stock. 

Mr Ryan sold 249,101 shares yesterday at $1.89, netting a total of $472,046. 

Mr Kemp has sold $16.8 million worth since Friday, offloading 2 million at $3.75 per share on February 22 and 5.6 million yesterday at $1.66 per share. 

In a response to an ASX query regarding the company’s share price volatility yesterday, ABC Learning said its directors might be required to sell their holdings because of margin calls. _


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## Nicks (27 February 2008)

hmmmm whats up with a director offloading 2,000,000 shares on 22 Feb at $3.75. Could he have had foresight into this?


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## TheAbyss (27 February 2008)

Nicks said:


> hmmmm whats up with a director offloading 2,000,000 shares on 22 Feb at $3.75. Could he have had foresight into this?




You have probably seen this however it is an interesting read regarding directors of ABC and share holdings.

http://www.theaustralian.news.com.au/story/0,25197,23284317-5013408,00.html


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## Nicks (27 February 2008)

Thanks for that article. Damn shocking. I think he deliberately only offloaded 2,000,000 (I say only in comparison to his total holdings) so it didnt look so blatantly obvious. But I think it has anyway. I guess he figured it was still worth it as it would be enough to keep him above water.

I think as soon as directors sell shares it should be available to the market immediately.


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## DionM (27 February 2008)

What kind of a margin call requires you to offload ALL your holdings?  

Sounds suspicious to me - an excuse for bailing out.


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## TheAbyss (27 February 2008)

Nicks

Bear in mind that a lot of companies pay salaries and bonuses via stocks and options particualrly at senior management level. 

Put yourself in a directors situation. Paid millions in salary and bonuses via company stock and watching its value freefall. There goes the family holiday this year or sell now and lock in the bonus as cash in the bank? Call it lock in your salary if you will.

The temptation to sell before the fall must have been strong for Mr Kemp who has been with ABC a long time and is very highly regarded. Lets see what the end result is and i for one truly hope ABC are around to learn from their error which was a lack of transparency when their business model came into question. What the cloak of secrecy is hiding we will read about in the coming few weeks i guess.

Watch for a US private equity firm buying the US assets and sending ABC home to the antipodeans.


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## ROE (27 February 2008)

DionM said:


> What kind of a margin call requires you to offload ALL your holdings?
> 
> Sounds suspicious to me - an excuse for bailing out.




The kind of margin you know the company is in trouble so better get a few millions than a few hundred K  due to insider knowledge.

government should change laws so insider trading becomes a criminal and lock these guys ups with the real criminal..so they get a bit of loves from the sisters 

As far as I'm concern insider trading is not different from robbing mum and dad hard earn cash and retirement funds.


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## Nicks (27 February 2008)

TheAbyss said:


> Nicks
> 
> Bear in mind that a lot of companies pay salaries and bonuses via stocks and options particualrly at senior management level.
> 
> ...





Fri 22nd Feb - Mr Kemp CEO of Australian Ops and ABC Director sells 2,000,000 shares
Sat 23rd Feb - Market Closed, Weekend
Sun 24th Feb - Market Closed, Weekend
Mon 25th Feb - ABC releases Half yearly report
Tues 26th Feb - ABC Shares Tank!

Sorry - this doesnt look like he casually decided to sell some of his bonus at some random time!

You talk as though his submission to the temptation is ok? whilst other not so wealthy investors whom are not privy to the same things he is were not afforded the same privallege.

Also, regarding your US Private Equity firm comment - this is already occuring, as I also read that today! (it seems as though the buyer of 10,000,000 shares is a US Private Equity co).

ps. not holding ABS and never have, just find this extrordinary and very interesting.


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## Nicks (27 February 2008)

2,000,000 shares is $7.5 Million Dollars! What kind of a director sells that kind of stash the day before the Half Yearly reports which were not good!!??! Bet that kept him out of a Margin Call, unlike some of the Mum and Dad investors.

I agree with ROE and his comments regarding insider trading.


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## Prospector (27 February 2008)

Nicks said:


> ps. not holding ABS and never have, just find this extrordinary and very interesting.




Having been badly burnt with a similar (too similar actually) story of MFS, and considered buying ABS a few months ago, I too am looking back and asking - "how can this happen" - again, and then, "who might be next"


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## Nicks (27 February 2008)

Ditto, Centro for me.

Ive been reading some bad press on Babcock and Brown today, in fact its been all over the media and in the BNB thread. Perhaps they are next?


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## TheRage (27 February 2008)

Nicks said:


> Fri 22nd Feb - Mr Kemp CEO of Australian Ops and ABC Director sells 2,000,000 shares
> Sat 23rd Feb - Market Closed, Weekend
> Sun 24th Feb - Market Closed, Weekend
> Mon 25th Feb - ABC releases Half yearly report
> ...




I completely agree with what you are saying. Directors and company execs should be made to disclose their trading activities within 1/2hr of doing so. Or better still they should be made to disclose their sale prior to doing it with their stated reason. For instance I am selling 2 million shares to buy a new home. This would at least give the ordinary punter some idea that something might be going on. I don't own ABS but I would be super pissed that they come out saying earnings are down 50% but will be up 15% in total for the year due to trading conditions. That doesn't wash. How were the trading conditions over the last period so much better. Surely childcare is not like a retail business where at Christmas time everyone is buying. I am assuming people use it all year round.


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## Prospector (27 February 2008)

Nicks said:


> Bet that kept him out of a Margin Call, unlike some of the Mum and Dad investors.




Hopefully the mums and dads didnt get into margin lending, but that is an interesting point you make.  They say he sold because of margin calls, but was that in anticipation or an actual call.  Big difference, as you say!  Has to be insider trading doesn't it?  The market wasn't generally crashing on the day he sold, so why the hurry THAT day - oh yeah, announcement the next business day!


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## TheRage (27 February 2008)

Executives on margin  were sold out around $1.80. Share price on Friday was around $4. Pretty big loss for those called.


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## Birdster (27 February 2008)

What I present in this post is *only* "food for thought". I have no intention of getting into some argument of speculation;

1. What will this do for the price of buying/selling a Child Care Centre? 

Market prices for buying CCC's have gone high since ABS bought every one they could get thier hands on. (cannot find figures to show atm) 

2. Will this force a shift in price for child care? As almost anyone with children will know, CC assistance is subsidised by the govt. in many facets. Will they step in and ???

3. CC workers are underpaid! (You can dispute me if you like) The livehood of some of these workers could be at risk if this causes centres to close to avoid the company disolving. Yes, you might say that "someone" will buy the centre and save the single centre, but refer back to "1".

I'm sure other factors come into play, just wanted to see what others have to say about the impact of the SP drop besides $$$.

Birdster


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## Prospector (27 February 2008)

TheRage said:


> Executives on margin  were sold out around $1.80. Share price on Friday was around $4. Pretty big loss for those called.




Not for this smart cookie:

_Board member Martin Kemp offloaded a whopping 7.64 million shares, leaving him with 2.76 million of the company's stock. 

Mr Kemp has sold $16.8 million worth since Friday, offloading 2 million at $3.75 per share on February 22 _

http://www.news.com.au/business/story/0,23636,23284258-14334,00.html


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## Prospector (27 February 2008)

Birdster said:


> I'm sure other factors come into play, just wanted to see what others have to say about the impact of the SP drop besides $$$.



I think maybe an assumption, but few people here have children in child care and as this is a share forum, repercussions for actual child care issues is most likely unknown.


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## Birdster (27 February 2008)

Prospector said:


> I think maybe an assumption, but few people here have children in child care and as this is a share forum, repercussions for actual child care issues is most likely unknown.




What your asumption maybe, it does not elude the fact that it does affect the SP of the equity in question.


Investing or backing in any company involves more than trends on price. CCC trends have risen due to increased govt support. It's a fact. If you are going to put hard earned money (or someone else's) into a company, you should know the trend other than the price. I do believe you were "thinking" of investing in ABS somewhere stated in this thread. Don't you think know more than the price is substanstial if not in retrospect of what has happened, but for possible future investment?


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## Prospector (27 February 2008)

Birdster said:


> What your asumption maybe, it does not elude the fact that it does affect the SP of the equity in question.
> I do believe you were "thinking" of investing in ABS somewhere stated in this thread. Don't you think know more than the price is substanstial if not in retrospect of what has happened, but for possible future investment?




I use technical indicators, or trends, to determine whether to buy or sell (hence my post 160 addressed to HangSeng where I talk about the charts) so I dont need to know as much about traditional yields/pe's etc, knowledge of business systems, salaries and wages etc.  You went into detail about salaries etc - most people here wouldnt even think about such issues before investing.  

The only thing affecting the SP is how well the business runs generally - macro versus micro if you wish.  Hence my comment that people here wouldnt know if child care workers were underpaid, or what the likely ramifications are for individual child care centres.  But I also know this is an assumption so I am happy to be proven wrong.


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## derty (27 February 2008)

The margins in child care are incredibly tight, even with the child care benefit and low wages paid (at our centre the hourly rate ranges from $17-$24 depending on qualifications and length of tenure) the utilisation rates need to be greater than 90-95% to make ends meet. 

I am the treasurer for our local community based not-for-profit child care centre and we have a revenue of about $1.1M per annum and aim to be in the black by about $20k each year and that is with a $1 peppercorn lease. ABS bought out 2 of the existing centres in town and have just finished building a brand new centre that would have cost close to, if not more than, $1M. I guess their aim was to produce a glut of places, drive down utilisation rates and run centres at a loss until others went out of business. I know we have been very close to shutting the doors on a couple of occasions even without the new centre being open.  

Even with the advantages economies of scale ABS has, it is going to be hard for them to service their debt from the profits generated from their centres. They will at least have to address some of their marginal centres, and who knows what sort of deal they are going to get for the fire-sale of their US assets?


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## mark_au (27 February 2008)

Geeze not having a good year
first ccp imploded and now abs.. getting really sick of scheming, lying  and/or incompetent  CEO's... 
shoulda just sold out and put my money in the back in december...


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## Miner (27 February 2008)

_A bunch of thugs in ABC Learning._

I wonder this organisation is looking after our kids giving child care. Probably they will sell drugs to the kids to fetch money. The incompetent ASIC to take any action. Incompetent ASX to publish the directors selling report after the trading halt with no purpose to the poor investors.
People who lost money are being called greedy. Who is not in this category. We all are when look for bargain. All speculative stocks are gambling so is lotto buy.


Here is the ABC News report 

*Groves, wife sold 19 million ABC shares*
*By business editor Peter Ryan and Tanya Nolan*
Posted 3 hours 36 minutes ago (27 February 08 5.44 pm WST) 
Updated 1 hour 35 minutes ago 


Yesterday Mr Groves refused to comment on whether he was under pressure to sell his shares. (AAP: Dave Hunt)

Video: Groves reassures ABC Learning investors (ABC News) Audio: ABC Learning suspends trading (The World Today) Audio: Business editor Peter Ryan discusses ABC Learning (The World Today) It has emerged that the founder of the childcare provider ABC Learning Centres, Eddy Groves, sold shares in the company during yesterday's share price plunge.

Mr Groves and his wife Le Neve sold 19 million of their shares yesterday.

After intense pressure over the past 24 hours, Mr Groves revealed this afternoon that he sold more than 8 million shares yesterday at $1.85 per share.

According to statements issued to the sharemarket this morning, non-executive director David Ryan sold his entire holding of more than 249,000 shares at $1.89 a share yesterday.

It has also been disclosed that the company's chief executive of operations, Martin Kemp, sold 7.6 million shares or 70 per cent of his stake in ABC Learning.

Mr Kemp's selling began last Friday, and concluded yesterday when ABC Learning shares plunged as much as 70 per cent.

Mr Kemp off-loaded his stake for between $3.73 and $1.66 per share.

The statements did not disclose the reason for the selling amid speculation that some directors had been hit with margin calls because of ABC Learning's debt exposure.

ABC Learning shares closed yesterday at $2.14 after plunging to $1.15 down or by around 70 per cent.

The disclosure from Mr Groves was in response to a "please explain" query from the Australian Securities Exchange in relation to yesterday's heavy falls.

The market regulator has confirmed it is investigating trading in ABC Learning shares as a "live supervisory matter."

The Federal Government is also keeping a watch on ABC Learning.

Families Minister Jenny Macklin says childcare places should be maintained and working parents must be protected from the company's troubles.

"We have a very, very tight labour market and if [parents] can't find the childcare we're not going to be able to address the participation issues that are so critical to the economy," she said.

"So we are aware of it, we're obviously talking about it internally."

Yesterday, Mr Groves refused to comment on whether he was under pressure to sell his shares apart from confirming that he was required to announce any buying or selling of stock within 48 hours.

In other developments today, ABC Learning disclosed it had received expressions of interest in part of its business and expected discussions could take longer than two trading days.

The company, which has 2,300 childcare centres around the world, requested and received a two-day trading halt while the talks were underway.

The company's shares were yesterday dumped by investors after announcing a sharp fall in profit after the close of trade on Monday.


Concerned childcare sector

Meanwhile, Child Care NSW which represents private childcare operators says even if the worst case scenario eventuates, there will be nothing for parents to worry about.

Executive officer Bruce Manefield, has told ABC Radio's The World Today families should not worry that centres will close.

"In the very hypothetical situation that for some reason or other ABC got into some substantial trouble, and I say that's highly hypothetical, in most instances like that if you look at other general cases most companies continue to trade under the directorship of a receiver," he said.

Mr Manefield says talk of a shortage of child care places in Australia is overstated, particularly in Sydney where he says there are plenty of providers who cannot fill spots in their centres, especially for three to five-year-olds.

He says there should be no change to the 40 per cent of public funding going to ABC Learning Centres, because it is given to parents through the Child Care Benefit and Tax Rebate. 

But the not-for-profit childcare sector is warning that a crisis awaits the industry if Australia's biggest childcare operator struggles.

Lynne Wannan, the convener of the National Association of Community Child Care Centres - which represents 1,100 not-for-profit centres - says there is no money to be made in childcare provision.

"When you have to conform with the quality requirements in Australia, our regulations, they're fairly strict and there really isn't a lot of money left over to make millions of dollars or to repay billions of loans which they have," she said.

Ms Wannan says if the centres were to shut their doors, there would be an immediate crisis.

"That would be a monumental crisis," she said.

"We already have hundreds and hundreds of families who can't access a quality children's service. We do have waiting lists in lots and lots of places and if we lost that quantity of our service system, it would be just a disaster for the Australian economy."


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## Birdster (27 February 2008)

Prospector said:


> I use technical indicators, or trends, to determine whether to buy or sell (hence my post 160 addressed to HangSeng where I talk about the charts) so I dont need to know as much about traditional yields/pe's etc, knowledge of business systems, salaries and wages etc.  You went into detail about salaries etc - most people here wouldnt even think about such issues before investing.
> 
> The only thing affecting the SP is how well the business runs generally - macro versus micro if you wish.  Hence my comment that people here wouldnt know if child care workers were underpaid, or what the likely ramifications are for individual child care centres.  But I also know this is an assumption so I am happy to be proven wrong.




Macro/micro, indicators, knowledge of a company or rubbing the Buddah doll-- everyone has their own way to ascertain what is going to go up or down. If it works for you, that's great. 

To ignore news in the industry of wage issues in child care as well as the issues of cost to families just bamboozles me. It's a vital part of this sector's advancement. Every year, CCC ownwers and parent's take note of how the govt. is going to address subsidised CC fees. If you are looking to invest in CCCs these are valid entities that will affect the over performance.

You don't believe so, Prospector, that is fine. What ever works for you. I'm only bringing interest in of the other things that can/will effect the price.


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## reece55 (27 February 2008)

Miner said:


> _A bunch of thugs in ABC Learning._
> 
> I wonder this organisation is looking after our kids giving child care. Probably they will sell drugs to the kids to fetch money. The incompetent ASIC to take any action. Incompetent ASX to publish the directors selling report after teh trading halt with no purpose to the poor investors.
> People who lost money are being called greedy. Who is not in this category. We all are when look for bargain. All speculative stocks are gambling so is lotto buy.




Miner
I agree with your comments and I'm sorry if you lost some money to this sucker, but lets get the facts clear......

The ASX does not publish the change in directors interest notice, the Company lodges the announcement. The ASX were not incompetent in this situation, in fact quite the opposite, they were very aggressive in getting detail by issuing a price query. In addition, under ASX listing rules, the directors actually have 5 business days to lodge the change in directors interest. Therefore, the ASX did not have a responsibility to enforce ABC Learning directors to lodge the notices.

In relation to the directors who sold as a consequence of margin calls, this is the way the cookie crumbles, if the takeover is indeed valid they have lost a lot of money due to their own leverage. My personal thought is that we will rapidly see amendments to disclosure to directors interest notice to incorporate if the director has secured their shares as collateral for any purpose. As for the Mr Kemp who disgustingly sold prior to the announcement of the results and who was clearly in contravention of insider trading law, you can bet that ABC have been served a notice from ASIC for a please explain.... believe me, I have seen them issue please explains for much less...... I hope he gets what he deserves.....

Cheers


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## ghostworld (27 February 2008)

Is it possible that the director sold prior to the release of the result due to a margin call?

Just being a devil's advocate here. It seems like such a stupid move by the director to sell prior to the release of the company's result.


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## M34N (27 February 2008)

ghostworld said:


> Is it possible that the director sold prior to the release of the result due to a margin call?
> 
> Just being a devil's advocate here. It seems like such a *stupid* move by the director to sell prior to the release of the company's result.



Stupid, or wise?

I definitely don't think it's ethical for director's to sell out before results like this. Sets a bad precedent for other companies and not good for investor confidence.


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## ghostworld (27 February 2008)

I would say stupid only because there are rules against it. Can't remember what the fines are for what is essentially 'insider trading'. Includes jail time I believe.


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## weird (27 February 2008)

Major aussies indexes, even past mid last year were in an uptrend for the entire year of 2007, ABS was in a downtrend the entire period ... even the most basic relative strength to an index, would suggest this stock was not a buy using the "trend is your friend" method.

Too many stocks, with similar downtrend patterns, have exhibited such drops, in the last 5+ (and more) years, forget the current reasons, just look at the chart of the stock, it usually tells you what is happening ... 

Incredible drop on this stock, margin (or whatever reasons) was perhaps at play, but I have found this being a common problem for many traders, not trading with enough capital so overexposing themselves, and getting hurt.

Basic principles - don't over-expose to one tradeable (I remember reading a Margin Lending article where they mentioned through study on customer accounts, those holding 8 or more stocks were less likely to have a margin call). If one is exposed to a particular tradeable, keep it in check with your overall trading account.

A 50% drop on one stock in a situation like this, when holding 10 stocks, is hopefully closer to a 5% drop to your entire account.

Have enough capital, cut your losses early, and spread the risks to avoid single melt downs to an overall account.


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## benwex (27 February 2008)

There are few articles circulating that predict when the trading halt is lifted "traders" will short the crap out of ABS in the hope fo flush out the rest of the directors shares...

http://business.smh.com.au/eddy-fac...ard-caught-by-margin-calls/20080227-1v5b.html

One thing is for sure, I was very surprised how quickly management have gone to the safetly of a trading halt and communicated to the market they are looking at asset sales or maybe a buy out by potential suitors..

Take CNP case in point, they have been dragging their feet for weeks with little clear guide to the market about their future other than trying to refinance there short term maturing debt.

Yesterday's tanking from the margin calls by directors may be an oversell to say the least....RSI of 18!

So I ask the forum a simple question, with public knowledge known today, is ABS a buy or sell??????

benwex


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## ghostworld (27 February 2008)

I would guess 'sell' due to the recent bearish sentiments and/or alledged short selling activities by hedge funds.

However, 10 million shares owned by the founder was alledgedly sold to Bain Capital. Price is unknown. 

http://www.theaustralian.news.com.au/story/0,25197,23284317-5013408,00.html

I would expect an increase in SP if a white knight comes along and offers to buyout the company. This is probably not likely to occur within the next few days.


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## Miner (27 February 2008)

ghostworld said:


> I would guess 'sell' due to the recent bearish sentiments and/or alledged short selling activities by hedge funds.
> 
> However, 10 million shares owned by the founder was alledgedly sold to Bain Capital. Price is unknown.
> 
> ...




Dear Ghostworld

Congratulations !
If I have some disposable ABS or MON shares I woudl have been gifted you off to say thank you 

Like Keith Nelson and many good experts you said in both ways. Starting the post with SELL and then said you would expect an increase in SP with a great IF.

Mate, do not blame you. But some one placed to buy $10 M ABS shares at $2.14 at the preopening session on the day of trading halt. At the same time people placed to sell ABS at 85 cents. Commsec site I am referring to.

I do not think any one honestly knows it is buy or sell for ABS. Many pundits will surface in few days once the market retracts itself . BUT now GOK - God only Knows.

Sorry could not dare to predict boldly but if the share price goes lower than $2 then I would be buying it. Since I do not have it so can not SELL any thing


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## mrgroundwork (27 February 2008)

weird said:


> Basic principles - don't over-expose to one tradeable (I remember reading a Margin Lending article where they mentioned through study on customer accounts, those holding 8 or more stocks were less likely to have a margin call). If one is exposed to a particular tradeable, keep it in check with your overall trading account.
> 
> A 50% drop on one stock in a situation like this, when holding 10 stocks, is hopefully closer to a 5% drop to your entire account.
> 
> Have enough capital, cut your losses early, and spread the risks to avoid single melt downs to an overall account.




that is the old diversification argument... you hold 10+ stocks, you are not going to make the same returns when things go in your favour...


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## benwex (27 February 2008)

Sorry could not dare to predict boldly but if the share price goes lower than $2 then I would be buying it. Since I do not have it so can not SELL any thing [/QUOTE]

Well you can.............

There are many CFD providers who would be happy for you to sell shares that you dont own (yet)

I think the way the market is today with short selling so accessable to retail investors makes me realise how unlevel the playing field has/was in the past.

When ABS is back on the boards it will be gripping viewing thats for sure and I will be trying to get some play.

benwex


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## Nicks (28 February 2008)

ghostworld said:


> Is it possible that the director sold prior to the release of the result due to a margin call?
> 
> Just being a devil's advocate here. It seems like such a stupid move by the director to sell prior to the release of the company's result.




Hi all, I think this sums it up well:

Even is it was to releive a Margin Call or an anticipated one, why should investors in this company suffer from the poor mismanagement of personal finances by a Director?

It is incompetent by the Directors to let their own personal finances affect the Company, and this is exactly what has happened (and to the detriment of shareholders - class action?). 

Its as simple as that, management's personal finances (gearing) has had a negative impact on the Company's viability and finances (and share price).

*Consider this scenario* - Jo Bloggs investor is facing a Margin Call last Friday. He has lots of shares to chose from in which he can sell, inlcluding ABS. However he does not have an insider position or connection with ABS, and unaware of factors and info due to be released to market the next business day. He weighs up all th info and option available to him and decides to sell off XYZ. How does this put him on equal footing with Mr Kemp as an investor and shareholder of ABS?

In any case, even if it was to get out of a Margin Call, buy a new Mercedes or Pay Off a Bookie for a bad Horse Bet, the reason is irrelevant.... it does not make it right or legal, especially in Mr Kemp's case. Its still abuse of position.


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## Prospector (28 February 2008)

Nicks said:


> Hi all, I think this sums it up well:
> 
> Even is it was to releive a Margin Call or an anticipated one, why should investors in this company suffer from the poor mismanagement of personal finances by a Director?In any case, even if it was to get out of a Margin Call, buy a new Mercedes or Pay Off a Bookie for a bad Horse Bet, the reason is irrelevant.... it does not make it right or legal, especially in Mr Kemp's case. Its still abuse of position.




Absolutely, Directors shares should never be exposed to margin calls, EVER!  How on earth ASX or ASIC continue to allow this to happen beggars belief.  But there is not even any comment about this in the media?     And in this case, the day before a poor announcement?  How can that even come close to being legal!  Double whammy!


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## mark_au (28 February 2008)

Prospector said:


> Absolutely, Directors shares should never be exposed to margin calls, EVER!  How on earth ASX or ASIC continue to allow this to happen beggars belief.  But there is not even any comment about this in the media?     And in this case, the day before a poor announcement?  How can that even come close to being legal!  Double whammy!




It would appear that the playing field, is truly stacked against the average investor... if you dont have the inside knowledge your screwed.... very very unfair... im furious at these guys for their incompetence with MY money


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## Nicks (28 February 2008)

So, NAB has the aquired the power to dispose of 26,000,000 shares. Yikes.

Protecting their loans no doubt to cover themselves. This could get dumped very quickly.


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## investorelse (28 February 2008)

First post....Prompted by this thread alone. 

Some of the posts above should be removed as electonic pollution. and make me question being here.

The back page of the Fin review 27th is about the only removed print about this I have read the public domain."Communication"

I don't think Eddie and his wife are cying into the Millions they have safely put away in protected financial structures. Good on them.

All the non investors boasting about how they are not affected because they were too clever...STOP POSTING GLOATS NO ONE CARES!

The market is responsible for this thats it.

After the event the questions arise about disclosure... but they were nowhere before the event?..This is the markets issue alone, the market values the stock. (Ok the regulators as well)
I do however agree that SOME with the power have not been playiing fair.
but they can and will
The trend means this is no real surprise.
Yes I am down (slightly) but have others I own that frustrate me much more.
My gains far out way this anyway...(Gloat!)
I own this stock and am Married to a valuable ABC employee.
I am still happy to be with both.


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## Rainmaker2000 (28 February 2008)

Mate, good to see your first post and encourage you to do more........

I could not be in more disagreement with you as many other serious investors on this site...

For one, my partner is also a professional child 'technician' who sometimes works at ABC's and I can assure you she dislikes the ABC experience just as much as those who owned ABC at $7...

I can assure you Eddie and Mrs Eddie would have seen a severe loss of wealth and if I measure Eddie accurately, this would have hurt big time......You lose a lot when you gear a stock that falls like ABC did....he could have almost lost everything

Not sure how one could say 'its just the market's fault' this one.....ABC should not have been trading.......as many posted before the event on this forum, rumours were circling which should have been disclosed as they were subsequently shown as truth......could there be any more clear lack of disclosure

Whether you're up or down personally,  this is an unfortunate story about management who showed little regard to the principles of enhancing shareholder value...and now there's a fire sale of assets, whereas two days ago management said they were 'firing on all cylinders'....


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## investorelse (28 February 2008)

" my partner is also a ...."
What a Technician was in childcare?.. Yes have some working for her at times....But the team is a mix of these and fulltime Qualified staff.

"I can assure you Eddie and Mrs Eddie would have seen a severe loss...
Please re read my post RE: "Structure" 

"Not sure how one could say 'its just the market's fault..."
I do not class posts on this site as disclosure or legal Questioning of the company or ASX, just some people in the "Market" being the market.

"this is an unfortunate story about ..."
Please re reread my post RE: "Trend"

Sorry, Reading todays fin now... moved on.


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## Rainmaker2000 (28 February 2008)

Since you have obviously 'moved on' to read today's fin review..hehe... maybe you should log on to tomorrow's fin review on their website......the story about possible probe into insider trading and associated lack of disclosure may be of interest....

Mate, seriously, I'm not having a go....I just would not want the ABS event smoothed over.......this is everything about share investing that turns many people off.....ABS should have been a reliable, stable, growing, quality provider of child care with conservative financing......instead its a house of cards based on a business model that gives kiddies 1 sandwich instead of 3 for lunch


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## Miner (29 February 2008)

In short
Todays Huntley Newsletter has recommended ABS as SELL. ONly two days ago they said it as HOLD.
What is an irony - SELL when the trading is closed.

Probably tomorrow Friday when the trading is resumed the share price will follow CNP's trend and price will start probably from 90 cents just to go down wards.

Directors are at default but should this be a buying opportunity at 50 cents?
Don't know.


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## investorelse (29 February 2008)

Funstastic and the property business must go. These flashy accessories are (were) only good in a positive market.
The Amazing Aussie dollar will continue to hurt ABS returns as well as the US economy trend.
4 @ Comsec have this at a stong buy still even with the forcast lower.
Question: Why does ABS have (seemingly) no trouble securing huge credit?


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## Miner (29 February 2008)

More bad days 

After trading halt now suspended from quotation.
It seems to be there is some Singaporian Chinese hands to buy up.
Poor Lazard - what science was applied on purchase ? You would think this million dollar paid investment bankers would have some brain. All white collared thugs.
What great Keith Nelson and his great curve, Directors are buying will tell us?
Enjoy the attachments


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## josjes (29 February 2008)

Singapore Temasek has filed an increase of holding from 12% to around 14.6%. They bought at last close of trading on Tuesday 8 mill shares @ 2.14 , so I reckon there will be strong support at that level. 
Plus, just came out tonight, share will be in suspension further, pending release of accouncemet of indication of interest on part of its business.


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## benwex (29 February 2008)

Miner said:


> In short
> Todays Huntley Newsletter has recommended ABS as SELL. ONly two days ago they said it as HOLD.
> What is an irony - SELL when the trading is closed.
> 
> ...




I disagree totally with your prediction...

I feel there will be strong support for ABS and the low of 1.15 on tuesday was due to climactic selling on the part  of margin calls by directors and a few other "poor" sods...

The fact that you have Temasek and Lazards increasing their holdings, I believe ABS is in play (carve up or buy out) and a victim of directors greed more than the businesses debt position...

These two holders are pretty good guys to have backing up the business IMO..

This is not a CNP and will not be a lamb to the slaughter.

benwex


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## Prospector (29 February 2008)

investorelse said:


> This is the markets issue alone, the market values the stock.




You are joshing aren't you?  Since when is it market forces when multiple Directors sell milllions of their shares, one of them just prior to a poor announcement, allowing the market to determine the prices?

Nice about being married to an ABC employer, and being happy about that, but what has that to do with the current discussion.

And for what it's worth, no-one here is gloating, people here have been burnt with either this, or other dealings by Directors, in other companies and have every right to discuss the legalties/moralities of what is happening here!   I don't see gloat anywhere, quite the opposite.



investorelse said:


> Question: Why does ABS have (seemingly) no trouble securing huge credit?




Did you mean 'did' or 'does'. 

However, if Temasek are buying further into this, it may well worth putting ABS on the watch list.


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## ROE (29 February 2008)

Just remember big funds has often get in and out in a time frame of a week if they discover something that they didn't like. So they buy first ask question later.

So from 1.15 to 2.14 because they are getting in...the question is what if they decided to cut their loss and get out?  How low can the price go when there are so much shares around and no one is buying?


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## TheAbyss (29 February 2008)

On the human side, ABC have some of the best people i have been involved with in my professional career. The staff of ABC are very good at their jobs and deserve some support in a time of chaos. On the whole, the entire ABC team are highly cappable professional people who enjoy their jobs and are very good at them. Eddy recruited a lot of people along the way who left very good positions to get on board with a visionary and do not deserve what is happening to them.

I for one sincerely hope that ABC get out the other side of this in one piece. Sure Senior management allowed Eddie to get ahead of himself and place ABC's future at risk and he needed to be reigned in which has certainly happened no matter where this ends up.

I think Eddie got carried away with wanting to be biggest boy on the block and just kept wanting to be bigger and bigger and eventually bloated himself on debt to the point of implosion (a nice mental image actually). Well now the sharks are circling and taking chunks out of him as well. Lets hope he learns from it and manages to to keep a very good company afloat.

Best result for ABC would be for the US and UK centres to be divested for enough funds too pay off what was borrowed to buy them (which could be difficult so a few other assets will probably have to go). ABC's business model for Australia is more than viable in its own right if they can keep it.

Perhaps if Temasek and Lazard get a board member or two they can reign in the growth and stick to the core business and remain profitable without trying to expand into markets they dont understand or take risks to stroke egos without full consideration of the inherent risks involved.


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## Nicks (29 February 2008)

investorelse said:


> After the event the questions arise about disclosure... but they were nowhere before the event




Ummmmmm, well the market would have asked questions if they had had a chance. Mr Kemp Offloaded a big stash Friday, report released Mon, all other directors forced to offload Tues.

I think there are SERIOUS questions about disclosure with ABS. 

Disclosure questions will often result after the event. It's normal - thats what disclosure and insider trading is always aboout - stuff that happens before an event, or using knowledge before and event.


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## Mr Peaman (29 February 2008)

My opinion - 3 positives so far pushing up the price and only 1 pushing down - There is still one variable that can go either way...

* T+3ers - They need to cover their loans so they will be fake buying in my opinion to push up the share price.
* Management buying their shares back - Maybe
* Temasek and others will be buying al lease at $2.14 so that sets a floor

*Hedged funds are going to be the only ones pushing the share price down at this stage. And with the scrutiny thats around at the moment about this on this very highlightd and public Company I doubt that they will be shorting anyone!

Unknown Variable is the interest in the companies Assets - Probably selling off the American Assets - If this is the case than i am of the opiniuon that this will be positive for the share price as at the moment Americans are un sure of what they are doing - this also decreases the level of debt!

IMHO i believe the share price will rise on open - And if the sale ends up being positive for the company than around $4 sounds about right to me!!!


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## ROE (29 February 2008)

Most of their purchase are fund on debt and buy at a premium price.
If they force to sale, they get much less value in return but own the same amount of debt..so debt is bigger than equity.

with US going into a recession, childcare facility will be in less demand so they have to drop a fair bit
for people to take on the risk.

so assume they let go of US arm they will still carry a big chunk of debt so
it be a long while before this business is making decent returns.

I think at $2 it's not that cheap but then again I wouldn't get into a business with such a crab ROE


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## dhukka (29 February 2008)

ROE said:


> Most of their purchase are fund on debt and buy at a premium price.
> If they force to sale, they get much less value in return but own the same amount of debt..so debt is bigger than equity.
> 
> with US going into a recession, childcare facility will be in less demand so they have to drop a fair bit
> ...




Didn't you just buy into CCP which now has a very crap ROE of about 12% forecast for FY08. That is, if you believe their latest downgrade?


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## josjes (29 February 2008)

ROE said:


> Just remember big funds has often get in and out in a time frame of a week if they discover something that they didn't like. So they buy first ask question later.
> 
> So from 1.15 to 2.14 because they are getting in...the question is what if they decided to cut their lost and get out  ? how low can the price go when there are so much shares around and no one is buying?






ROE said:


> Someone just take a big stake in CCP. I cant read the damn form with hand writing, can someone with better eyes read it?
> 
> Obviously someone sees value in this.




For CCP, Some obscure fundie increases stake, it's obviously hidden value. 
For ABC, Some well known respected value manager (Lazard) and Foreigner (Temasek) with stash of billion dollars cash increase stake, it's only short term trading. 
'Beauty is the eye of the beholder'


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## ROE (29 February 2008)

dhukka said:


> Didn't you just buy into CCP which now has a very crap ROE of about 12% forecast for FY08. That is, if you believe their latest downgrade?




Wrong... historical CCP beat ABS by a country mile and even at 12% which is average that's a far cry from 5-8% which is below standard.


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## ROE (29 February 2008)

josjes said:


> For CCP, Some obscure fundie increases stake, it's obviously hidden value.
> For ABC, Some well known respected value manager (Lazard) and Foreigner (Temasek) with stash of billion dollars cash increase stake, it's only short term trading.
> 'Beauty is the eye of the beholder'




Most funds like Lazard don't get into stock below certain market cap.. ie small cap companies except for boutique funds where they have more flexibility on what stocks they buy into.

They obviously want to make money out of stocks they invest but You cant always assume just because a fund buy into a stock it going to make great return.

Many times they get it right and there are time they got it wrong too.
If you can pick winners all the time you can be a billionaire pretty quick.

Even Warren Buffet make bad investments.


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## dhukka (29 February 2008)

ROE said:


> Wrong... historical CCP beat ABS by a country mile and even at 12% which is average thats a far cry from 5-8 % which is below standard.




Historically yes the ROE is very good, however given recent events I wouldn't be using historical ROE's to value this company. *12%* is average? I'd say it's on the low side.


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## ROE (29 February 2008)

dhukka said:


> Historically yes the ROE is very good, however given recent events I wouldn't be using historical ROE's to value this company. *12%* is average? I'd say it's on the low side.




I dont want to get into tick for tat argument but if you google search for American and Australian companies average ROE you find it will falls between 10-15% .... 15% start to come into the high range and most people will be happy to get ROE of 15% of course you get exceptional company where it exceed it with 20,30 and even 40-50% ROE but as a whole it's around low 10.

Other people who came across various research paper on ROE can comments on this. 

Peace


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## investorelse (29 February 2008)

Stakeholders: mutlibank syndicate funding, government, and lots of interesting new majors, I like it!
"Whats it got to do with the discussion?"...Just a dose of reality in a thread in a fantasy.
Time to get back to the core this business, Thats where it's going...
not in careers123 and the rest.
lets play!


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## dhukka (29 February 2008)

investorelse said:


> Stakeholders: mutlibank syndicate funding, government, and lots of interesting new majors, I like it!
> "Whats it got to do with the discussion?"...Just a dose of reality in a thread in a fantasy.
> Time to get back to the core this business, Thats where it's going...
> not in careers123 and the rest.
> lets play!




Clearly you haven't _"moved on"_ yet. I assume your latest piece of garbled nonsense above is supposed to say; _"Just a dose of reality in a thread *of* fantasy."_?

The only fantasy here is the mindset of any ABC shareholder who thought this company was a good investment. The writing has been on the wall for years and now the chickens have come home to roost. 

Rather than vent your bitterness here, have a look in the mirror and take responsibility for your own actions.


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## seden33 (1 March 2008)

Shat more could u ask for , this is the perfect scenario for abc I feel sorry for ed and wife they got touched up . imagine if they were making massive profits off hard working familys struggling with interest rate rises and so on , or is that all your worried about . screwing down the average family


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## robert toms (1 March 2008)

I think that my religious upbringing has clouded my view on shares like this one.
I see it as not quite right to make money from child care,nursing homes etc.
Perhaps I am not modern enough!


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## Rainmaker2000 (1 March 2008)

I don't think one needs just a religious viewpoint to have a dim view of mass childcare........some of the stories I hear and the science conducted on kids who have intensive exposure to child care centres......well, child care has a dollar value and then there is the rest of it...what is the price of mental illness imposed in the most impressionable years.......we will see the dollar value of that in future years...It's a lot simpler just focusing on good stocks.............


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## blinkau (1 March 2008)

Does anyone know when the shares are likely to be out of suspension for trading again??

I wish I could of taken my profit on the day except for damn staff trading rules!


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## Prospector (1 March 2008)

investorelse said:


> Stakeholders: mutlibank syndicate funding, government, and lots of interesting new majors, I like it!
> lets play!




I think you may have trouble convincing the masses on that:

http://www.news.com.au/business/story/0,23636,23301079-462,00.html

Directors should have advised ASX/ASIC of any dealings that may threaten to company

and

http://www.news.com.au/business/story/0,23636,23298064-462,00.html

ABC shareholders are threatening to sue re non-disclosure


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## ROE (1 March 2008)

This business is a good business they just have crazy people running the show.
and that why it turn into a high debt, high leverage such business that could be brought down to its knee.

With all the problems going on I don't know how they can continue to run the show efficiently in the short term (next 12 months). There be lot of investigation into share trading.. Share holder could sue for non-disclosure etc.

I like this business because there isnt many business around where demand exceed supply, well resource is the other beast  but with the current management and low ROE I think I sit on the side line and watch it unfold till such time it proven otherwise.


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## investorelse (1 March 2008)

It is a fantastic business and as necessary as water and power.
Even more than ever in an economy with the highest employment rate ever.
Hope this garbled message is clear enough for you Dhuy?


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## dhukka (1 March 2008)

investorelse said:


> It is a fantastic business and as necessary as water and power.
> Even more than ever in an economy with the highest employment rate ever.
> Hope this garbled message is clear enough for you Dhuy?




It's absolutely clear, just misguided. As stated by me and others on this thread, ABS *was* a good small business. Unfortunately the meglomaniac at the helm, in his bid to take over the global childcare industry, has run this good small business into the ground by encumbering it will huge amounts of debt, asking investors to stump up increasingly more capital and then producing ever decreasing returns. 

What needs to happen, is for this company to halt it's expansion program, sell off some assets, pay down some debt, and extract better returns from the existing business. However Groves seems intent on growth at any cost.  In the latest financial report he plans to continue to open 150 new centres a year. That means , he will have his hand out for more debt and more capital.... and around we go again.


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## investorelse (1 March 2008)

Prospector said:


> I think you may have trouble convincing the masses on that:
> 
> http://www.news.com.au/business/story/0,23636,23301079-462,00.html
> 
> ...




THANKS PROSPECTOR for some actual feedback!
I agree there is an issue to be resolved.
Looking at your links it seems like laywers selfishly only looking for some revenue.
The communication from ABS management to customers has been fantastic,
they are very poor communicators to the other stakeholders, Staff and shareholders I totaly agree.
Dhuy, you say something? Found any more videos on utube to post about???


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## Prospector (2 March 2008)

Yes, I do agree with you Investorelse that the only people to make any money out of a shareholder class action will be the lawyers.

People here agree that the ABC learning centres, in Australia, provided an excellent (in most cases) and necessary service to the parents and children.  But, as is often the case, the Directors forgot about their key mission - providing that excellent service - and went above and beyond their realms of expertise by seeking out massive debt, and I agree,  Dhuka, take over the world in childcare!  Or just maybe, their mission was not about childcare at all, but making a global commodity.  Their model simply did not work once world factors, in this case, the debt crisis in the US which then moved elsewhere.  Their model of debt/expansion worked in Australia but was catastrophic when global issues (as opposed to local Australian issues) came into play.  They simply did not know enough about global risks.

And somewhere, someone just has to be accountable for that.  And the threat of class action is all that the luckless shareholders have to press that issue.  And that is when we get back to lawyers. Who will always get paid first.

They did get one thing right as you say, they communicated to their fee paying customers.  But that is probably more the responsibility of each individual child care centre, some of whom got it very right, and others probably got it very wrong due to the different skills in each centre coming into play.  But the rest is corporate responsibility, and these people (Board and Directors) obviously got it very very wrong, and that is misleading the market.  Big no no in my books.


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## grace (2 March 2008)

Just be very careful with holding onto this one everyone.

We did own a child care centre for 5 years until recently.  The future success of this company is reliant on the families staying, and low unemployment (apart from reducing debt).   Parents will not want to be at a child care centre if they think it is a sinking ship.  This weeks media attention would put doubt IN EVERY PARENTS MIND!

They may start investigating alternative arrangements IF THEY CAN.  I know there sometimes is no choice in the cities, and  parents can not just give 2 weeks notice and find another place, particularly in the birth to 2 yrs age group.  There are a lot of centres in QLD with space in 2 - 5 yrs, and this is the most lucrative area when full.  The babies don't really make any money because of the staff ratios involved.  If ABC start losing their 2 - 5 yrs, watch out!
I am only speaking on a general basis. 

I believe ABC have had a good run, because in most instances, families will take whatever is available because choice is limited.  The media attention ABC has received would be enough to put any family in the mindset of "are we at the best place for our child/ren?".  Believe me, they will start doubting the care their child receives and start investigating alternatives!  Any little slip up will be seen with more negativity than usual.


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## investorelse (2 March 2008)

Prospector,
The customer comminication (letters) came directly from Brisbane head office.
Four letters to customers over three days sent to all centres and the centre directors instructed to ensure they were communicated.
Only one letter to the Staff.(surprise)
As before The corporate resposibilty will no doubt be routed out, This is a wait and see issue until the experts advise in my book. (Thats experts, not you Dhuy).

Before ABC This industry was mainly made up of small busines and  husband and wife centre’s ranging from fantastic carers down to even illegal operations.
ABC established and proceeded to set the bar height for providing strucured learning.
I remember being shocked at the Idea of ABC becomming a global provider but thought like all Entrepreneurs Eddie saw a bigger picture the the crowd, ready and personaly prepared to take the risks to see if it can be done.

Good thing Dhuy was not Eddie's business adviser back then other wise Eddie would still be driving a commodore to work everyday and sitting in that first Brisbane centre. Now Eddie is in the terrible position of having 75 million personal dollars stripped away in 24hrs by yet to be fully understood event. He might have to sell his Basketball team? (Dhuy?)

Dhuy, Don't like what Eddie does? just don't invest with him.
Now go start a Eddie Bashing Thread or something.
I am sure the eight banks who approved the debt did review the business plan. Maybe you can offer them your valuable input next time.


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## Prospector (2 March 2008)

investorelse said:


> He might have to sell his Basketball team?




I think he owns two - one in Queensland  and certainly Adelaide 36'ers; and the stadium they play in!


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## chops_a_must (2 March 2008)

investorelse said:


> I own this stock and am Married to a valuable ABC employee.
> I am still happy to be with both.




Tell me, would this valuable employee be a centre manager earning 28k?

Or perhaps one of the other valuable child care assistants working for wages below the poverty line?

And given your priviledged position, maybe you can tell me what organisations such as Worksafe WA think of ABC "Learning" Centres, about the way they treat their staff; the conditions the staff work in; the incompetent Queensland managers; and the dangers these things all pose to any child attending.


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## investorelse (2 March 2008)

Wow chops 28K? double it and you will be closer for a centre director.
Worksafe? I dont know? you asked them yourself yet? You have a duty of care! if you know something, you know! please tells us all Im sure you have some details. (not really)
Poverty line? in WA? LOL.
Not privileged just observing.
Oh well, Looks like another one to add to list...
Chops, I can see why you have racked up 2000 posts, if you have nothing relevent to say don't post.


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## MRC & Co (2 March 2008)

Come on fellas, get off the personal insults!

Basically it has been concluded, that ABS is a high risk, low reward investment!

Not sure why someone would want to hold that.  But hey, each to his own.  You live with your own decisions at the end of the day.


----------



## Miner (2 March 2008)

investorelse said:


> Prospector,
> ,,,,,,,,,
> 
> Dhuy, Don't like what Eddie does? just don't invest with him.
> ...




*An honest dumb question : Did you invest in ABC in current market price before it fell down ?*

If not, please STAY AWAY. You will not feel the pain of a large chunk of investors and no matter what big profile Eddie has created to some of the readers of this forum.


First problem is money lost from many investors. Who cares what Eddie did with his money as no one has audited how the money came and how much he already siphoned from balance sheet towards hs own expenses for various things including so called business development expenses.

Second problem is our childrens future - I am more concerned on that. So many child care centers with no future - just because one Eddie and his wife incompetently handled the whole mess in a disgusting and pathetic way.

They are  as honourable as any drug peddler in the street who sell drugs to children and minor. At least teh drug peddlers do not rob other dad and mum's money. Eddie and his lovely educated wife with education degrees did both damages.

If this country was Bali, Singapore  or Thailand - They would have been shot.

THat is my feeling and  I am not making any apology here to speak out my heart without any prejudice.
 (sorry Could not check the spellings )


----------



## investorelse (2 March 2008)

Hi Miner the answer is yes.
but if you bother to read you would have seen this.
BTW I personally know people who have made an absolute killing that had this company shorted as it was an obvious call if you bothered to look at the Trend.
I didn't short them BTW cause I have other larger investments to manage on my hands at the time.
Truth is In a worst case senario for ABC is where I would profit most due to my intimate knowlege of this industry and people for the last 15 +years.
But obvously that means nothing here.

I don't actualy care what happens to this stock or its investors because I don't influence it. They have all made their own decisions on that.

You are Just another to be added to the list, Why?  making uneducated fantastical comments about things you obviuosly don't understand.

For the record ABC pay staff more then the other providers that I have any knowlege of in the area I know.

It will be an intersting Directors conference next week in ABC's home.

Admin, This thread should be closed, nothing of value in it...

Goodbye...


----------



## tigerboi (2 March 2008)

However you look at it,the white shoe brigade have been sent a clear message if you are a paper tiger you are fair game,whatever way has been
employed to flushout the margin calls it now shows all punters the extent of
how debt has been used to build empires on everyone else's money.its a big
wake up call for these types of companies,rest assured trendsetters there will be more they are still at the A's...ABC,AFG,AED?,next up BNB...


----------



## dhukka (2 March 2008)

investorelse said:


> Prospector,
> The customer comminication (letters) came directly from Brisbane head office.
> Four letters to customers over three days sent to all centres and the centre directors instructed to ensure they were communicated.
> Only one letter to the Staff.(surprise)
> ...




Still haven't moved on I see. No experts needed to see where this company was headed. The half year report confirmed what was already known for those who bothered to look past the hype.

Who cares what kind of car Eddie drives? What's under discussion is the business of ABS and it's likely future performance. That is now more obvious than it has ever been. Again, no experts needed to get a handle on that. 

I don't and never have invested with Eddie and if you had a clue about what constitutes a good investment neither would you.  However your emotional attachment (always a big mistake) and your lack of understanding of business principles prevents you from making informed decisions.


----------



## seden33 (2 March 2008)

Miner said:


> *An honest dumb question : Did you invest in ABC in current market price before it fell down ?*
> 
> If not, please STAY AWAY. You will not feel the pain of a large chunk of investors and no matter what big profile Eddie has created to some of the readers of this forum.
> 
> ...




Miner sounds like you don't want anyone buying in with passion so obviously your not long, you didn't get caught short by any chance?


----------



## investorelse (2 March 2008)

tigerboi said:


> However you look at it,the white shoe brigade have been sent a clear message if you are a paper tiger you are fair game,whatever way has been
> employed to flushout the margin calls it now shows all punters the extent of
> how debt has been used to build empires on everyone else's money.its a big
> wake up call for these types of companies,rest assured trendsetters there will be more they are still at the A's...ABC,AFG,AED?,next up BNB...




Just when Im about to give up on this site...

Hi Tigerboi,

Can you expand some more on this?

Why did the ASX or the Company not trigger quickly on the day?
There must have been so many alarms going off on the day?
How could they have both been asleep at the wheel on this event?


----------



## Rainmaker2000 (2 March 2008)

I go off camping for the weekend and wallah, this thread continues to deliver nuggets of gold......

Apparently, I and other asf members are on an ignore list from a certain learned threader who keeps contributing sound bites to the thread even though he has urged admin to close the thread as its apparently of little utility........I can only assume a thread praising Eddie and ABS's contribution to shareholder value would be more useful.

Just to illustrate the utility of this thread.......look back the weeks and you'll find a mum and dad investor who was an ABS owner round $6 from memory.......he was seeking guidance from the many learned threaders.....many threaders chipped in with myself giving ABS more benefit of doubt than most, ironically.....bottom line: that mum and dad investor I think realised that ABS pretty much did not suit his risk profile and sold.....I'm pretty sure that investor may have though the thread worthwhile long before the price hit $1.15....


----------



## chops_a_must (2 March 2008)

investorelse said:


> Wow chops 28K? double it and you will be closer for a centre director.
> Worksafe? I dont know? you asked them yourself yet? You have a duty of care! if you know something, you know! please tells us all Im sure you have some details. (not really)
> Poverty line? in WA? LOL.
> Not privileged just observing.
> ...




You know that is not true.

I just so happen to live with a worksafe investigator who just happened to audit and investigate ABC centres last year.

And I'd say what he said about ABC and their management and structure was incredibly relevant to the workings of ABC.

Cheers.

P.S. - yeah they have had to pay a bit more for centre managers now, but they still face a huge staff turnover because of ****e conditions and incompetent overhead  management.


----------



## gstrauss (2 March 2008)

*Major factors in ABS decline*

Hi. I've been attempting to educate myself on the recent decline of ABS. I do not hold any stocks, and am just following out of interest. 

Could people let me know if I have everything covered here. 
The main factors in its recent tumble are:

1. High levels of debt, and the fear that ABS, like Centro and Allco, will have difficulty refinancing. 
2. Purported short selling by hedge funds.
3. Groves had to sell a significant amount of shares due to a margin call (which was intentionally caused by the short selling)

There are clearly other factors which have been involved in its prolonged downward trend, but I'm more interested in the factors that caused its sudden drop. 

Please let me know if I've left anything out. I'm new to all of this. 

Also, what do people think will happen now? Some people have mentioned that PE will buy the American businesses. Do you think there are any other possible outcomes in terms of if and how ABS would be carved up?


----------



## theasxgorilla (3 March 2008)

robert toms said:


> I think that my religious upbringing has clouded my view on shares like this one.
> I see it as not quite right to make money from child care,nursing homes etc.
> Perhaps I am not modern enough!




Oh you should move to Sweden.  Public child care and nursing homes are the norm, and until recently it was obligatory to pay a portion of your wage in tax to the Swedish Church.  If I'm not mistaken I believe it's still implied that you want to do this, so unless you write to them and tell them to stop paying it for you, you will end up paying it anyway!


----------



## theasxgorilla (3 March 2008)

Rainmaker2000 said:


> I don't think one needs just a religious viewpoint to have a dim view of mass childcare........some of the stories I hear and the science conducted on kids who have intensive exposure to child care centres......well, child care has a dollar value and then there is the rest of it...what is the price of mental illness imposed in the most impressionable years.......we will see the dollar value of that in future years...It's a lot simpler just focusing on good stocks.............




Making throw-away comments about childcare and mental health is kinda pathetic, to put it lightly.  It's completely normal in Sweden to send kids to childcare while both parents work.  I repeat, completely NORMAL.  I'd hardly call the society dysfunctional.  Since we're a tribal species by nature it stands to reason for me that children are mixed into the greater society sooner rather than later...that would make for more function human beings IMO.


----------



## Freeballinginawetsuit (3 March 2008)

theasxgorilla said:


> Since we're a tribal species by nature it stands to reason for me that children are mixed into the greater society sooner rather than later...IMO.




Our kids spend ample time mixing with there peers.........12 years of schooling, a couple of years in kindy/pre school..........thats plenty of 'mixing time' IMO .

You have to wonder why some even have kids in the first place if they havent the means/time to raise and promote the values of kin raised in a nuclear family.


----------



## Rainmaker2000 (3 March 2008)

Thanks for the Swedish experience Gorilla......I don't believe the science conducted on kids who have intensive exposure to child care centres is 'throw away' and its currently an active area of exploration.........Your use of the word 'normal' and 'dysfunctional' is interesting, especially in the context of your reference to humans being 'tribal by nature'.....

I must concede, I'm a big fan of the inclusiveness of public policy in that part of the world.....maybe they do really great childcare......I'd love to know......what I do know is that the Austrialian trend away from Community based childcare to corporate based does not appear to be quality driven....


----------



## investorelse (3 March 2008)

*Re: Major factors in ABS decline*



gstrauss said:


> Hi. I've been attempting to educate myself on the recent decline of ABS. I do not hold any stocks, and am just following out of interest.
> 
> Could people let me know if I have everything covered here.
> The main factors in its recent tumble are:
> ...




Talk about hitting the nail on the head.

The "event" itself is certainly the only point interest surrounding this stock.
and yes what will be some likely outcomes?
Gotta be someone around here who has knowledge of this?


----------



## MRC & Co (3 March 2008)

*Re: Major factors in ABS decline*



gstrauss said:


> Hi. I've been attempting to educate myself on the recent decline of ABS. I do not hold any stocks, and am just following out of interest.
> 
> Could people let me know if I have everything covered here.
> The main factors in its recent tumble are:
> ...




Yes, you have it covered!

Groves got burnt after publically challenging the hedge funds (BAD MISTAKE), hopefully he will now have to sell some of his luxury goods and get down to the real nity gritty of the business!  

When is this trading halt going to end?

Could we see a short-term price bounce as the shorts close out?


----------



## ROE (3 March 2008)

I think Groves is arrogant and he thinks everyone is an idiot..the day the stock drop to $1 ish ...that night he came out saying he have a margin account, but his margin call price is way way low and current price doesn't trigger a margin call.....

If you are in a stock market you know he got margin call because margin usually based on around 30% to 50% of the share price movement...sometimes it even less than this figure.

When it drop 70% you don't have a margin call problems?


----------



## MRC & Co (3 March 2008)

ROE said:


> I think Groves is arrogant and he thinks everyone is an idiot..the day the stock drop to $1 ish ...that night he came out saying he have a margin account, but his margin call price is way way low and current price doesn't trigger a margin call.....




I thought Groves came out beforehand and told the hedge funds they couldnt get him!

I then thought his margin call came before it hit its low.  

Thats the debate and that will be the inquiry.  Did the banks force him to sell?  Or did he use his insider information to sell before it hit its low?


----------



## ROE (3 March 2008)

MRC & Co said:


> I thought Groves came out beforehand and told the hedge funds they couldnt get him!
> 
> I then thought his margin call came before it hit its low.
> 
> Thats the debate and that will be the inquiry.  Did the banks force him to sell?  Or did he use his insider information to sell before it hit its low?




no I think he got called on the day, he and his wife got around 1.8 ish per share for their margin call stocks.
just may as well they are on trading halt otherwise could be blood bath in a day like today


----------



## bunyip (3 March 2008)

Those who have even a basic knowledge of trends and chart reading will know that ABS has been in a downtrend since about the $7 mark. Anyone who adopts a HAH (hold and hope) attitude towards downtrending stocks is just begging to get severely mauled. We saw it in stocks like HIH, PAS, SGW, and many others......real life disaster stories that severely burnt folks who held them without any thought of risk control.


----------



## Prospector (3 March 2008)

bunyip said:


> Those who have even a basic knowledge of trends and chart reading will know that ABS has been in a downtrend since about the $7 mark. Anyone who adopts a HAH (hold and hope) attitude towards downtrending stocks is just begging to get severely mauled.




That is very true, the trouble I have at the moment is that the overall market fall since Christmas is really messing up the trends for everything (except for a couple of miners)  Should we sell everything?


----------



## chilliaa (3 March 2008)

Prospector said:


> That is very true, the trouble I have at the moment is that the overall market fall since Christmas is really messing up the trends for everything (except for a couple of miners)  Should we sell everything?




Spot on prospector, when the market goes into panic selling, charts wont distinguish 'good' companies from bad.
I strongly suggest turning off market noise.  Make up your own mind the value of a share and then just selectively buy.
For myself i look at earnings trend.  So long as long term earnings are going up who cares what the market is doing, (apart from giving you some excellent entry points from other peoples panic)


----------



## chilliaa (3 March 2008)

Those that have the courage to invest smartly now, could set themselves up very nicely for the rest of their lives.
Think about it, there are alot of companies that are paying close to 10%gross ylds.  Ok the next couple of years maybe hard, but looking past that certain industries are nearly guaranteed to be earning more in say 5yrs time than now.
If you can pick up companies with 10%ylds now, what will they be in 5 yrs time, 15%?, 20%
On $500k that would pretty much substitute the need to work.


----------



## bunyip (3 March 2008)

Prospector said:


> That is very true, the trouble I have at the moment is that the overall market fall since Christmas is really messing up the trends for everything (except for a couple of miners)  Should we sell everything?




It's not for me to say.....guess you'll just have to make up your own mind in that area, Prospector.


----------



## MRC & Co (3 March 2008)

bunyip said:


> Those who have even a basic knowledge of trends and chart reading will know that ABS has been in a downtrend since about the $7 mark. Anyone who adopts a HAH (hold and hope) attitude towards downtrending stocks is just begging to get severely mauled. We saw it in stocks like HIH, PAS, SGW, and many others......real life disaster stories that severely burnt folks who held them without any thought of risk control.




This is one thing I learnt the hard way when I started out.

A company became "good value" based on my equations, so I bought.  However, it was still on a downtrend (I bought in as it was now good value, correct fundamentally right?), but the downtrend continued until people came to their senses.  

I could have bought the stock a LOT lower, if I just used T/A to time my entry and still got my cheap, fundamentally sound company.  

I think looking at either F/A or T/A without ANY use of the other, is truly ignorant.  Only those using T/A with tight stops and robust, down-pat strategies could possibly get away with only using T/A!  

But I just dont get why those F/A investors dont use T/A to time things.  Either newbies, or stuck in their ways and lucky they have been living in bull-market times!  Maybe sentiments regarding the use of each method will be re-evaluated now that we have hit turbulent times. 

Sorry, off topic.


----------



## chilliaa (3 March 2008)

MRC & Co said:


> This is one thing I learnt the hard way when I started out.
> 
> A company became "good value" based on my equations, so I bought.  However, it was still on a downtrend (I bought in as it was now good value, correct fundamentally right?), but the downtrend continued until people came to their senses.
> 
> ...




For true long term fundamental investing, there are two issues
1) buying the right company
2) buying at the right price.
Many people confuse fundamental investing with just buying a company cause its price has gone down.  The most important criteria is to make sure that the company itself is 'good'.  This maximises the chance of preserving your capital.
The second is the buy in price and this will determine your rate of return.


----------



## MRC & Co (3 March 2008)

chilliaa said:


> For true long term fundamental investing, there are two issues
> 1) buying the right company
> 2) buying at the right price.
> Many people confuse fundamental investing with just buying a company cause its price has gone down.  The most important criteria is to make sure that the company itself is 'good'.  This maximises the chance of preserving your capital.
> The second is the buy in price and this will determine your rate of return.




Yes, here is an example.

JST or DEX.  Both strong brands, growing EPS, good ROE, bright growth forecasts, excellent management.  Yada yada, these are the basic principles of fundamental anslysis and both looked very good prices a few months back.  However, they kept falling?  Why not wait until the trend turns upwards and buy the stock even cheaper?  

Both, I calculated as good value, using intrinisic value equations, but both kept falling.......

This is why you need to use some T/A!

Those who only use F/A and buy once their trigger price is hit, can really miss maximising their long-term returns by buying in at higher short-term prices.


----------



## ghostworld (3 March 2008)

MRC & Co said:


> Yes, here is an example.
> 
> JST or DEX.  Both strong brands, growing EPS, good ROE, bright growth forecasts, excellent management.  Yada yada, these are the basic principles of fundamental anslysis and both looked very good prices a few months back.  However, they kept falling?  Why not wait until the trend turns upwards and buy the stock even cheaper?
> 
> ...




MRC & Co,

I'm a beginner when it comes to T/A. How do you know when it 'trends upwards'? is there a definition of this? Like 5 days of consecutive increases? Hope you or anyone else in this forum can give me a better idea.


----------



## ithatheekret (3 March 2008)

If a margin call caught the parties out , was there an original allocation at listing that was previously sold ? 

and ..... 

If there was a previous allocation , at what level was the margin facility used and when ?


Who was privvy to the actions ?

Should know in a few years when ASIC gets around to it ...............


----------



## MRC & Co (3 March 2008)

ghostworld said:


> MRC & Co,
> 
> I'm a beginner when it comes to T/A. How do you know when it 'trends upwards'? is there a definition of this? Like 5 days of consecutive increases? Hope you or anyone else in this forum can give me a better idea.




Hi ghost,

Basically, if a stocks price (looking at its chart) is moving down, wait until it starts making higher highs and/or higher lows.  This may happen straight away, or after a period of consolidation.  

Of course if it shoots up instantly following a downtrend, it could be an exhaustion rally (running out of sellers as it becomes extremelly oversold, you can use MACD, RSI etc to see this), or it could be due to a fundamental reason (check out the DEX chart and its profit release and ex div date).

Its also good if it starts moving back up on strong volume.

This is simply something I have learnt from buying "value stocks" (which WERE good value at the time IMHO), but not looking at the trend.

There are no definitions, its really a matter of interpretation.  But its better that its at least moving upwards to buy in, that if its been on a multiple week/month or even year slide. 

Any corrections or opinions welcome.

Cheers


----------



## dhukka (3 March 2008)

MRC & Co said:


> Yes, here is an example.
> 
> JST or DEX.  Both strong brands, growing EPS, good ROE, bright growth forecasts, excellent management.  Yada yada, these are the basic principles of fundamental anslysis and both looked very good prices a few months back.  However, they kept falling?  Why not wait until the trend turns upwards and buy the stock even cheaper?
> 
> ...




No, this is why *you* need to use TA. If you are buying for the long term and you buy a good company at a reasonable price, what does it matter if it falls another *10 - 15%*? Waiting for a stock to put in a series of higher highs and higher lows could mean you miss the bottom by that much anyway. Put more effort into picking good companies than picking bottoms and you'll do well. 

Personally, DEX would not have been on my list of undervalued stocks given it's latest results. The company pumped in a boat load of new capital into the business and managed to squeeze out a *20%* increase in profits, halving return on equity in the process. That would have been enough to keep it off my radar. 

Now JST definitely does show up on my undervalued radar, however their earnings growth has slowed in the last year, they've taken on more debt and they've decided to diversify outside their core competence with the Smiggle acquisition. Still, the company looks attractively priced. 

However, we are looking down the barrel of higher interest rates in the short term which means more pressure on households and thus less discretionary spending power. Like financial stocks, there just doesn't seem to be any compelling reason to rush in and buy retail stocks given the headwinds they face. See, no TA necessary.


----------



## gstrauss (3 March 2008)

Hi Guys,

Thanks for your confirmation that I was on the right track in terms of analyzing the factors that lead to the down turn. 

What about the carve out process? Nobody commented much on that.  Do you think PE will buy the American businesses, do you think the property could be parceled off as trusts to repay debt?.... what do you think the roles of the Investment Banks will be in this scenario?

If this is such a dog stock, then why is Tamasek buying in even further?

Also, like someone else mentioned, do you think the stock prices will bounce back up because the short will need to be closed out. 

Perhaps I'm looking at an aspect of this that isn't relevant for this forum/thread. I dunno.  If this is so, could someone recommend a better one that would have more discussion on this aspect of the stock (the corporate finance implications). 

Cheers.


----------



## MRC & Co (3 March 2008)

dhukka said:


> No, this is why *you* need to use TA. If you are buying for the long term and you buy a good company at a reasonable price, what does it matter if it falls another *10 - 15%*? Waiting for a stock to put in a series of higher highs and higher lows could mean you miss the bottom by that much anyway. Put more effort into picking good companies than picking bottoms and you'll do well.
> 
> Personally, DEX would not have been on my list of undervalued stocks given it's latest results. The company pumped in a boat load of new capital into the business and managed to squeeze out a *20%* increase in profits, halving return on equity in the process. That would have been enough to keep it off my radar.
> 
> ...




Ok, thanks for the opinion, however I note you are speaking from hindsight.  DEX based on current figures a few months ago, appeared attractive to me, as did JST.  A small diversification in Smiggle for JST and no idea just how bad this inflation problem was going to become. 

Which are your strong performers and investments as far as value stocks in the past few months which could not be ripped apart by hindsight?


----------



## MRC & Co (3 March 2008)

gstrauss said:


> Hi Guys,
> 
> Thanks for your confirmation that I was on the right track in terms of analyzing the factors that lead to the down turn.
> 
> ...




I dont think you are getting many answers, because the first part is speculation and nobody probably has much of an idea.

As far as Tamasek buying further, you have a valid point.  This may be oversold and we could see a bounce IMO, hence again, no answers, nobody knows.  As far as fundamentals, ABS needs to clean out some of its debt, sell off some assets and get back to its core business before it could be properly analysed and become a viable long-term investment.  Like many companies that try to grow too fast, they come crashing to their knees.

You are in the right forum and thread.


----------



## investorelse (3 March 2008)

gstrauss, I think you will do well, asking good questions...

Can anyone comment or shed some light on ABS shorts / options and if they remain valid as the Trading Halt went past EOM?

Cheers,


----------



## dhukka (3 March 2008)

MRC & Co said:


> Ok, thanks for the opinion, however I note you are speaking from hindsight.  DEX based on current figures a few months ago, appeared attractive to me, as did JST.  A small diversification in Smiggle for JST and no idea just how bad this inflation problem was going to become.
> 
> Which are your strong performers and investments as far as value stocks in the past few months which could not be ripped apart by hindsight?




Isn't using hindsight stock picking exactly what you're doing? You claim that DEX & JST were good value some months ago but you would have been better off waiting until they fell further before buying them. 

My view on DEX has to be hindsight as I've never looked at the numbers before today. Although the capital raising was almost a year ago so the half year should have given you an idea that the business performance was deteriorating.  The JST info has been around for some time. Evidence that retail and financial stocks would come under pressure has been around for months and I've been blogging about such issues for the best part of a year. 

I don't have any strong performers right now. I bought a stock (REF) last week that has fallen more than *60%* from its highs. Maybe it will go further but I'm happy with the price I paid. Time will tell if I'm right.


----------



## MRC & Co (3 March 2008)

dhukka said:


> Isn't using hindsight stock picking exactly what you're doing? You claim that DEX & JST were good value some months ago but you would have been better off waiting until they fell further before buying them.
> 
> My view on DEX has to be hindsight as I've never looked at the numbers before today. Although the capital raising was almost a year ago so the half year should have given you an idea that the business performance was deteriorating.  The JST info has been around for some time. Evidence that retail and financial stocks would come under pressure has been around for months and I've been blogging about such issues for the best part of a year.
> 
> I don't have any strong performers right now. I bought a stock (REF) last week that has fallen more than *60%* from its highs. Maybe it will go further but I'm happy with the price I paid. Time will tell if I'm right.




I am talking hindsight, as this is what my market activity has taught me.  Learning from past experiences.  At the time, without knowing what I do now, I could have waited on the sidelines due to the SP of each trending downwards.  Would have been a lot more beneficial than trying to pick the bottom and buy at good value (according to my calculations and opinion).

DEX reports even a few months ago, looked good value for its price.  Even after this "disappointing" report was released, it still rose 20% plus div?

As for JST, I would say the banking sector was more prone to come under perssure than retail.  It was a matter of if this mess could be contained within the banking sector, without it spilling over into retail.  At the time, this was still unknown, especially within Australia.  I beleive the latest retail figures I saw, remained very robust.  See link below:

http://www.stgeorge.com.au/resources/sgb/downloads/treasury/eco_outlook/February_2008.pdf 

Page 5.

Good luck with REF, fundamentally, looks like a very good buy, technically not bad either, you should do well!

Cheers


----------



## gstrauss (4 March 2008)

MRC & Co said:


> I dont think you are getting many answers, because the first part is speculation and nobody probably has much of an idea.
> 
> As far as Tamasek buying further, you have a valid point.  This may be oversold and we could see a bounce IMO, hence again, no answers, nobody knows.  As far as fundamentals, ABS needs to clean out some of its debt, sell off some assets and get back to its core business before it could be properly analysed and become a viable long-term investment.  Like many companies that try to grow too fast, they come crashing to their knees.
> 
> You are in the right forum and thread.




In your opinion, what would an acceptable level of debt or debt/equity be for a company like ABS?

Also, how did it diverge from its core business?


----------



## MRC & Co (4 March 2008)

gstrauss said:


> In your opinion, what would an acceptable level of debt or debt/equity be for a company like ABS?
> 
> Also, how did it diverge from its core business?




I dont look at debt/equity ratios, I simply look at profits in relation to debt.  How many years of net profits, would it take to repay debt?

Diverge, in that it tried to grow too big too quick.  Not diversify in essence, but simply load up with debt and raise as much capital as possible through shareholders, then buy up everything in its path.  Not sustainable IMHO and too complex to really value.  As soon as growth slows, its in big trouble, which we saw.  Core business = what it does best.  Obviously these new aquisitions are not as profitable as what it started with.

Anyways, Im out of this thread, I have no interest in ABS whatsoever.

Good luck!


----------



## ROE (5 March 2008)

MRC & Co said:


> I dont look at debt/equity ratios, I simply look at profits in relation to debt.  How many years of net profits, would it take to repay debt?
> 
> Diverge, in that it tried to grow too big too quick.  Not diversify in essence, but simply load up with debt and raise as much capital as possible through shareholders, then buy up everything in its path.  Not sustainable IMHO and too complex to really value.  As soon as growth slows, its in big trouble, which we saw.  Core business = what it does best.  Obviously these new aquisitions are not as profitable as what it started with.
> 
> ...




I disagree, debt is the major factor in all company going bell up..you dont get a corporation with little debt or no debt go bankrupt.

High Profit in relation to debt can only works when you get cheap debt..you will be struggling when debt rise and game over.

Consider average corp get a return of around 10-15 cents in a dollar.
The closer the debt cost to that level the closer you go bankrupt with high debt company.

And high debt company are usually bad business anyway.. if you make so much money, you can fund your expansion from your cash flow don't need to go to the bank. It's ok if you go to the bank for a one off capital expenditure but if you keep coming back then it is definitely a bad business.

And it looks like Margin call and Greed cost Eddie his family.

http://www.news.com.au/business/story/0,23636,23322592-462,00.html


----------



## Rainmaker2000 (5 March 2008)

Is anyone taking bets on when Eddie and the former lord Mayor of Brisbane will be sacked or move along from their positions........I'm pretty amazed I have not read such suggestions in the media yet....Eddie is still taking the line 'the business is fundamentally sound so we will see how it goes

I suspect Eddie himself still thinks its 'his baby', but I guess when you run your personal shareholding down through acquisition after acquisition, so does your influence....still nice pay cheque for creating 'shareholder value'....


----------



## Aussie2Aussie (5 March 2008)

ABC pair split as firm faces 

March 05, 2008 12:00am

ABC Learning founders Eddy Groves and his wife Le Neve have separated, and are under renewed pressure to ease fears the company is on the verge of collapse.

The childcare giant yesterday asked for its shares to continue a trading halt put in place last week after a huge profit downgrade caused widespread panic among investors. 

Mr Groves and his wife are now believed to be living in separate Queensland cities - the former on the Gold Coast and the latter mainly in Brisbane. Despite the split, the couple continue to work on the board. 

The pair, who have two daughters, married in 1985 when Mr Groves was 19 years old. Three years later they opened their first childcare centre in southeast Queensland. Company insiders say the pair have lived apart for many years. 

There were fresh calls yesterday for them to come clean about their relationship after ABC Learning's value halved to around $1 billion last week. 

"You wouldn't be wrong suggesting that was the case," one company insider told The Daily Telegraph when asked about the separate living arrangements. 

ABC Learning spokesman Scott Emerson refused to deny that the pair were living apart, saying he "declined to comment". 

The pair was among four directors who were forced to sell $45 million worth of stock last week, when the share price dived as much as 70 per cent. 

The Groves are also selling off three Gold Coast waterfront houses for about $12 million. Sources say Mr Groves had planned to build a "dream home" on the three lots but abandoned that plan last year. 

The Australian Shareholders Association said any split in the board should be made public to the 35,000 shareholders. 

"In any company, it is absolutely vital that the members of the board work together well as a team," ASA deputy chairman Stephen Matthews said. "Otherwise there is always a risk that the whole thing will fall apart."

Mr Matthews said one of the "key responsibilities" of a company chairman is to ensure the smooth operation of the board. 

Another ABC Learning insider said it had been "pretty common knowledge" across the company that the relationship between the Groves started to sour last year. 

"The view within the company is that she's the brains of the gang," the insider said.

"She's got the educational and child development background and he's always been more into the money side. 

"Since they separated obviously they haven't been working as well as a team."

Mr Groves is overseas, talking to investors about selling off some of the firm's more than 1000 childcare centres in the US.

http://www.news.com.au/dailytelegraph/story/0,22049,23319795-5001021,00.html


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## dhukka (5 March 2008)

Rainmaker2000 said:


> Is anyone taking bets on when Eddie and the former lord Mayor of Brisbane will be sacked or move along from their positions........I'm pretty amazed I have not read such suggestions in the media yet....Eddie is still taking the line 'the business is fundamentally sound so we will see how it goes
> 
> I suspect Eddie himself still thinks its 'his baby', but I guess when you run your personal shareholding down through acquisition after acquisition, so does your influence....still nice pay cheque for creating 'shareholder value'....




I think this is a scenario that becomes increasingly more likely. Groves will be forced out for his gross incompetence along with others. An asset stripper is appointed, comes in sells assets, pays down some debt and halts the growth for growth's sake policy. The company moves on with a smaller but more stable capital base. 

Of course Groves will claim that he has been wronged. It was the hedge funds, short sellers, the media. They were shortsighted, they couldn't see the grand vision of global childcare. Noone understands his genius, his passion, afterall, he did it all for the kids!


----------



## Prospector (5 March 2008)

Aussie2Aussie said:


> The Groves are also selling off three Gold Coast waterfront houses for about $12 million. Sources say Mr Groves had planned to build a "dream home" on the three lots but abandoned that plan last year.



I was in the Gold Coast (I live in Adelaide) when the story of the multi-million $ dream home on the foreshore was done in the local paper.  May last year I think.  I do feel so sorry for him   Maybe some bargains to be had?


----------



## MRC & Co (5 March 2008)

ROE said:


> I disagree, debt is the major factor in all company going bell up..you dont get a corporation with little debt or no debt go bankrupt.
> 
> High Profit in relation to debt can only works when you get cheap debt..you will be struggling when debt rise and game over.
> 
> ...




Dont get me wrong ROE, I DEFINATELY look at debt, its one of the biggest things I look for, low debt, strong cash flows.

However, how do you think the debt/equity ratio is a better measure of a companies ability to repay than debt/net profits?  

Cheers

Rainmaker, I agree, I have no idea how his head hasnt been put on the chopping block!  He is obviously incompetent with no idea about realistic and sustained growth!


----------



## TheAbyss (5 March 2008)

I for one would appreciate it if contributors to this thread could stick to the business of shares and investments. Discussions on marital seperation etc are ridiculous (they have lived in seperate residences for at least 5 years so who cares if it is now official) and nothing but rumour mongering.  It seems some on this thread take great delight in sinking the boot in while someone is down. I am not saying you should not state anythiing that isnt positive however stick to the business at hand please.

Bottom line is will Eddie sell the US centres at a loss, a gain or for what he paid for them? That will decide the SP action short term not where he is sleeping or who with.

Whether Eddie and the board should be removed is premature. Sure he over exposed the business in the US however it was done with board approval so you cant hold him solely responsible however if the US arm goes at a loss to PE then he may very well be removed as Global COO as someone does have to be responsible. If that happens though ABC will become a nice steady dividend bearing stock with little capital growth.


An old axiom that i feel applies, you do not weaken a strength to strengthen a weakness. Sanction him and move on.


----------



## Prospector (5 March 2008)

TheAbyss said:


> I for one would appreciate it if contributors to this thread could stick to the business of shares and investments. Discussions on marital seperation etc are ridiculous (they have lived in seperate residences for at least 5 years so who cares if it is now official) and nothing but rumour mongering.  It seems some on this thread take great delight in sinking the boot in while someone is down. .




Can't agree with you Abyss that this is not relevant.  Also, kicking him when he is down - he has brought his shareholders along with him!

Abyss, many of the people in this thread *are down themselves, specifically because of how the management team have conducted their business, and because of margin calls on their personal assets, their personal financial arrangements too.*  When a husband and wife are co-directors of a publically listed company, and are both actively involved in the operations of that company, and they separate which will have impact on the operations of the company, then shareholders have every right to discuss how this will impact on their money.

If you dont want your private life to go public then don't mix the two.


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## Rainmaker2000 (5 March 2008)

I agree that it is unfortunate to have such rumour mungering about people's personal lives.......

Whilst it is unfortunate, in this circumstance a falling out or even divorce between these two directors and shareholders may well be something shareholders need to consider....for example, I'm pretty sure when studying bankrupcy law, divorce can be a pretty nice way to segragate assets....I think Bondy may have been acquainted with this....This is just rank speculation of course and we have heard people on this forum testify as to Eddie's diverse asset base so I'm sure everything will be all good


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## benwex (5 March 2008)

"A.B.C. Learning Centres Limited (“ABC”) has entered into a Memorandum of Understanding (“MOU”) with Morgan Stanley Private Equity for the sale of a 60% interest in its US business (“US business”) reflecting a value for 100% of the US business of US$775 million (the “Sale Transaction”). The transaction will result in cash proceeds on completion of approximately A$750 million1, with an additional US$30 million payable shortly after 30 June 2009."

Does this mean ABS is selling 60% of their US operations for a sell price equal to 100% of the total value ( i.e more than what they paid)  or a pro rata price based on 100% of the value (break even)???

Good news for ABS IMO..

benwex


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## mim168 (5 March 2008)

Anyone dare to predict what might happen tomorrow when trading commence again? I gained $$  last Tuesday,but due to greed brought shares again towards the end of the day....the waiting is torture....


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## MRC & Co (5 March 2008)

Benwex, I gather it means they break-even.  

Definately good news for ABS.

Might see a bounce tomorrow (how bigger ballz do the Hedge Funds have?).  Will be interesting to find out! 

If price moves up on high volume, I might be interested in dipping my fingers in (with a VERY tight stop).


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## benwex (5 March 2008)

If you consider the likes of CNP and AFG, and their pathetic efforts in addressing their growing debt problems (market perception that is) I think ABS management have done very well.. 

Either that or the underlining business model is good and is attractive because I dont think ABS had a lot of bargaining chips when it came to the negiation table.

The speed and certainty the management have brought to ABS is stunning and E. Groves for all his faults has done a good job IMO..

benwex

PS: holder of course


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## ROE (5 March 2008)

Looks like good news but if I was you I'd look at the 60% that they sold, are they good assets? And the 40%?  Are they good stuff or more bad news for ABS down the track?

These private equity guys are very clue and they dont buy crab assets.


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## michael_selway (5 March 2008)

ROE said:


> Looks like good news but if I was you I'd look at the 60% that they sold, are they good assets? And the 40%?  Are they good stuff or more bad news for ABS down the track?
> 
> These private equity guys are very clue and they dont buy crab assets.




Didnt Morgan Stanley gave a lof of Bad Debt Provisions & W/Os?

*ABS - Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 36.0 33.2 45.7 54.2 
DPS 17.0 17.5 23.0 27.0 *

Thx MS



> Date: 5/3/2008
> Author: Fiona Tyndall; James Chessell
> Source: The Australian Financial Review --- Page: 61
> A deal between ABC Learning Centres and a US private equity house could beannounced as early as 5 March 2008. The listed Australian child care centreoperator is finalising an agreement to offload a stake in its US assets. Theproceeds would be used to repay its debts. There is speculation that US-basedKnowledge Learning or Bright Horizons may be interested in the assets.Meanwhile, Temasek has not commented on claims it has dispatched executives toAustralia to consider the group's 14.7 per cent interest in ABC Learning
> ...


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## kivvygosh (5 March 2008)

ROE said:


> Looks like good news but if I was you I'd look at the 60% that they sold, are they good assets? And the 40%?  Are they good stuff or more bad news for ABS down the track?



It sounds like they sold 60% of the business which holds all the US assets.  Therefore they aren't selling 60% of the individual businesses in their entirely, but are selling a 60% share in every individual business.


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## investorelse (5 March 2008)

Like watching a movie this...
ABS: going about business, hit in the head from behind fell to its knees and had their wallet stolen?
Then given a hand to get back on their feet by an accomplice.

Sorry, Just someone gave me one of those conspiracy movies to watch last night...
just a comment nothing else...

My two cents...Support like this I think it will bounce.


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## Pimping (6 March 2008)

So, I believe that this is a strong company with good fundamentals with strong earnings outlook, I think you could do worse than get some on open today, or should you wait for the profit takers and buy on weakness in the afternoon? decisions decisions?


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## snabbu (6 March 2008)

benwex said:


> If you consider the likes of CNP and AFG, and their pathetic efforts in addressing their growing debt problems (market perception that is) I think ABS management have done very well..
> 
> <snip>
> The speed and certainty the management have brought to ABS is stunning and E. Groves for all his faults has done a good job IMO..
> ...




Ah but a good job for who?
Is it a good time to be selling US assets with the Aud high: NO
Is it likely you will get fair value in an emergency asset sale:NO
Given the above why the fire sale: Because they have too can be the only conclusion.
Why do they have to sell the most profitable part of the business?

I suspect the following.
The directors are subject to more margin calls, so to protect themselves they do the following.
(1) Institute a trading halt, stops the margin calls.
(2) Then flog the most profitable part of the business to reduce debts and bolster the share price.
(3) share price rises, margin call risk reduces giving the opportunity to off load shares at a better price.

So in a nut shell what is going on here is the long term profitability of the company and the interests of the general share holders is being white anted to protect the assets of the directors.

I am sure the hedges will figure this out in a New York minute.  Perhaps any recovery will be short term.  This companies Australian earnings are heavily dependant on government largess I do note the government has recently changed and Swan and Kev are promising lots of pain in the budget.
My fearless footy prediction is that some of that pain may involve child care subsidies.

Regards

Gary


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## TheAbyss (6 March 2008)

Snabbu

In response to your questions,

Ah but a good job for who? *For all shareholders given the alternative was a continued downward spiral. *
Is it a good time to be selling US assets with the Aud high: NO - *Like Eddy had a choice. He had to sell.*
Is it likely you will get fair value in an emergency asset sale:*Well actually he made a $75 million profit on the 60% he sold so you can hardly call it a fire sale.*
Given the above why the fire sale: Because they have too can be the only conclusion. *He sold to reduce debt which has been achieved. Whether they can now increase their profit margins is yet to be seen.*[/B][/COLOR]
Why do they have to sell the most profitable part of the business? *How did you deduce that? The vacancy rates in the US centres are around 62% and 90% for Aus. The australian centres are where the money is the rest is an ego trip.*


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## ROE (6 March 2008)

I'm a little confused about this deal...I got to do some digging

Is Morgan Stanley lending ABC the money with the option of converting that money into stocks? So if ABC is not doing too well they said sorry we don't want to covert it into stock, you own us the money.
But if the stock took off, they say well we like to convert it to shares now and share the profit.


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## Rainmaker2000 (6 March 2008)

Yeah, ROE, it does not look as if many learned investors have read the finer points of the deal........

As I understand, part of it is a straight sale of 60% but it is also a condition that  Morgan signs up for some additional 'convertible notes' which is ABS's form of cheap unsecured debt instead of secured bank debt....I read that the transaction is also subject to some 'guarantees' from ABS which includes that the US centres will perform this year consistenly with company guidance.........since the market was sceptical of company guidance, its hardly a don't worry, be happy scenario.....


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## Blank1979 (6 March 2008)

Kohler, Gottliebsen and Bartholomeusz have just released this exslusive interview with Eddy Groves.

It's awesome

http://www.businessspectator.com.au/bs.nsf/Article/KGB-INTERROGATION-Eddy-Groves-CG4L5?OpenDocument

Eddy has a bit of a go at a few people and some big companies on the way too.


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## ithatheekret (6 March 2008)

huge volume today .

I wonder if they'll keep the dividend up . Who knows ( except Eddy ) ?

UK next , then back home for meat and potatoes ?

Back to the drawing board .


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## nioka (6 March 2008)

snabbu said:


> So in a nut shell what is going on here is the long term profitability of the company and the interests of the general share holders is being white anted to protect the assets of the directors.
> Gary



Don't you consider the directors ARE sholders, they are some of the biggest shareholders. Anything they do to protect the assets of the directors is almost certainly in the best interests of other shareholders.


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## freddy2 (6 March 2008)

The details of the deal aren't very clear. Deliberately or not the use of 2 different currencies (AUD/USD) obsfucates the overall outcome of the deal (= price paid - price sold). It would be much clearer if the terms of the deal plus what price was originally paid for the assets was done in terms of 1 currency - IMO the currency of whatever debt has been used.


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## Rainmaker2000 (6 March 2008)

Eddie makes some pretty solid allegations against Citi.........I'm not sure I've ever heard a story like that one about Citi...another matter for ASIC no doubt..

I actually gathered an ounce of respect for Eddie and at 1.75 at close, may even do some numbers on an ABS investment.......sound like ABS may actually fund some growth with operating cash flows...please talk me out of doing some numbers ROE..surely ABS even has a price..or maybe no...


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## chops_a_must (6 March 2008)

Rainmaker2000 said:


> Eddie makes some pretty solid allegations against Citi.........I'm not sure I've ever heard a story like that one about Citi...another matter for ASIC no doubt..
> 
> I actually gathered an ounce of respect for Eddie and at 1.75 at close, may even do some numbers on an ABS investment.......sound like ABS may actually fund some growth with operating cash flows...please talk me out of doing some numbers ROE..surely ABS even has a price..or maybe no...




Some things really don't add up.

If there was not an ounce of truth to the Citi report, why have ABC had to offload some of their US assets?

And since when have analysts _had_ to talk to management before issuing a report? Most of the crap analysis I have read is when the authors have clearly spoken to management.

Seems a little odd that a firm doing coverage can have intimate knowledge of director positions however... I think that is going to have to be another regulation... But... if you want to margin loan against your companies shares as a director, you have to assume a pretty high risk.

Really messy... but if there weren't severe problems in the business, none of this would have happened.


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## Miner (6 March 2008)

If Citi is so smart then why them made losses in billions ?
It is often who can not they teach.
Sorry but how many great players have become a good coach ?
If you are that great in your academic you would not do the Ph D or join  teaching  but straight go earning money.

No disrespect to teachers. Because they go to teach then only we learn from them and become better than them. That is how a good coach produce Ponting, Tendulkar, Sobers and Hewette.
But i would put pinch of salt to read any CIti reports.


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## snabbu (7 March 2008)

nioka said:


> Don't you consider the directors ARE sholders, they are some of the biggest shareholders. Anything they do to protect the assets of the directors is almost certainly in the best interests of other shareholders.




Perhaps I didn't make myself clear, the future earnings of the company are being sacrificed to sure up the SP in the short term, this benefits those who have margin loans to the detriment of those who are merely long.
Of course the SP over the medium term is a function of projected future earning which will reduce as a result of this deal.
It will be interesting to see who sold what yesterday.
I note no one here agrees with my suspicions on this, perhaps I am wrong.
It alarms me a little that Citi agrees with me as their track record of late is not that flash.  However I do hope you got out at the 2.70 mark as the fluctuations yesterday seem to confirm my reading of the situation.
But even I didn't expect the insiders to get out with 100 percent profit in one day.  As of this morning the price is down 18.22 percent so on that basis as of this morning the market also agrees with me which is something I guess.
Anyway it will be interesting to see what happens today.
Do you know how long after they sell shares that directors have to report to the ASX, because that will be fascinating.

Cheers

Gary


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## snabbu (7 March 2008)

Hi TheAbyss
Thank you for your comments on my rhetorical questions (quoted below in blue). A couple of comments.
*For all shareholders given the alternative was a continued downward spiral. * Didn't appear to work very well so far, down 18.2 percent yesterday, be interesting to see what happens today.
*He sold to reduce debt which has been achieved. Whether they can now increase their profit margins is yet to be seen.* My interpretation is he sold to prop up the share price in the short term to protect himself from more margin calls. As the mid term SP is a function of future earnings, selling 60 percent of the US business will affect those earnings and therefore the price in the medium to long term.  I am not across the fundamentals of the company as you are I have only read the business summaries which is where I formed the opinion that the future profit of the company was heavily influenced by the US operations.

Do you think that an 18 percent mark down is fair considering the decreased value of the company post the sale,  is there more to go? or should it bounce back.  I guess the question is what percentage of EPS do you think the sale represents, because this will determine a fair price.

Could you clarify this, are you saying that the Australian centres are 90 percent empty?
*How did you deduce that? The vacancy rates in the US centres are around 62% and 90% for Aus. The australian centres are where the money is the rest is an ego trip.*

Anyway it's an interesting situation.
I hope you got out yesterday if you were holding.
I am watching the ASX announcements with great interest.

Cheers

Gary


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## snabbu (7 March 2008)

Blank1979 said:


> Kohler, Gottliebsen and Bartholomeusz have just released this exslusive interview with Eddy Groves.
> 
> It's awesome
> 
> ...




Great link, good interview, thanks for posting it. I found this quite telling.
"AK:	And what’s your position now? Do you have any lending left against your shareholding?

EG:	Look, I wouldn’t want to comment on the current position. I’m happy to do another interview with you in a little while once I get through all this. "

I take that to mean yes he does or he did before yesterday.

It is interesting that he says he was surprised that citi sold his shares from under him, it is not up to citi to ring him it is up to him to rectify his situation. This is quite plain in the conditions of Citi margin loans.
For those interested there is a link to the PDF if you skip down through all the BS to the bottom of page nine the process is quite clear.

https://sec1.citismithbarney.com.au/auc/pdf/FIF_ML_section.pdf

I kind of wonder about a guy who can't get his head around a simple document like this.  Particularly as fellow director Martin Kemp was margin called on the 22nd which he didn't meet and was sold down at $3.00 odd. Four days later the price was approx $1.80 when Mr Groves was margin called and sold down.  I really can't understand his surprise at the result. 

It is also interesting that in answer to one question he says he's put everything he owns into ABS, the very next he says if citi had rung him he would have written them a cheque. 

Thanks again for the link.

Cheers

Gary


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## buffettologist (7 March 2008)

ABS @ the current price of $1.47 is an absolute bargain IMHO
Assuming the hiccup in current earnings is due to seasonality and the operations of the business is still sound, it's currently trading at a 2008 projected earnings yield of 20% and 2009 earnings yield of 28%
The price to book value is 0.32
Bargain! Bargain! Bargain!


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## ghostworld (7 March 2008)

buffettologist said:


> ABS @ the current price of $1.47 is an absolute bargain IMHO
> Assuming the hiccup in current earnings is due to seasonality and the operations of the business is still sound, it's currently trading at a 2008 projected earnings yield of 20% and 2009 earnings yield of 28%
> The price to book value is 0.32
> Bargain! Bargain! Bargain!




Not if the below article is true. Note that it's by Michael West. Could result in massive dilution of shares.


http://business.smh.com.au/bad-notes-trigger-abcs-renewed-dive/20080307-1xrm.html



Bad notes trigger ABC's renewed dive

    * Michael West
    * March 7, 2008 - 7:02PM
    *

Eddy Groves was looking good. He had nipped over to the US on a mission to sell some assets and recapitalise his child-care empire.

In no time at all, he had struck a deal with Morgan Stanley Private Equity. It might have been a fire sale but the $502 million price tag for the bulk of his US centres didn't look too shabby.

Eddy was back. Smaller. But back.

With the $811 million proceeds from a convertible notes issue, ABC could now make a large dent in the $1.2 billion senior bank facilities - the covenants of which ABC had come so perilously close to breaching.

The stock price rallied. Then mysteriously, at 3pm yesterday, ABC shares took a 25% pounding. The slide has continued today, with the stock down a further 20% at one point.

What happened?

One theory is the hedge funds are back having their evil way with Eddy's stock price again. It could be true. Perhaps they have seen the terms of the recent convertible note issue.

It is a bit speculative at this point but, according to a Goldman Sachs JBWere note to clients, these convertible notes may be known as "exploding convertible notes", that is, "if the ordinary shares drop in value, the number on issue explodes".

If so, ABC shareholders are in for a torrid time and whoever owns these convertible notes has got the company by the proverbials.

"The last big company to issue such notes was HIH Insurance in 1999. In the case of ABC, there appears to be no limit on how many shares could be issued on conversion, whereas with HIH there was."

If Goldman is correct, this security is one of the silliest ever issued to raise money. It would even go down in the annals of corporate history as the "iconic" security of the great market downturn of 2008.

ABC issued the notes last June, according to reports, about the time of the US credit market meltdown.

"It did the issue on a dollar basis rather than the conventional `fixed proportion' system," says Goldman, which means they are an absolute bargain. Why would you ever buy ordinary shares again?

The story goes that the hedge funds may have driven down the ABC ordinary shares while buying up as many of these notes as they could.

Naturally Eddy Groves and his advisers from Austock did not contemplate the stock being so low but that is no excuse for issuing these notes, if indeed the story is right.

According to reports, Comm-Sec holds some $360 million of the $600 million tranche and may turn out to be a very large holder of ABC.

In Eddy's defence, unlike the Allco executives, Eddy declined to draw a large salary last year, preferring to take stock instead.

He is indeed a true believer, though perhaps poorly advised.

Despite the aggressive accounting, extreme expansion tendencies and poor corporate governance of ABC that has led to its recent troubles, Eddy Groves certainly deserves to own a few of those convertible notes.


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## ROE (7 March 2008)

buffettologist said:


> ABS @ the current price of $1.47 is an absolute bargain IMHO
> Assuming the hiccup in current earnings is due to seasonality and the operations of the business is still sound, it's currently trading at a 2008 projected earnings yield of 20% and 2009 earnings yield of 28%
> The price to book value is 0.32
> Bargain! Bargain! Bargain!




Then buy some more  no one stopping you from doing it... spend a few millions and you can own the whole company 
Game over for three directors, Eddie his wife and Kemp all shares gone.. another margin call today

they together hold less than 50,000 shares


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## Rainmaker2000 (7 March 2008)

_"The story goes that the hedge funds may have driven down the ABC ordinary shares while buying up as many of these notes as they could."_

Well, that's the end of the story then, if correct.... The sheer negligence of this situation is absolutely beyond comprehension.....no wonder the ABS share price had a heavy weight on it.....makes a lot more sense....my understanding of most convertible notes is a debt agreement with an interest rate and a call option as a bonus......These guys clearly had no idea at all....ASIC will need another 3 office blocks by the time this boom to bust is over...

I'm going to get my finances in order and prepare a bid for an ABC centre in my local neighbourhood....

My thoughts go out to anyone who participated in this story.....I think I'll just stick to my boring stocks who fund growth out of last year's earnings...


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## freddy2 (7 March 2008)

If there is anyone who looks after number 1 more than Eddie Groves it is the investment banks. I would like to see who advised ABC on these deals, surely they didn't just trust the investment banks. Basically these sharks have fleeced ABS shareholders with the unwitting help of the directors.


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## Miner (7 March 2008)

*Joke of the Day or Night*

My friendly broker Bell Potter Securities in their report published today 7 March has advised ABS as BUY at prevailing price $1.73

Any way as always I have posted when Bell Says - BUY means they want to sell their favourite clients shares  to you.

Probably they will offer  Bundy Rum with it as an incentive.

Should ASIC investigate these cowboy brokers?


What do you think folks?


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## snabbu (8 March 2008)

While making it clear I feel sorry for those who lost money.

I have to say it is a very nice feeling to be so right about something.
I know it's childish to gloat but I just couldn't help it
Thinking about the ex notes for a moment. Someone who is too dense to understand the terms of his margin loan could not possibly be competent enough to do deals of this magnitude.

In regard to the "deal" it isn't a deal it's an expression of interest due diligence is  underway as we speak it could still fall over.  If it does what value the shares then?  Also when the directors share transactions show up on the ASX next week what will the market reaction to that be?

I rely a lot on the quality of the management and the board in making investment decisions.  I would not lend Groves bus fare.

Cheers

Gary


----------



## snabbu (8 March 2008)

ROE said:


> Then buy some more  no one stopping you from doing it... spend a few millions and you can own the whole company
> Game over for three directors, Eddie his wife and Kemp all shares gone.. another margin call today
> 
> they together hold less than 50,000 shares




Hi Roe
Just a quick question.  How do you know that information.  I've been waiting for an announcement on the ASX is there somewhere else you can find out first.  I suspect some of the directors shares were sold before margin calls, which was the primary reason for flogging the US assets i.e. for a short term boost in the price.

Cheers

Gary


----------



## chansw (8 March 2008)

*ABC Learning founder sells most of stake*
March 7, 2008 - 7:07PM

http://news.smh.com.au/abc-learning-founder-sells-most-of-stake/20080307-1xvg.html

ABC Learning Centres Ltd founder Eddie Groves has been forced to sell almost his entire stake in the company after facing more margins calls.

Mr Groves sold off more than 12 million shares on Thursday at $2.14 apiece - leaving him with only 3,186 ordinary shares in the company he built up from a single childcare centre in Brisbane 20 years ago.

After topping the annual Business Review Weekly Young Rich List with a personal fortune of $260 million two year ago, Mr Groves now owns a $4,683.42 stake in ABC.

His wife Le Neve Groves also sold off her entire stake of six million shares at $2.21 apiece on Thursday, while the childcare giant's Australian head Martin Kemp sold 2.7 million shares at $2.02 each.

Mr Kemp is left with 23,659 ordinary shares while Mr Groves still has 308,880 options, according to directors' change on interest notices lodged with the Australian Securities Exchange late on Friday.

The share sales were all the result of margins calls, a spokeswoman confirmed.

Last week Mr Groves, Mrs Groves, Mr Kemp and another director were forced to sell off the bulk of their stakes after margin calls were triggered during panic selling of the stock by investors.

Trading was halted on Wednesday last week and Mr Groves flew to the US to negotiate the $US775 million ($A836.57 million) sale of 60 per cent of ABC's US assets to Morgan Stanley Private Equity.

The deal will help ABC pay off most of its debt.

But investors remained suspicious of the value of the rescue plan and stripped another 18 per cent from the stock's value when it restarted trading on Thursday.

The nose-dive apparently set off more margin calls to Mr Groves and his fellow directors.

ABC shares fell another 16 per cent, or 28 cents, to $1.47 on Friday.

Investors first fled the stock on February 26, stripping $760 million from the value of the company in a single day before the trading halt.

The night before ABC had lodged a disappointing 42 per cent fall in interim net profits to $37.1 million.

Concerns over the interim result and the company's heavy debt were then ignited by market rumours that loan covenants had been breached, sparking the sell-off.

Mr Groves and ABC have rejected all speculation their bank covenants had been breached.

On Thursday Mr Groves accused his personal banker Citigroup of being the source of faulty research creating uncertainty over whether ABC had breached one of its loan covenants.

But in further research analysing the rescue deal, Citigroup has labelled ABC a speculative hold and says the board and management "need to go" before the childcare provider can regain an investment-grade rating.

A March 5 Citigroup note to clients challenged Mr Groves and ABC's assertions they were under no pressure to sell ABC's US assets.

"The urgency with which the sale was conducted indicates the company is under pressure from some source," the note said.

"If the urgency relates to shoring up share price to avoid margin calls, the longer-term interests of the majority of shareholders may have been jeopardised for the interests of a few."


----------



## Aussiejeff (8 March 2008)

chansw said:


> *ABC Learning founder sells most of stake*
> March 7, 2008 - 7:07PM
> 
> http://news.smh.com.au/abc-learning-founder-sells-most-of-stake/20080307-1xvg.html
> ...




Poor fella. He returned *only* $25.7 Million to his bank account on the Thursday, huh? That must hurt. I don't think I'd be happy with *only* $25.7 Million bucks on one day. Who could possibly live on that? We better cut the poor guy some slack, eh?

LOL


AJ


----------



## ROE (8 March 2008)

snabbu said:


> Hi Roe
> Just a quick question.  How do you know that information.  I've been waiting for an announcement on the ASX is there somewhere else you can find out first.  I suspect some of the directors shares were sold before margin calls, which was the primary reason for flogging the US assets i.e. for a short term boost in the price.
> 
> Cheers
> ...




I just use ASX announcement and broker site announcement which usually they get from ASX anyway..

I also watch the volume...unusually high volume either indicates the stock is trade out of existence or margin call.

so regardless if some people denied that fact (margin call) I still use volume.
Volume speak louder than words 

I don't hold ABS..and I feel sorry for Eddie to lost it all but at the same time I think he should be more responsible and accept the fact he doesn't understand how margin call and leverage works or have some very very bad advisers.

Banks are in the business of making money, they are not your family or close friends when it comes to crunch time they will do what ever it takes to protect their money. If they happen to send you broke well they will do that as long as they can recover the money.


----------



## ROE (8 March 2008)

Aussiejeff said:


> Poor fella. He returned *only* $25.7 Million to his bank account on the Thursday, huh? That must hurt. I don't think I'd be happy with *only* $25.7 Million bucks on one day. Who could possibly live on that? We better cut the poor guy some slack, eh?
> 
> LOL
> 
> ...




No man chances are he wont see much of that money if it's a  margin call.
Banks will have most of that money to recover his lost position.


----------



## snabbu (8 March 2008)

ROE said:


> I just use ASX announcement and broker site announcement which usually they get from ASX anyway..
> 
> I also watch the volume...unusually high volume either indicates the stock is trade out of existence or margin call.
> 
> ...




Ta for the info I think I mustn't have refreshed the ASX page still getting 
it from the cache, now I see the announcements.

I see he got out on the 6th at 2.13 so he probably sold them himself otherwise they would have been margined last week at that price.
Still better to get out at 2.13 than still be in or margined at $1.47

He can look forward to a more relaxed life now as I imagine the owners wont want him around after this Monday.

Be interesting to see who they appoint.

Have to be a bean counter I guess.

Cheers

Gary


----------



## buffettologist (8 March 2008)

You still have to credit eddy groves for starting up a business from scratch and building it into an empire. Although his finance skills may not be top notch he's still regarded as a top business manager in Australia. I'd hate to see him leave and start up another child care centre.


----------



## hangseng (8 March 2008)

buffettologist said:


> You still have to credit eddy groves for starting up a business from scratch and building it into an empire. Although his finance skills may not be top notch he's still regarded as a top business manager in Australia. I'd hate to see him leave and start up another child care centre.




Well done, great to see and I couldn't agree more.

Australia needs more Eddy Groves, willing to quite simply have a go and to back themselves doing so.


----------



## kloid (8 March 2008)

hangseng said:


> Well done, great to see and I couldn't agree more.
> 
> Australia needs more Eddy Groves, willing to quite simply have a go and to back themselves doing so.




I also agree.  I had a heated discussion with my wife in the car this morning.  She described him as a "sleazy ba****d who makes money off of kids" but I think he simply took the opportunity that was there - if the government weren't going to provide more child care facilities then they would have to come from private enterprise.  I'm sure Eddy Groves is not going to be destitute any time soon though and I'm sure he'll be doing something else in the near future.


----------



## Miner (8 March 2008)

buffettologist said:


> You still have to credit eddy groves for starting up a business from scratch and building it into an empire. Although his finance skills may not be top notch he's still regarded as a top business manager in Australia. I'd hate to see him leave and start up another child care centre.




Top business manager  in Australia !! You are not insulting the real top managers - i hope. In what parameters of top business manager? What was the life cycle of his business ? What is the difference between a gambler and him then who did not have any plan b for him or his share holders ? If he is top then what is the definition of incompetency ?

If you really see his investment pattern and postings in this forum - there was never a consistency in his buying own shares for long time. Condolences for him but sorry in business sentiment and kindness are always rolled over by realities. Eddie has lost the confidence of his share holders excepting few top persons like himself. 

Sorry but let us not protect failures who by their action have ruined thousands of families in street.


----------



## hangseng (9 March 2008)

Miner said:


> Top business manager  in Australia !! You are not insulting the real top managers - i hope. In what parameters of top business manager? What was the life cycle of his business ? What is the difference between a gambler and him then who did not have any plan b for him or his share holders ? If he is top then what is the definition of incompetency ?
> 
> If you really see his investment pattern and postings in this forum - there was never a consistency in his buying own shares for long time. Condolences for him but sorry in business sentiment and kindness are always rolled over by realities. Eddie has lost the confidence of his share holders excepting few top persons like himself.
> 
> Sorry but let us not protect failures who by their action have ruined thousands of families in street.




You are targetting the wrong person. Eddy bought shares in ABC in good faith and a belief in the company he founded. He wasn't the one that decided to target the shares and short the crap out of them....the hedge funds have "ruined thousands of families in street" not Eddy Groves.


----------



## vida (9 March 2008)

A man of good faith does not go massively into the dark night of margin loans

He had a rash belief in the company he founded making him mega wealthy fast as possible, that is clearly his modus operandi buying millions of shares in various parcels last year on borrowed money. Why otherwise would he do that?

He was the one who put his shares, the company and its investors at perilous risk by leveraging their purchase on such a scale in a market heading downwards and when the credit crunch had already been triggered. He should have known better.

Eddy Groves is the responsible party here. No use passing the buck.




hangseng said:


> You are targetting the wrong person. Eddy bought shares in ABC in good faith and a belief in the company he founded. He wasn't the one that decided to target the shares and short the crap out of them....the hedge funds have "ruined thousands of families in street" not Eddy Groves.


----------



## prawn_86 (9 March 2008)

hangseng said:


> You are targetting the wrong person. Eddy bought shares in ABC in good faith and a belief in the company he founded. He wasn't the one that decided to target the shares and short the crap out of them....the hedge funds have "ruined thousands of families in street" not Eddy Groves.




I do not see how going short really pushes the price down?

No different to how going long does not push the price up.

It was a margin call which forced a huge amount of stock to be dumped on market, which THEN forced the price down.


----------



## mim168 (9 March 2008)

ABC boss says centres will not close
SMH
March 9, 2008 - 11:16AM


ABC Learning Centres Ltd founder Eddy Groves has sold his entire stake in the childcare empire, but says the business is solid despite its financial crisis.

On Thursday, Mr Groves offloaded almost all of his shares - 12 million at $2.14 apiece - after margin calls were made on his holdings.

He was left with only 3,186 ordinary shares, worth $4,683.42, in the company he had built up from a single childcare centre in Brisbane 20 years ago.

Mr Groves returned to Australia on Friday after selling 60 per cent of the company's US assets.

He today attended the annual conference of Australian and New Zealand directors in Brisbane, where he was expected to reassure staff their centres would not close.

Prior to the conference, Mr Groves told reporters he had sold all of his shares.

"My stake as of right now is I have no shares in ABC," he said.

"Unfortunately, you know, that's what's happened in amongst this process."

But Mr Groves said staff and parents with children in the centres should not link the company's financial crisis to its day-to-day running.

"I think there's a lot of interesting things that are happening out in the share market today, and I don't know if they have too much relationship to what a business is actually doing," he said.

"At the end of the day this is very solid business, we've been here for 20 years, I think we'll be here for a lot longer than that, and really I don't think there's too much link between the share price and the strength of the operating business."

Mr Groves said Australian centres would "absolutely not" close.

"When you have fear and frenzy in a market place it can do amazing things, and I've seen amazing momentum and a negative sentiment gathered in the last two weeks, and I think that's something that's, you know, a bit sad," he said.

"At the end of the day, there's 16,000 people in Australia and New Zealand that rely upon us doing a good job and we have done a good job."

Mr Groves also denied reports that he was trying to sell his basketball team, the Brisbane Bullets.

The Sunday Mail newspaper reported Mr Groves tried to sell the club last week, but the deal fell through.

Mr Groves said he received offers for the team at the end of every season, and had not considered them.


*This was in SMH this AM, how would Groves leaving the company affect the shares/company?*


----------



## snabbu (9 March 2008)

mim168 said:


> ABC boss says centres will not close
> SMH
> March 9, 2008 - 11:16AM
> 
> ...




The price will go up provided they appoint someone good.  I guess it's up to the Singaporeans what happens next.

Cheers

Gary


----------



## ROE (9 March 2008)

vida said:


> A man of good faith does not go massively into the dark night of margin loans
> 
> He had a rash belief in the company he founded making him mega wealthy fast as possible, that is clearly his modus operandi buying millions of shares in various parcels last year on borrowed money. Why otherwise would he do that?
> 
> ...




Can you state you name:
ED: Eddy Groves

Can you state your title:
ED: CEO/MD

Can you explain what CEO and MD stand for:
ED: Chief Executive Office/Managing Director

Chief Executive Office, there is no other higher person
running the company so I can safely assume the buck stop
with you?

ED: Yes

Enough said.


----------



## Miner (9 March 2008)

ALL STOOD UP IN A HOPE THAT THERE WILL A SHARE SURGE ON MONDAY( SADLY DJ FALLING INDEX  ON FRIDAY WILL PROBABLY  POUR WATER ON HOT WISHES)

Nevertheless there are very few CEO who have the gutts to get such a standing ovation like Eddie (I am not condoning his action on my personal capacity however).


*Groves gets standing ovation at meeting*
Posted 4 hours 50 minutes ago 
Updated 4 hours 37 minutes ago 


Personal toll: Eddy Groves arriving for the meeting today (AAP)

Map: Brisbane 4000
 Embattled businessman Eddy Groves has received a standing ovation from directors and staff of ABC Learning at a company meeting in Brisbane. 

The group's founder also reassured them that the firm was safe and would be around for another 20 years despite the recent financial turmoil that led to the sale of 60 per cent of its US assets. 

Heading into the meeting at the Brisbane Convention and Exhibition Centre, Mr Groves said he had paid a heavy personal toll to get the childcare empire back on track.

"My stake as of right now is I have no shares in ABC [Learning]," he said.

"It's disappointing but at the end of the day my focus is always going to be ... on this company and the children and the families and the people in that room and the staff that work for us."

Despite claiming he no longer owns ABC Learning stock a company spokesman says Mr Groves still has about 3,000 shares.


----------



## buffettologist (9 March 2008)

Fundamentally there's nothing wrong with the business, mums and dads will continue to send their love ones to child care centres and ABC will continue to make money, the share price will eventually reflect this.... one year from now people who bought in now will be  those who didn't will


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## Rainmaker2000 (9 March 2008)

Great to see a diversity of views even at this late stage......people still even rooting for Eddie as a 'top manager' and man in good faith.....that's what's so good about the internet...

Quite simply, ABC is game over as an investment if what people suspect about the terms of the convertible notes are true........game over.....period...of course ABC centres will keep making money but what will that have to do with shareholder returns...

Untill there is full disclosure of regarding these notes, ABS can not even be seen as a speculative investment, as there is absolutely no certainty over issued capital


----------



## investorelse (9 March 2008)

Summary of this thread ...
JP morgan does not know what a good investetment is and buys 750 Mill of crap.
A solid business means nothing unless shareholders like it...
LOL
This event is a result of those who have the power to manipulate the makert regardless of the shareholders
so what if the market does not like debt ATM it was the market that drove the price not eddie.
oneday the market will like the debt just not today...


----------



## freddy2 (9 March 2008)

vida said:


> A man of good faith does not go massively into the dark night of margin loans
> 
> He had a rash belief in the company he founded making him mega wealthy fast as possible, that is clearly his modus operandi buying millions of shares in various parcels last year on borrowed money. Why otherwise would he do that?
> 
> ...




I agree. Eddy Groves probably could have gotten very rich slowly but instead risked going bust to try and get rich fast. If he actually enjoyed what he did, like many business owners do, the first option is a no brainer. Quite simply greed, arrogance and no understanding of finance/risk caused this disaster. The investments banks love it when guys with these traits show up, easy pickings.


----------



## hangseng (9 March 2008)

prawn_86 said:


> I do not see how going short really pushes the price down?
> 
> No different to how going long does not push the price up.
> 
> It was a margin call which forced a huge amount of stock to be dumped on market, which THEN forced the price down.




So then why did the hedge funds bother to short unrepentently, literally forcing a margin position which in turn supported their short position?

The shorting was occurring in a big way before the margin call, tripping stop losses on the way and providing further downward momentum and panic in a market made for shorters.

'Free' and not so open market at work. But it makes the market function so we are all happy, right? What I would like to know is how did they know his margin position? I would be a cynic to think the same lender or one of it's traders let this information slip now wouldn't I?


----------



## MRC & Co (10 March 2008)

hangseng said:


> So then why did the hedge funds bother to short unrepentently, literally forcing a margin position which in turn supported their short position?
> 
> The shorting was occurring in a big way before the margin call, tripping stop losses on the way and providing further downward momentum and panic in a market made for shorters.
> 
> 'Free' and not so open market at work. But it makes the market function so we are all happy, right? What I would like to know is how did they know his margin position? I would be a cynic to think the same lender or one of it's traders let this information slip now wouldn't I?




Yeh, I think you got this one wrong prawn.

Any buying (long) is going to push price up.  Vice-versa, selling (shorting, i.e. selling borrowed stocks) is going to push the price down.  Supply and demand.

Hangseng, I heard Eddy came out before all the shorting, saying he had a margin loan and said the hedge funds will never "get him".  Arrogance?  Sounds like it!  Leant a BIG lesson, NEVER challenge the hedge funds, especially with a margin loan and a shaky, high debt company.  Its like a pack of vultures seeing a weak lamb stuck in the mud.  They are going to eat him alive!


----------



## buffettologist (10 March 2008)

Assuming the $600 million tranche of exploding convertible notes is true and it dilutes the earnings per share at a worse case scenario say 50%, ABS is still trading at a forcasted 2008 earnings yield of 10% and 2009 earnings yield of 15-20%, and the share price is around 2/3 of its book value even with the diluted number shares on offer.


----------



## ghostworld (10 March 2008)

buffettologist said:


> Assuming the $600 million tranche of exploding convertible notes is true and it dilutes the earnings per share at a worse case scenario say 50%, ABS is still trading at a forcasted 2008 earnings yield of 10% and 2009 earnings yield of 15-20%, and the share price is around 2/3 of its book value even with the diluted number shares on offer.




You would have to wait until the deal with the private equity group is spelled out. The assumption from that article was that ABS may have issued exploding convertable notes to them.


----------



## tigerboi (13 March 2008)

Well i believe there is  at least one very disgruntled  ABC stakeholder who rumour has it would like to have a quite word to fast eddy, This guy relies on the kindness of the ABC learning staff to keep him from having to pan handle outside city offices & scour the city for scraps,he is worried that if the ankle biters dont get their milk & tuna sandwiches neither will he.keep an eye on today tonight & a current affair as the street corner tip is a 6 figure amount for his story has been sent to his agent, none other than the ubiquitous max markson(aca) & ex long bay client harry m miller(tt)...tb


----------



## tigerboi (13 March 2008)

tigerboi said:


> Well i believe there is  at least one very disgruntled  ABC stakeholder who rumour has it would like to have a quite word to fast eddy, This guy relies on the kindness of the ABC learning staff to keep him from having to pan handle outside city offices & scour the city for scraps,he is worried that if the ankle biters dont get their milk & tuna sandwiches neither will he.keep an eye on today tonight & a current affair as the street corner tip is a 6 figure amount for his story has been sent to his agent, none other than the ubiquitous max markson(aca) & ex long bay client harry m miller(tt)...tb




look out this guy means business!i reckon he could run ABC better than fast eddy...slash costs on the food to the rugrats & refloat as the XYZ non learning centres,how to roll up the rugrats pre schools & screw the average punter as you leverage your **** so tight you wouldnt get a tally ho in your crack!however eddy was shown what a dose of humility is all about it is the banks that own your **** if you go being a mug lair at a clever 31 centres to a 1000+ all on someone elses money & used that leverage in an attempt to make himself fat cat eddy,look out when machine gun pussy cat gets him!as i said previously next cab off the rank,blabcock & brown!...talk about furious bum covering going on there.the best expansion is organic it sets the company up much better & the punters can rest easy...tb


----------



## hangseng (13 March 2008)

MRC & Co said:


> Yeh, I think you got this one wrong prawn.
> 
> Any buying (long) is going to push price up.  Vice-versa, selling (shorting, i.e. selling borrowed stocks) is going to push the price down.  Supply and demand.
> 
> Hangseng, I heard Eddy came out before all the shorting, saying he had a margin loan and said the hedge funds will never "get him".  Arrogance?  Sounds like it!  Leant a BIG lesson, NEVER challenge the hedge funds, especially with a margin loan and a shaky, high debt company.  Its like a pack of vultures seeing a weak lamb stuck in the mud.  They are going to eat him alive!




Yes evidence everywhere of the shorters hitting the stop losses which creates the rapid downward momentum. Especially CFD providers who know where the CFD traders stop losses are.

I agree that Eddy would have been better not to even talk about it. If you are going to bluff about your position, be prepared.


----------



## kloid (13 March 2008)

tigerboi said:


> look out this guy means business!i reckon he could run ABC better than fast eddy...slash costs on the food to the rugrats & refloat as the XYZ non learning centres,how to roll up the rugrats pre schools & screw the average punter as you leverage your **** so tight you wouldnt get a tally ho in your crack!however eddy was shown what a dose of humility is all about it is the banks that own your **** if you go being a mug lair at a clever 31 centres to a 1000+ all on someone elses money & used that leverage in an attempt to make himself fat cat eddy,look out when machine gun pussy cat gets him!as i said previously next cab off the rank,blabcock & brown!...talk about furious bum covering going on there.the best expansion is organic it sets the company up much better & the punters can rest easy...tb




Jeez, you ever heard of paragraphs?  It takes me longer than necessary to work out that you are talking utter rubbish.


----------



## ithatheekret (17 March 2008)

Does anyone know whether Eddy and co. who paid off the $9M to Citi to stop legal action , did it with their own funds ? Or was it from the $700M sale of the US centre sales ?


----------



## ZacR (18 March 2008)

kloid said:


> Jeez, you ever heard of paragraphs?  It takes me longer than necessary to work out that you are talking utter rubbish.




I agree... that was ramble that took me 5 mintues to make out what was actually being said - nothing.


----------



## Kat82 (19 March 2008)

ithatheekret said:


> Does anyone know whether Eddy and co. who paid off the $9M to Citi to stop legal action , did it with their own funds ? Or was it from the $700M sale of the US centre sales ?




I believe the sale of US business is still under exclusive negotiation and will not be closed until end April.


----------



## ithatheekret (20 March 2008)

Thanks for that Kat . Do you know if the first installment has been paid yet ?

I've heard a mention that Eddy had secured a new line of credit as well , but has virtually lost control of the company to other shareholders .

Do you know if this is correct ?


----------



## Kat82 (20 March 2008)

ithatheekret said:


> Thanks for that Kat . Do you know if the first installment has been paid yet ?
> 
> I've heard a mention that Eddy had secured a new line of credit as well , but has virtually lost control of the company to other shareholders .
> 
> Do you know if this is correct ?




The deal is subject to MS securing the financing so I do not think there is any significant payment made to ABS.  The deal risk is quite high given the current credit squeeze.  ABS is down 14.5% today.  I wonder why.


----------



## ithatheekret (20 March 2008)

Thanks again .

I'm just trying to get past a few mentions and square them off .

One I must admit puzzles me . Eddy said he had everything in ABS , I thought he had a nice slice of a private equity fund as well . Future Capital something .


----------



## chansw (25 March 2008)

Kat82 said:


> The deal is subject to MS securing the financing so I do not think there is any significant payment made to ABS.  The deal risk is quite high given the current credit squeeze.  ABS is down 14.5% today.  I wonder why.




ABC Learning debt in question
By Liam Walsh and Josh Robertson
March 25, 2008 12:00am
http://www.news.com.au/business/story/0,23636,23427591-462,00.html

CHILDCARE business ABC Learning Centres might have come close to "breaching" a debt agreement, an analyst report has said ahead of a deadline for exclusive negotiations for a sale of US assets.

Speculation about whether ABC had remained within debt obligations was a factor which helped drive down its stock last month. 

Some analysts have felt comfortable with statements from ABC, responsible for 2300 centres across four countries, about meeting debt covenants and there is speculation that hedge funds are trying to force down prices by spreading bad news. 

*Already-battered ABC shares dipped again on Thursday amid rumours that negotiations with US investment house Morgan Stanley for the partial sale of US childcare operations had ceased. 

ABC last week reaffirmed talks were ongoing but yesterday could not confirm documentation would be finalised before an agreement with Morgan Stanley lapsed at 2pm Brisbane time today. *

The $750 million deal was proposed after ABC surprised the market on February 25 with a fall in half-year profits. 

ABC issued an update on February 26 to dispel speculation of breaching debt covenants. 

Some analysts had found the profit result, released late in the afternoon, confusing. 

Citigroup analysts, talking before ABC's debt statement, said one funding-ratio covenant appeared to have been breached but ABC might have calculated to keep it within agreements. 

Citigroup said it would "seek clarity" but ABC co-founder Eddy Groves criticised the research and its release in a later Business Spectator interview. 

"We're fine with our banks," he said. 

Yet last week Patersons analysts stated: "Our calculations, although using loose assumptions on operating lease expenditure . . . reveal that the company was close to breaching their (funding ratio) debt covenant". 

Patersons said ABC would not give detailed covenant calculations. 

ABC declined to comment on Patersons' report while reaffirming past debt statements.


----------



## hsv2001 (22 April 2008)

Nice increase on ABS today, ann at 3pm that they've sold off 60% of their US interest. Share price up 40 percent at close !!! Anyone got any views on whether this will drop or continue to grow?

marc


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## Dezza (22 April 2008)

Still have a $80-89m net loss for 07/08. No guide as to how this will improve over the short-term now that their growth / expansion has been affected. 

Although change of directors and strategy might help it over the long-term, might struggle to head back towards the $7 days of joy. 

However, Eddy's still in charge so anything could happen!!


----------



## propergeez (23 April 2008)

Mmmmn very strange couple of days up to $2 on the plethora of news yesterday, back down to $1.51 today. Amazing that you can have 35% - 25% fluctuation over 2 days. Perfect for day traders for which I dabble with CFD's (had a very nice day yesterday and didn't go back in today), but still worrying for long term investors. The big 3 ABS, CNP, and AFG are like yo yo's - predicting the flux and traders notion's in the credit crunch - will they make it won't they is a big decision for the long term investor.


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## YELNATS (23 April 2008)

propergeez said:


> Mmmmn very strange couple of days up to $2 on the plethora of news yesterday, back down to $1.51 today. Amazing that you can have 35% - 25% fluctuation over 2 days. Perfect for day traders for which I dabble with CFD's (had a very nice day yesterday and didn't go back in today), but still worrying for long term investors. The big 3 ABS, CNP, and AFG are like yo yo's - predicting the flux and traders notion's in the credit crunch - will they make it won't they is a big decision for the long term investor.




Taking a line from ABS's performance over the last 2 days, maybe AFG will dive tomorrow after their surge today? Let's wait and see.


----------



## shanghaining (8 May 2008)

have no idea why the price dropped by nearly 7% today, I can hardly find any news or updates about this share.  Anyone can help?


----------



## MRC & Co (8 May 2008)

Supply>demand 

This stock looks horrible at the moment, just slowly trending downwards!  

Notice of becoming a substantial holder released after close however, so may get some upward movement tomorrow.


----------



## shanghaining (8 May 2008)

MRC & Co said:


> Supply>demand
> 
> This stock looks horrible at the moment, just slowly trending downwards!
> 
> Notice of becoming a substantial holder released after close however, so may get some upward movement tomorrow.




Supply>Demand is due to the company's earning is greater than its debt?

I found 1.3 had been a strong supporting point for past few weeks, but looking at yesterday and today, sp penetrated through it so easily.


----------



## ChomChom (14 May 2008)

_MLC buys 5.7m ABC Learning shares_

http://www.businessspectator.com.au...ys-57m-ABC-Learning-shares-ELEYM?OpenDocument

More money from the government to pay for childcare is good news too 

http://www.theaustralian.news.com.au/story/0,25197,23694600-643,00.html

_Struggling childcare group ABC Learning is also expected to benefit from a $1.6 billion increase over the next four years in childcare rebates for out-of-pocket expenses. The aim is to help families with cost-of-living pressures and increased workforce participation. 

ABC has begun a clean-out of its board and management following the 60 per cent sale of its US business to a private equity group, and it will now focus on its market-leading Australian business. _


----------



## Lukeyz (15 May 2008)

Quiet the afternoon rally this afternoon. I can't find the reasons for this though.. Anyone got any theories?

Cheers


----------



## TheAbyss (16 May 2008)

Lukeyz said:


> Quiet the afternoon rally this afternoon. I can't find the reasons for this though.. Anyone got any theories?
> 
> Cheers




The budget was kind to them which would have been at least part of the reason if not all. 

My opinion is that they are now undervalued however it will take some time for sentiment to shift plus they do have a $280m loss from the US to deal with.


----------



## Khailor (28 May 2008)

zzz to sell or not to sell, got a bit tied up in this, thinking ti liquididate and pump into some of those oil and iron ore stocks


----------



## Lukeyz (30 May 2008)

Nice 12c rally after the announcement of Sallyanne Atkinson ceasing to be a Director. I'm guessing that made a lot of people quiet a bit more confident with ABC Learning Centres.. Hopefully the rally can continue early next week..

Cheers


----------



## brendan87 (2 June 2008)

Reflections on a stock market dog . . . 

As a long-time supporter of ABS I think it’s time to reflect on past mistakes and offer my opinion about the current situation and the future prospects for ABS.

Firstly, I share my lessons learned:

1)	Transparency is a very valuable thing and all the analysis in the world cannot save you when management is not disclosing important information. When management comes clean after the event (look at the multiple revisions to 1H 07-08 numbers) it destroys all credibility. Transparency is still pathetic (and this only becomes a problem in a bear market, catching out the herd, including myself!).

2)	High debt. While I am still a big supporter of leveraging a sound business, ABS highlights the need for basic project evaluation and cost of capital hurdles to be applied to investment choices. Eg. The US expansion, new centre openings/closures. Management has a TOTAL lack of financial discipline, combined with their high gearing was a recipe for disaster. It seems management has not conducted any sort of sensitivity analysis on their business model (exchange rates, margins, demand etc). Again, this is something that only comes to light in a bear market and congratulations to the few that identified these risks – I hope your shorts rewarded you handsomely, I’m sure they did. I am surprised that such a ‘defensive’ industry would lead the market in the downturn/bear market we are experiencing.

3)	Shoddy business model. Only recently have we heard the full extent of the developer subsidies to ABS – but still lack any idea of their impact on the bottom line going forward. Perhaps due to management distractions, or incompetence, ABS was unable to convert its remarkable revenue growth into earnings. One of my primary reasons for investing in ABS was the expectation that they would successfully consolidate their businesses to drive margins up and deliver earnings growth (it is ironic perhaps, that this was the motivation for MSPE's stake in ABC US!). In this area ABS failed, and hence their model failed. I think this reflects management incompetence (inability to respond to market conditions, anticipate change), distractions such as the overseas expansion and neglect of the Australian business.

4)	Personally: Over-reliance on EPS-driven valuation, rather than considering other measures more. In hindsight, ABS has cleverly/(deceitfully?) inflated their earnings numbers through tricky accounting and the ‘developer fees’ – showing valuation models are only as good as the accounting numbers underlying them. This is a lesson I won’t forget.

Thoughts at present:

- very interesting report published by Comsec that questioned the effects of the removal of the RMC structure on the value of licences and the unwinding of the developer fee model: very pessimistic indeed. But their DCF valuation (which has upped the discount rate and been quite harsh in their assessment of future CF's, still gives ABS a DCF considerably higher than the current SP).

- I find it interesting that management decided to divest a stake in the US business and divest other non-core assets when it was value-destructive and it was not being forced for by its bankers (another example of a total lack of regard for shareholders and failure to make basic financial decisions). I feel this was knee-jerk, but given it occurred in the height of the sub-prime collapse and the market was at its most fickle – doing nothing may have proved more fatal. 

- This begs the question: was the business sustainable without the divestments? I believe it was and I also believe management thought it was. In a conversion with MSPE, it was suggested to me that the motivation of the sale was to ‘show’ the market what ABS’ US assets were worth (note the frequent comparisons to the Bright Horizons sale) - so the market would start valuing the entire company on that multiple. Very interestingly, MSPE’s basis for making the investment centres around ABS ability to drive margin improvement in the US business at a time when margins are being crunched in the Australian business. If MSPE feels profit margins can grow during increasing unemployment in the US – why did ABS not consider divesting some Australian/NZ centres (where the multiples would have been much higher and there would be no currency write-downs?)?
- Groves paid the ultimate price for running a business with no financial discipline and dodgy accounting. It was being run like a family business not a public company. I hope that this changes.

What do I think about ABS now?

- Well I totally concede that ABS was and is a poor investment for a start. I think many would have overlooked a lack of transparency (during the ‘boom’ times) and lack of quality accounting information. 

- I think the attempts at better disclosure have been encouraging – but management needs to show that they are financially disciplined and focussed on shareholder returns. They are so unwilling to come up with forecasted numbers, not that the market could take them seriously anyway (given the misleading nature of ABS vehement maintenance of its 15%+ growth forecast until the US sale).

- I would like to see Eddy out and a CEO with a track record of sound investment decisions brought in.

- I don’t think ABS will buy back the US business and if it does it will probably overpay due to the conditions placed on the call option by MSPE, the likelihood of a lower AUD by the expiry date and the high chance of expansion in the US labour market by the expiry date. 

- ABS is still a highly levered business, so a turn-around in the AUS businesses is the only hope of ABS ever selling for $8+ per share (obvious). But due to developer fees, any COP improvement in the subsidies centres will not be EPS accretive (it will only replace the developer subsidies). At least the end of the developer model will force ABS management into applying financial decision criteria on centre acquisitions/closures – so we have some assurance the management attitude of growing top line growth (at the explicit expense of the bottom line) has come to an end. ABS may take several years to work through its excesses in the past.

- I do not expect a positive return on ABS until ALL the skeletons are out of the closet and we have a 2008-9 forecast (which is post-developer fees and post-RMC removal) – this will be extremely telling. Less exposure to the US, for the short-term is a positive for ABS. My outlook is to ‘wait-and-see’ until some idea of FY08-09 earnings come to light. I think down-side is limited because the market is probably (sensibly) pricing in, to some extent, the risks surrounding rest of the undisclosed information (about AUS margins and the impact of changes to the business model) – it would be wise to do so given the management attitude towards shareholders/transparency.

- A speculative investment in ABS could be considered in 12-18 months time. I don't think the new/re-entering investor will miss out on much by waiting. While the shares are unlikely to go lower than $1.15 they are equally unlikely to head over $2.


----------



## Family_Guy (12 June 2008)

Great thought provoking response above. So why did it dive 20c today to fall under $1?

This was one of my first ever buys, i got in nice and low, just above $1 and missed selling when it near on hit $2 6 weeks ago.

Is it because of the placement for more cash is a worrying sign?


----------



## Young Gun (13 June 2008)

It feel below $1 because ABC Learning Centre issued a private capital raising with Morgan Stanely to the tune of $80m at $1.15 a share.


----------



## peteai (24 June 2008)

Young Gun said:


> It feel below $1 because ABC Learning Centre issued a private capital raising with Morgan Stanely to the tune of $80m at $1.15 a share.




I am surprised there are no comments given it has been so much in the media recently. Maybe the news is so bad no one wants to talk about ABS anymore.

Can ABS make money or does it have too much debt ?

Thanks,
PETEAI


----------



## peteai (24 June 2008)

peteai said:


> I am surprised there are no comments given it has been so much in the media recently. Maybe the news is so bad no one wants to talk about ABS anymore.
> 
> Can ABS make money or does it have too much debt ?
> 
> ...





Apologies to *Brendan87*. for not reading your post before my previous comment

You have provided an excellent, intelligent analysis.
Wish you the best in all your future investments.

Cheers,
PETEAI


----------



## Family_Guy (26 June 2008)

Nothing like a bit of good news to get me out of trouble. Hit a intraday high a few moments ago of $1.01 after announcing the US sale has gone thru. Thats up from a mid weekly low of mid .60's


----------



## DionM (26 June 2008)

Wow ... what a morning for ABS.

I expected a bit of a surge but nothing like this!

I had been sitting on the sidelines waiting for some stability before thinking about dipping in ... bit of a bummer I didn't get in when I was going to (70c) but hindsight is always 20/20.  

It's up a lot on good volume too - will be interesting to see what happens in the coming days and weeks - whether it can sustain it or not.


----------



## njc.corp (26 June 2008)

DionM said:


> Wow ... what a morning for ABS.
> 
> I expected a bit of a surge but nothing like this!
> 
> ...




as a side line watcher i need and it needs more time to re-group and get the debts to a manageable level

dion-i argee it  needs to be sustain-how long well we will have to wait and c

even if today's % are good-its got  a long way to  go in my books

Thanks

Nick--


----------



## Gekko (26 June 2008)

Goes to show, every dog has its day. ABS sold hard due to overseas credit uncertainties, poor sentiment and clustered tax selling. I will holders well. This wont be an easy ride.


----------



## UMike (26 June 2008)

I holding also.

Must say I was disappointed not to get out of this today. Stopped chasing this down at $1.05

Bought a huge lot at 67c to go with the $1.32 I bought prior.

Hope to see it continue to rise a bit more tomorrow.


----------



## njc.corp (2 July 2008)

This is what i think-

correct me if i am wrong-

i dont trust eddie-i feel that he is to interested in making money for himself rather then focus  on the business it self and its share holders-


i heard yesterday he does not want any abs share's but options itself?

Eddie how about fixing the debt and focusing on the business-and maybe the sp might make a move north

does anyone here think i am talking  rubbish-

i been watching him and i just feel that their is something he is not saying or their is worst to come for them-

Anyone ?

Thanks

Nick--


----------



## ROE (2 July 2008)

njc.corp said:


> This is what i think-
> 
> correct me if i am wrong-
> 
> ...





Very dodgy arrangement if you ask me... that arrangement is purely to benefit Eddie to get back his lost million in the margin call.


----------



## TheAbyss (2 July 2008)

My view is you need to ask one question right now on the subject of why Eddie Groves has taken options.

EG has forsaken his entire years salary and Le Neve half ($300k of her $600k salary) in return for options. The question to ask is if you could have $1million cash in the hand or take options in a company on the slide, what would you do?

EG and LG have risked around about $1m cash on the fact that the options when converted will be worth more. Why would they do that? Eddie G opwns around $3k of stock in ABS currently so surely he must have some strong belief in the stock or he would take the money and run.


----------



## TheAbyss (31 July 2008)

The numbers are the same however with a different set of eyes the news is now

Additional loss (write down $213 million), no final dividend and declare a full-year pre-tax loss.

Transparency may or may not save them now. Still going to spend $165 million to buy 110 new centres in 2009 with an additional $45 million on refurbishments. 2010 they will buy 70 centres for $80 million in 2010 and spend $17 million on refurbishments.

So some growth and with any luck some positive eps based on the first 3 weeks of this fy.

Alas this one doesnt present anything like an acceptable risk/profit profile at the moment.

I do hope they get through and turn things around which they have made some ground on but a long way to go.

They have also had a fair bit of rationalisation administratively to reduce administrative costs so they are doing a lot and appear to be getting some good advice at the moment.


----------



## mim168 (23 August 2008)

on trading halt, anyone got any reasoning? Assume its bad news? I thought the price was already fairly bad, pray that tuesday is  a good day and not another record bad day.
ta


----------



## pmunny (23 August 2008)

From what they closed at the day before the halt i'd say it's definately not going to be positive but how much lower could they go!!
I've taken a bath on them and only bought in a few month's ago, gotta feel sorry for anyone still holding that bought in at the top...


----------



## Kat82 (23 August 2008)

I have questions on the developer model and hopefully someone in this forum is able to answer:

(1) It seems that this was a way for ABS to quickly expand its business by leveraging the resources of the individual developers.  I see nothing wrong in it.  However, I am rather confused as to (a) whether ABS received the developer fee in cash ($73.3m in 1H08) or simply capitalised the fee into intangibles which is never amortised anyway, (b) whether ABS operated those centres itself, thus paying for the operating expenses and (c) when those centres were "transferred" to ABS, whether ABS paid cash or reversed some of the amount in the intangibles.   In short, does ABS finance the individual developers?

(2) How big is total outstanding developer projects?  If it is a relatively new business model, the size should not be significant.

(3) I read an article that this developer fee is what boosted the earnings in 1H/08 which otherwise would have been loss making.  I tend to disagree as in 1H/07, ABS was already profitable without such fee.  Unless the business has deteriorated significantly from 1H/07.  Any opinion on this?

Thank you.


----------



## Stomper (27 August 2008)

Last night's (26/8/2008) ABC 7.30 report tried to shed some light on this organisation. Some of the concerns raised included;

- lack of transparancy on underlying core revenues/earnings
- claims that the company hasn't had a true profit since 2006
- claims of significant transactions with organisations controlled by Eddie's brother-in-law / girlfriend ($70m per annum for services)
- significant debt $1b+ due in 2 years (but may be repayable sooner depending on covenants)
- history of overpaying for acquisitions and subsequent levels of intangibles on balance sheet

The restatement of prior year earnings and other disclosures expected once the company comes out of suspension will make very interesting reading.


----------



## awg (27 August 2008)

after watching 7.30 report, last night

and many previous articles re there business model

this company is the deadest of dead ducks.

God only knows what will happen to keep the doors open, for the little kiddies

parents will go ballistic if they shut the doors.

they are in a market dominant position.

they haved achieved this by buying up as many CC centres as possible, to make them market dominant..many reports of owners being made "offers to good to refuse"..or we will build one anyway and send u broke.

so now

Paid way to much for assets
On cheap borrowed money
Income way short of expenses
Fiddled the books?

sounds like they are insolvent, and if they arent able to pay wages??, unless banks extend further finance.

u can bet yr ass no foreign bank will want to.

CBA will be absolutely critical to thier survival

i expect SP will fall even further.

this is only my opinion, based on what i have read.
hope i am wrong


----------



## grace (27 August 2008)

The biggest worry is for the kids who attend these centres.  Government has helped create this monster ABC.  Sallyanne Atkinson - did you notice her offloading her shares over the years?  I think she knew about all of the fixing of the books.  She left before the .... hit the fan.  Move on with all of your money Sallyanne - you were responsible for quite a bit of the overseas expansions which sent ABC broke (along with fast Eddy).  

I think they all lost sight of the most important thing - the kids!  It is a very sad state of affairs. 

Who were the auditors by the way?  Fairly bad job there IMO.

Edit:  the auditors were Pitcher Partners (never heard of them) until Ernst & Young took over to bring the rot out of the cupboard early this year.


----------



## JTLP (27 August 2008)

Grace...Pitcher Partners are a middle tier firm just below the big 4. Still quite large and well respected. 

But for a comp of ABS size and no big 4...hmmm


----------



## Miner (27 August 2008)

http://www.abc.net.au/news/stories/2008/08/27/2347609.htm

Well said Mr Fast Eddy and his gambling at the cost of school kids

Pity he gets a jail free card and worse than a drug peddlar or a pedaphollic

No court of law will punish him excepting some cash fines


----------



## TheAbyss (28 August 2008)

Miner said:


> http://www.abc.net.au/news/stories/2008/08/27/2347609.htm
> 
> Well said Mr Fast Eddy and his gambling at the cost of school kids
> 
> ...




Are you for real? To compare some cash against a pedophile? Wake up to yourself.

Not to say i support any part of what has transpired however to compare it to what i consider the most heinous of crimes is grandstanding to say the least. Stick to the sharemarket for comparisons please.


----------



## mim168 (1 September 2008)

anyone got any news on this?...still suspended.


how much longer before the annual repost comes out?..can't hide forever. No matter how bad it will look.


----------



## Stomper (1 September 2008)

mim168 - they are now overdue and facing a fine from ASIC for non-compliance with the listing rules. Eddie was quoted as saying he "wasn't sure when they would come out" and that "it's due to different accounting interpretation". 

Given the restatements are expected to be material - the details around the different interpretations will make interesting reading - as will the outcomes.


----------



## grace (3 September 2008)

JTLP said:


> Grace...Pitcher Partners are a middle tier firm just below the big 4. Still quite large and well respected.
> 
> But for a comp of ABS size and no big 4...hmmm




I've been in the bush too long it seems.

Actually, I went to uni with Simon Green, the audit partner at Pitcher Partners responsible for the ABC audit in past years.  

No matter how large or small the audit firm was, all auditors must apply the same stardards.  One can't use the excuse that you took on something too big for your firm to handle I'm afraid.


----------



## chansw (7 September 2008)

"End of a fairytale" at http://business.smh.com.au/business/end-of-a-fairytale-20080905-4amn.html?page=fullpage#contentSwap2

"Shares last traded at 54c, but Clime Asset Management's Roger Montgomery, a long-time ABC sceptic, the stock may be worth as little as 19c."


----------



## prawn_86 (9 September 2008)

Looks to be a long painful wait for holders.

Results not expected until the end of the month. Dodgy. I never did trust fast Eddy. I just didnt like the look of him, too sleazy.

http://www.news.com.au/business/story/0,27753,24317777-462,00.html


----------



## rajeev (24 September 2008)

is there any news on when it will start trading? 
i thought by now they will be ready with the results.
from bleeding investor..........


----------



## Stomper (24 September 2008)

I understand that the announcement is not expected until end of the month... so you have to wait until next week.


----------



## UMike (24 September 2008)

Well  you can't get much more end of the month than now.

Tomorrow will be exactly a month since they last traded.

Anyway no matter when they start in can't be good news and there'll be just more red ink on my spead sheet.


----------



## mim168 (14 October 2008)

far out!!!when r they coming out of hiding??

today would be good..
anybody got any news???


----------



## Family_Guy (5 November 2008)

Just reading that ABC learning is expected to go into receivership today. Glad i bailed from this one. 
http://www.news.com.au/business/story/0,27753,24603471-462,00.html

ABC Learning, the childcare centre operator that looks after 100,000 Australian infants and toddlers, is today expected to be swept into receivership after months of escalating financial trouble.
It is understood the board of the debt-laden company will call in administrators, formally killing founder Eddy Groves's dream ofcreating a global childcare empire, The Australian reports.

ABC's bankers are then expected to demand the appointment of receivers, in a sign that Australian banks are losing patience with companies crippled by the global financial crisis.

Last night, banks including Westpac, the Commonwealth, NAB and St George appointed receivers to stricken investment firm Allco Finance Group  - another victim of the credit crunch.

The Commonwealth is also the biggest creditor to ABC, which declined to comment last night.


----------



## Aussiejeff (5 November 2008)

Family_Guy said:


> Just reading that ABC learning is expected to go into receivership today....




That's gotta be the most un-surprising announcement of the year. 

What WILL be interesting is how the thousands of ex-ABC child care centres will now cope in the aftermath. Presumably The Guv-Mint will offer guaranteed, no-risk truckload$ to the few alternative, much smaller companies to assist them to buy up the assets (ie a form of bailout to the sector)? 

Condolences to those that held/hold shares in this dead dog.

Fortunately, I am not one.



aj


----------



## chops_a_must (5 November 2008)

Aussiejeff said:


> That's gotta be the most un-surprising announcement of the year.
> 
> What WILL be interesting is how the thousands of ex-ABC child care centres will now cope in the aftermath. Presumably The Guv-Mint will offer guaranteed, no-risk truckload$ to the few alternative, much smaller companies to assist them to buy up the assets (ie a form of bailout to the sector)?
> 
> ...




Or perhaps parents may actually have to pay full cost or even have to raise their own kids for once. Fancy that!


----------



## prawn_86 (5 November 2008)

Two 'top 200' companies in a day. ABS and AFG, its all happening 

Good lesson in what not to do i guess.


----------



## TheAbyss (5 November 2008)

Another aspect of this is the artificial bubble ABC created in the value of child care centres. ABC were buying every centre they could get their hands on no matter what the price.

Speculators were building centres in the hope of selling to ABC and achieving same. The value of centres owned by others everywhere went up accordingly. Did they use their new found values to borrow for additional centres, other purposes or expansions? What happens after the revaluation is applied with less b uyers available in a tighter credit market?

Where does this leave the other major players? Short term less value longer term very well if they have some capital to pick up some cheap centres. 


Thoughts?


----------



## UMike (5 November 2008)

Well it hasn't happened yet.

Can't see why they can't trade out of this mess.

As if the creditors want it to go under? :roll:


----------



## ROE (5 November 2008)

UMike said:


> Well it hasn't happened yet.
> 
> Can't see why they can't trade out of this mess.
> 
> As if the creditors want it to go under? :roll:




Well when you cant meet your debt repayment, bank siege control of your business and call in the administrators. 

The long they wait the worse it get and banks are not in the business of keeping thing going, they want their money back ASAP so they can lend it to the next guy and get interest on that.

When that happen kiss good buy to share holders, you get nothing back.
bank will get some or most of their money back and the rest they write it off as bad loans.

Sh*t happen, I dont own shares in ABS same was as I dont hold shares in BNB and Alco, Centro as their model is based entirely on debt and revaluation for profit. History proved this model NEVER works

When ABS buy a center say for 6 or 7 times earning and then revalue it at 15-20 times earning and called it profit that scare the hell out of me and that the end of me looking at ABS


----------



## awg (5 November 2008)

UMike said:


> Well it hasn't happened yet.
> 
> Can't see why they can't trade out of this mess.
> 
> As if the creditors want it to go under? :roll:





The way the business is run,(ABC) has NEVER made a profit, as per my earlier post.

The whole thing is a sham, when I looked at investing in this company due to its growth, I was appalled and could not believe why anyone would.

Childcare is a low margin game. Basically not-for-profit.

Australia is the only country in the world that ran this model.

There is no way income will cover operating cost including interest.

Assets are so overpriced it beggars belief.

Looked closely at childcare some years ago..they were Mom and Pop wages jobbies, who employ young girls at Mcdonalds rates.

It is totally uneconomic to look after babies!!

staff ratio is too high.

a dozen 4 yr olds in a sandpit with 1 supervisor is the only way to make money.

big changes coming, looking after babies is hard work, done for love, not money


----------



## drsmith (5 November 2008)

The financial accounts must be an absolute horror story given the ongoing delays in their release.

When finally released it will make for interesting reading.


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## UMike (6 November 2008)

Well while I can't provided an online link it has just been announced (FOX business) that ABC is in the hands of the receivers.


----------



## Aussiejeff (6 November 2008)

ASX ANNOUNCEMENT 11.22am Thu 6 Nov 2008
A.B.C. LEARNING CENTRES LIMITED (“ABC”) (ASX:ABS)
APPOINTMENT OF VOLUNTARY ADMINISTRATOR

The Directors of ABC (ASX: ABS) (ABN 93 079 736 664) today announced the appointment
of Peter Walker and Greg Moloney of Ferrier Hodgson as Voluntary Administrators of ABC
and a number of its subsidiaries pursuant to Section 436A of the Corporations Act 2001.

The action was taken following the Directors careful review of the company’s future.
ABC Chairman, Mr David Ryan, said “the Board and current management team are
disappointed to be in this position despite the efforts of so many staff and the continued
support of parents. The management team have worked tirelessly over the past few weeks
to ensure that families across Australia and New Zealand continue to have access to quality
childcare”.

Subsequent to the appointment of administrators to ABC, the company’s banking syndicate
appointed Chris Honey, Murray Smith and John Cronin of McGrathNicol as receivers of the
companies set out in the attached schedule.

Trading in ABC’s securities will remain suspended.

Media Enquiries should be directed to:
Angus Trigg Jo Collins Michael Cave
Gavin Anderson Gavin Anderson Ferrier Hodgson
0413 946 708   0423 029 932   0409 647 910

All Investor and Creditor enquiries should be directed to the Administrators office:
Ferrier Hodgson
Tel: 07 3831 4833
Fax: 07 3831 3862
E: abcenquiries@fh.com.au

Matthew Horton
Company Secretary
A.B.C. Learning Centres Limited

-----------------------

Good luck to those of you who still hold in this dead duck.

Who's next to fall?


----------



## Aussiejeff (6 November 2008)

Ironically, this also today - 

-------------------

*Federal Government won't run ABC Learning centres if it collapses*
AAP
November 06, 2008 11:18am


THE Federal Government will not be involved directly in running the centres owned by the nation's biggest childcare provider, Finance Minister Lindsay Tanner says.

Debt-stricken ABC Learning says it is in discussions with stakeholders, including banks and the Federal Government to secure the future of its operations.

It said all of its 1200 childcare centres in Australia and New Zealand were continuing to operate as usual.

The Government has said it has contingency plans ready should ABC be placed in receivership.

"I wouldn't imagine we would be directly running them,'' Mr Tanner told Fairfax Radio Network.

"Clearly one of the key things we have got to do is to make sure we minimise disruption to people with arrangements.

"We can't allow a situation to emerge when there's thousands of families around the country that depend on their childcare is suddenly taken away and no alternative.'' 

---------------------

OK Mr Tanner. ABC is now in receivership.

What are the Government's secret "contingency" plans?


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## integrity (6 November 2008)

Said only half tongue in cheek as I fully expect it to form part of this "government's plan" (is that a contradiction in terms?) ...

Mr Swan will triumphantly announce that ABC child care centre workers will be able to go down to their local Centrelink office and receive paments equivalent to what they were earning with ABC ... to keep the child care centres running of course ... no mention of how current asset test rules will affect said worker's ability to receive such payments ... until government announces it is a work in progress and contingency plans are being drawn up to prevent said poor working famileis from suffering at the hands of un-Australian speculators and short sellers. No word will be made of how the children of said families (and every other Australian child) will pay the future tax bill being placed on the government's credit (nay debt) card.


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## rajeev (6 November 2008)

Doen anybody know what does happen to the share holding in case of Recieverships/volutary administration. the shares become 0 value? if anybody knows how these things work?


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## prawn_86 (6 November 2008)

rajeev said:


> Doen anybody know what does happen to the share holding in case of Recieverships/volutary administration. the shares become 0 value? if anybody knows how these things work?




Once the banks and other lenders have been paid out then shareholders get the leftovers (if any). If the banks do not get enough back then ordinary shareholders will recieve 0


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## derty (6 November 2008)

integrity said:


> Mr Swan will triumphantly announce that ABC child care centre workers will be able to go down to their local Centrelink office and receive paments equivalent to what they were earning with ABC ...



Given what child care workers are paid, this is probably a cheaper alternative than them receiving unemployment benefits :

Good luck to all holders - I'm not surprised though, margins are incredibly fine in childcare, even with the govt's childcare bonus, and servicing their debt with those margins was a very optimistic proposition.


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## ROE (6 November 2008)

rajeev said:


> Doen anybody know what does happen to the share holding in case of Recieverships/volutary administration. the shares become 0 value? if anybody knows how these things work?




just assume you get nothing when the company fold, it nearly impossible for share holder to get anything back because the asset backing worth very little
when it comes to a fire sale... Most of those sell goes to secure creditors, then bond holders, invoice payment etc..

share holders is the last in line so expect nothing.
just take it as a risk of doing business/investing when company fold and learn
from those lessons and never repeat the same mistake


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## skc (6 November 2008)

There used to be some providers out there that let you transfer to them the title of zombie or dead shares for a nominal sum so that it allows you to claim a capital loss before everything like liquidation is sorted out. You also pay an admin fee and forfeit any eventual payout (if any)

Does anyone know any names of such? I can't recall any names and couldn't google any.


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## Julia (7 November 2008)

integrity said:


> Said only half tongue in cheek as I fully expect it to form part of this "government's plan" (is that a contradiction in terms?) ...
> 
> Mr Swan will triumphantly announce that ABC child care centre workers will be able to go down to their local Centrelink office and receive paments equivalent to what they were earning with ABC ... to keep the child care centres running of course ... no mention of how current asset test rules will affect said worker's ability to receive such payments ... until government announces it is a work in progress and contingency plans are being drawn up to prevent said poor working famileis from suffering at the hands of un-Australian speculators and short sellers. No word will be made of how the children of said families (and every other Australian child) will pay the future tax bill being placed on the government's credit (nay debt) card.




This suggestion will soon be reality, not tongue in cheek at all, Integrity.
There seems to be a widespread expectation that we taxpayers will bail out ABC Learning.    When this happens I hope there will be a demand from the taxpayers funding such a bail out to know the exact terms.  At the very least it should be a short term loan at market interest rates.


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## chops_a_must (7 November 2008)

Julia said:


> This suggestion will soon be reality, not tongue in cheek at all, Integrity.
> There seems to be a widespread expectation that we taxpayers will bail out ABC Learning.    When this happens I hope there will be a demand from the taxpayers funding such a bail out to know the exact terms.  At the very least it should be a short term loan at market interest rates.



It'll be funny if the government employs the workers on exactly the same terms.

Could be a bit of a "ruh-roh" moment, given a lot of the workers will be getting paid below award wages.

Would be good for parents to pay full price though. Can't see that happening...


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## Julia (7 November 2008)

The company should never have been allowed to become effectively a monopoly.  If the ACCC had been doing their job the current position would not have meant that a bail out is probably necessary in view of the lack of alternative child care centres.


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## awg (7 November 2008)

the recievers sure will have a job on their hands. are they pro-bono?

i laughed when Roger Clime said they may be worth 19c per share.

even my amateurish FA could see they were worth < 0c

that is correct...cash flow will not cover operating expenses, including interest.

the real killer is they have vastly overinflated the value of their properties.

the only possible alternative I see, is the shareholders and ALL unsecured creditors will take a complete loss. The secured creditors will take a huge bath, even if they dont get sued for lending to insolvent, I would hate to be the former auditor!

The only way they can keep the doors open, is to short term lease to a willing operator, with the requisite expertise, and by God I would be driving a hard bargain.You need requisite licences to run child care

One thing I can say for sure, most people wont work for nothing, so unless the liquidator has access to a complete debt holiday, he wont have the funds to pay wages, let alone accrued entitlements....u can be absolutely sure the previous management would have left the operating account in a pillaged state..hence the liquidation.

value of all childcare operations will be severely reduced cause of this (hopefully temporary)


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## drsmith (7 November 2008)

According to an article in The Australian, one person familiar with the company described the accounts as a "complete mess" and an "absolute disgrace".


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## integrity (7 November 2008)

I see the government is giving ABC $22mil to keep the centres open. 

http://www.news.com.au/business/story/0,27753,24613676-462,00.html

I must admit I am somewhat surprised. Given the tax the government (to be fair - taxpayer) receives on every litre of fuel, they could have made all of this back, and then some, by making the employees go to Centrelink to pick up their pay rather than through their pay checks. No vision, no vision at all ...


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## grace (7 November 2008)

grace said:


> I've been in the bush too long it seems.
> 
> Actually, I went to uni with Simon Green, the audit partner at Pitcher Partners responsible for the ABC audit in past years.
> 
> No matter how large or small the audit firm was, all auditors must apply the same stardards.  One can't use the excuse that you took on something too big for your firm to handle I'm afraid.




Oh dear, Simon is in deep ... I think.  He was quite bright at Uni too!

Don't think the old professional indemnity insurance will be big enough for this one!


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## Julia (7 November 2008)

integrity said:


> I see the government is giving ABC $22mil to keep the centres open.
> 
> http://www.news.com.au/business/story/0,27753,24613676-462,00.html
> 
> I must admit I am somewhat surprised. Given the tax the government (to be fair - taxpayer) receives on every litre of fuel, they could have made all of this back, and then some, by making the employees go to Centrelink to pick up their pay rather than through their pay checks. No vision, no vision at all ...



The announcement from the government is very vague.
Should we assume this is a loan, to be paid back in the final wash-up?

And isn't a government bail out of ABC Learning setting a dangerous precedent for other failed companies?  Maybe this needs to be a separate thread.


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## awg (10 November 2008)

I have been following this story fairly closely, ever since I decided NOT to invest.

But i do own CBA, so I am still somewhat appalled, as they have a large unsecured loss awaiting.

not to mention a taxpayer - $22m

thing that strikes me, is the similarity to ENRON.

Even tho I didnt follow that very closely, I seem to remember, the principles got canned for booking up profits that were manipulations, third party deals, improper account and audit practice, misleading lenders and shareholders.

ABC has allegedly done all these things (IMO)

If proved, the ir(responsible) parties should be jailed, absolutely no doubt at all in my mind.

they jail shoplifters and welfare cheats for $10k.

Can understand various parties will do all they can to prevent companies failing, for obvious reasons, but there surely has to be better accounting standards to protect investors ( or the existing ones were not followed)

the thing that annoys me more than anything is I didnt short the bejesus out of the stock, like plenty of others did, but I was just a beginner then and didnt short ( i just didnt buy an obvious dog)


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## grace (15 November 2008)

Anyone got a list of the Centres the Receivers wish to sell by any chance?  Have emailed the receiver.......

Anyone heard anything?


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## Stomper (16 November 2008)

Grace - the receiver wants to sell ALL of the centres - he needs to realise as much cash as possible to repay the creditors.


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## Judd (16 November 2008)

Grace, I don't think either the receiver or ABC Learning have any centers they can sell.  The properties were leased by ABC from the Australian Education Trust, ie they were never and are not owned by ABC Learning.


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## prawn_86 (16 November 2008)

This is proving to be yet another shining example of government short termism and lack of regulator powers in dealing with monopolies and enforcing proper competition.

A good example of why industries shouldnt be protected...


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## grace (16 November 2008)

Judd said:


> Grace, I don't think either the receiver or ABC Learning have any centers they can sell.  The properties were leased by ABC from the Australian Education Trust, ie they were never and are not owned by ABC Learning.




AEU (Australian Education Trust) own the land and buildings to 415 ABC Centres.  The receivers will only be able to sell the business in these situations. 

I was of the thought that ABC had 1040 centres Austalia wide.  

Please correct me if I'm wrong please!


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## Judd (17 November 2008)

From what I have been able to glean is that ABC Learning Centres is really only a manager of child-care centres. Most of the buildings were sold off over the years to a variety of trusts and independent landlords. The biggest of these trusts is the Australian Education Trust, which owns more than 400 centres.  It seems that these trusts are independent of ABC Learning and are not in receivership.  For example, Orchard Funds Management has a Childcare Property Fund which has over 200 ABC learning centers and it is not in receivership nor is the Australian Education Trust.

This is the problem that the receivers are now facing.  ABC Learning does not seem to hold any tangible assets and in the main, only held child care licenses, which are issued under State Government legislation and cannot be legally sold (you can sell a child care business to someone else but that apparently voids the license and the new owner has to apply for a new licence specific to that centre.)

From what I understand - and I could be wrong of course - it seems that ABC even attempted to create a market (internal to itself) and revalued the licences in its accounts.

Very, very messy but in the end it is probable that shareholders will receive zip from the receivers and legal action may be their only recourse but, then, you need to find someone with dosh to get it back from them.

Have a read of this and it will give you some idea of the extent of the problem

http://www.orchardfunds.com.au/News/Archive/2008/November/6 November 2008 - ABC Learning.aspx


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## DionM (17 November 2008)

Judd said:


> From what I have been able to glean is that ABC Learning Centres is really only a manager of child-care centres. Most of the buildings were sold off over the years to a variety of trusts and independent landlords. The biggest of these trusts is the Australian Education Trust, which owns more than 400 centres.  It seems that these trusts are independent of ABC Learning and are not in receivership.




Isn't AET owned by Eddy Grove's brother-in-law, or something like that?  I can't remember the details, but I'm sure I read something along those lines ...


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## basilio (17 November 2008)

Interesting part about the whole ABC deal was t*hat it never added up.*. Child care centres have been traditionally run by small operators making a living after paying wages. There was never going to be any capacity for the economies of scale that would enable the huge profits Groves made from the business.

That meant that the "profits" came from the same place that Enron, BNB, Firepower, Westpoint and others have made them - financial sleight-of-hand.

And yet the banks, financial analysts all accepted the magic pudding. That's our money they have lost.


*Learning an old lesson: a sucker is born every minute*

    * Ian Verrender
    * November 14, 2008

_For his 40th birthday a couple of years back, Eddy Groves took 24 or so of his closest friends on a round-the-world jaunt in a jet chartered for the event. His Cessna Citation jet, which seated just 16, was not big enough.

Details of the itinerary are sketchy. There were suggestions they assembled in Las Vegas for a spot of gambling.

Variously described as reclusive and shy during his rapid rise, his largesse, and where exactly all that money came from, is a touchy subject for Groves these days.

He says the Citation, his helicopter, the Ferrari, the 26-metre yacht moored at the Versace marina and the various waterfront and Gold Coast hinterland properties are all gone.

That could well be true. Strangely, however, a few weeks ago - just after Groves trousered an $800,000 payout when he jumped from the soon-to-collapse child-care group ABC Learning Centres - he was spotted on the Gold Coast highway in a new silver Mercedes with the number plate BULLETS.

That probably was not his either. More than likely it is owned by the collapsed Brisbane basketball team Groves owned.

Taxpayers have tipped in $22 million as a lifeline to keep the child-care centres open until Christmas while the collapsed group's receivers began begging the banking syndicate this week to extend extra cash to prevent the entire network shutting down.

Put aside the accounting irregularities now emerging from the collapsed company. Ignore the allegations of conflicts of interest that allegedly enriched various family members on construction and maintenance contracts.

The scandal of the rise of and fall of Eddy Groves is how anyone was seduced into his fantasy tale in the first place.

*Australia's biggest banks believed him. They are owed $1.1 billion between them. Even more amazing, the Singapore Government's investment arm Temasek tipped in a lazy $400 million.

Despite sophisticated investment models and analytical tools employed by our big banks and investment houses, it shows a sucker is born every minute.

Despite all the high-powered negotiations and due diligence, they missed the bleeding obvious - that small family-run suburban child-care centres will always be more efficient than small corporate-run ones.*

It is the same ethos that has ruled the economics of rural production in this country. Corporate farming has never overtaken family-run operations because a family will run their business on a much tighter budget and will endure leaner returns than any corporation just to ensure their survival.

A corporation will only be more efficient than a family business if it can amalgamate small disparate holdings, achieve economies of scale in purchasing power or marketing power, and lower the cost of production.

It works in retailing, and that is the reason large retailers can offer lower prices than corner shops.

*That model was never adopted by ABC Learning because it could never be implemented. Child care is labour intensive. It requires skilled labour by individuals devoted to the task, not just paid employees.*

Groves and ABC could not lower the cost base of a family-run operation. His business merely added to costs because of the enormous amount of administration required to maintain the compliance demands of a stockmarket-listed public company.

*Did anyone in the investment world or our big banks realise that it simply was not possible for Groves to shut down 10 suburban centres and amalgamate them into a "super preschool"? Did they ever twig that there were no economies of scale, just extra costs?*

Every boom throws up these types of "entrepreneurs". Just as Christopher Skase, the Brisbane property and media mogul of the 1980s, kept borrowing and expanding, so too did Groves.

It is a neat strategy because no one can ever compare the performance with the previous year. There are always one-off costs associated with the last big acquisition. The idea is to keep juggling those balls so no one can ever really count how many you have in the air.

When Groves ran out of child-care centres to buy in Australia he turned his attention overseas. Almost three years ago to the day he spent $218 million buying the third-biggest child-care group in America.

The banks were happy because their job is to lend money and they picked up handsome fees on the transactions. Groves was happy because the bigger the company, the more he could pay himself. And the investors swallowed the whole silly tale hook, line and sinker that they were part of an expanding international empire.

Groves has gone to ground. He may only be worth a fraction of his previous fictitious wealth, but at least he has it in cash and he has more than most families would ever be able to amass.

Like those who have gone before, Groves absolved himself of blame. It was short sellers who brought him undone, working in tandem with nasty stockbrokers. And then, of course, there were those he left in charge of the Australian operations who let him down._


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## TheAbyss (17 November 2008)

Story is pretty close to the mark imo. Doesn't include that the Mercedes he was driving was in his girlfriends name (Viryan Collins) purchased on the back of a $3m loan by Frank Zullo (Brother in Law) to Viryan. You can bet QMS wont see that 3m again.

Next they should try and uncover the Don and Heather Jones money laundry machine (Ex Global 123).

Eddy and Viryan are comfortable living in Currumbin valley on whatever funds and good luck to them. One thing is for certain, the cash cow has dried up and the life style has to change.


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## Aussiejeff (18 November 2008)

Todays non-startling media release revelations:




> DEPUTY Prime Minister Julia Gillard has accused the owner of 15 ABC Learning centres of scaremongering, after he threatened to shut the facilities down before Christmas.
> 
> Don Jones, whose company 123 Careers is in a legal dispute with ABC Learning over the right to supply relief staff, has said he is considering shutting the 15 centres he owns before December 25.
> 
> ...




Maybe Mr Jones HAS given a reasonable notice by alerting the public to what may occur. Of course, this would not be to Ms Gillard's taste, but hey - that's business!

then 



> THE administrator for ABC Learning Centres says the company *has more than $1.6 billion in liabilities in Australia alone*.
> 
> More than 100 ABC Learning creditors gathered in Brisbane today for a meeting with insolvency firm Ferrier Hodgson for an update on the child care giant's situation.
> 
> ...




Seems the cesspit just keeps getting bigger. At this rate, they will probably owe more than AUS$2 Billion by the time all the claims are in.

Time for another KRudd bailout. That should leave about 2c in the kitty.....


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## YELNATS (18 November 2008)

basilio said:


> Interesting part about the whole ABC deal was t*hat it never added up.*. Child care centres have been traditionally run by small operators making a living after paying wages. There was never going to be any capacity for the economies of scale that would enable the huge profits Groves made from the business.[/I]




The most salient point of this whole sorry saga. 

Unfortunately for them and their shreholders, ABC's banks/financiers just don't understand how small businesses of this nature are run and survive.


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## Sean K (18 November 2008)

Aussiejeff said:


> Time for another KRudd bailout. That should leave about 2c in the kitty.....



Can't let the little kiddies not have a sand pit to play in....

Maybe the balance between state owned and privitisation tipped too far to the right the last 5 years. And now it will dip back the other way? Then another bullmarket will start....


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## Aussiejeff (18 November 2008)

kennas said:


> Can't let the little kiddies not have a sand pit to play in....
> 
> Maybe the balance between state owned and privitisation tipped too far to the right the last 5 years. And now it will dip back the other way? *Then another bullmarket will start....*




I'm increasingly starting to doubt the "things will get back on track, the same as before" argument.

A couple of factors have changed significantly since the last big downturn. 

(a) The world wide web has become MASSIVELY connected over the last 10 years. That was not the case the last time or for any major downturn before that. Hell, 'puters were just a dream for most in as recently as the 80's! 

(b) Politicians of all persuasions have HATED the apparent loss of control over many aspects of business and society through this WWW thingy.

(c) However, every cloud has a silver lining, and smart politicians of all persuasions would have discovered that spreading their messages (and therefore their influence and control) has been made vastly easier by the same mass media and high-speed broadband networks that they once hated.

(d) Having succeeded in scaring everyone witless with campaigns of fear (Illegal immigrants, terrorism, internet pr0n, world financial crisis etc) they are now finding they have real power via new technology to get and HOLD FOREVER controlling interests in many businesses, censoring what you think, see or read - why, they even got shorts banned! 

I really don't think that having discovered this new Tower Of Power (the WWW) they are going to give back thereins to "the free markets" of the world.

No sirree.

The New World will be one where your friendly, caring MP will guide you EVERY step of the way through your business and private life - and punish you severely if you should stray from their ideals.

IMO.



aj


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## drsmith (18 November 2008)

In the following article an ABC learning employee says the parents are leaving the centres in droves.

http://business.smh.com.au/business/abc-learning-in-race-against-time-20081118-69vi.html


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## Judd (18 November 2008)

Another one bites the dust - as Freddy Mercury sang with gusto.

"The operator of 43 child-care centres in NSW, CFK Childcare Centres, has gone into voluntary administration due to a failed asset sell-off to ABC Learning Centres Ltd............................."

http://business.theage.com.au/business/abc-link-spells-end-for-cfk-childcare-20081118-6a9s.html

Now watch out for Funtastic, contracted supplier of toys to ABC Learning.

Note: Have never directly held shares in this lot and I feel very, very sad for those that do.


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## Aussiejeff (19 November 2008)

Judd said:


> Another one bites the dust - as Freddy Mercury sang with gusto.
> 
> "The operator of 43 child-care centres in NSW, CFK Childcare Centres, has gone into voluntary administration due to a failed asset sell-off to ABC Learning Centres Ltd............................."
> 
> ...





I believe the American term would be "collateral damage".

The Chinese might call it the "domino effect".

Whatever, it is just the tip of a crumbling iceberg.

IMO there are going to be plenty more sad tales to tell come out of this debacle. 



aj


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## Judd (24 November 2008)

Judd said:


> ...........This is the problem that the receivers are now facing.  ABC Learning does not seem to hold any tangible assets and in the main, only held child care licenses, which are issued under State Government legislation and cannot be legally sold (you can sell a child care business to someone else but that apparently voids the license and the new owner has to apply for a new licence specific to that centre.)..........




Seems the situation is what I feared it was.  ABS has no assets to sell, ie $1.7 billion blown by the CBA and other lenders.  Shareholders will get zilch.

http://business.smh.com.au/business/empty-playroom-at-abc-20081124-6fkk.html?page=1

"Empty playroom at ABC

    * Michael Pascoe
    * November 24, 2008 - 1:43PM
    * Page 1 of 2

ABC Learning receiver McGrath Nicols came up with a liabilities figure at last week's creditors meeting - $1.66 billion - but what was obviously missing was an indication of assets. Maybe that's because there aren't any.

Well, none to speak of anyway. A bear in there, a chair as well, and that's about it - nothing to sell.

ABC leased the vast majority of the child-care centres it operated. The $657 million of alleged "property plant and equipment" listed in the company's December half accounts is likely to be as fanciful as the rest of the accounts. As someone familiar with the business observed, that seems to be an amazing number of toys and toddler-sized chairs..................."


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## everob (27 November 2008)

There seems to be some pretty knowledgeable people commenting on the ABC Childcare dramas, so I was wondering what any of your predictions might be for the private landlords of ABC centres? My father has two - one which made it to the "will continue operating" list and a second that didn't even make it to the "under review" list.......it's definitely folding (even though it is at full capacity). That means a loss of about $120 000 pa income, and as he has a bank loan over the property...he's a little concerned. What do you suppose the future holds for him? Would a private operator be interested in taking over the lease at the same rent do you think? Would love some thoughts.....


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## grace (28 November 2008)

everob said:


> There seems to be some pretty knowledgeable people commenting on the ABC Childcare dramas, so I was wondering what any of your predictions might be for the private landlords of ABC centres? My father has two - one which made it to the "will continue operating" list and a second that didn't even make it to the "under review" list.......it's definitely folding (even though it is at full capacity). That means a loss of about $120 000 pa income, and as he has a bank loan over the property...he's a little concerned. What do you suppose the future holds for him? Would a private operator be interested in taking over the lease at the same rent do you think? Would love some thoughts.....




Everything is for sale at the right price.  The same rent?  I doubt it.  Make the deal attractive enough and someone might take it on.  (ex-child care centre owner here).

Other option is to sell his freehold and lease at the same time.  Some buyers prefer that.


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## Stomper (29 November 2008)

Rubbish.... it's got to fold.

Most if not all of the centres will be picked up in some form or another.

If you look at where the asset value is it's in the rent of the property - the landlords want the properties let 

The fact the most of the shareholders money went in overpaying for assets and in poorly structured business ventures doesn't mean that the centres themselves can't be profitable or maybe community run.

The government should assist in an orderly transition - it won't take much $


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## Stomper (29 November 2008)

everob said:


> There seems to be some pretty knowledgeable people commenting on the ABC Childcare dramas, so I was wondering what any of your predictions might be for the private landlords of ABC centres? My father has two - one which made it to the "will continue operating" list and a second that didn't even make it to the "under review" list.......it's definitely folding (even though it is at full capacity). That means a loss of about $120 000 pa income, and as he has a bank loan over the property...he's a little concerned. What do you suppose the future holds for him? Would a private operator be interested in taking over the lease at the same rent do you think? Would love some thoughts.....




If it's at full capacity then there is no reason why it shouldn't be viable - I wonder if the rent he's earning is "market value" - if not then he's overpaid for the centre and may need to take a haircut to bring the rents down to viable commercial rates. Alternatively he could put in a manager to run the centre in it's own right.


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## AS414 (3 December 2008)

Some analysis of ABC Learning's failed _strategies_:

http://internationalbs.wordpress.com/2008/11/07/as-simple-as-abc/ 

http://internationalbs.wordpress.com/2008/11/18/following-up-on-cars-and-caring/


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## Quincy (25 June 2009)

*Watchdog moves to freeze ABC founder's assets*

THE corporate regulator has moved to freeze the assets of ABC Learning founder Eddy Groves and have his passport seized - indicating he may be considered a flight risk - as investigations continue into the child-care provider's collapse.

http://business.smh.com.au/business/watchdog-moves-to-freeze-abc-founders-assets-20090624-cwu6.html





> The regulator hopes the court will order Mr Groves to remain in Australia until June 30, 2010. It has asked that he hand over his passports within two days.
> 
> The court may also ban Mr Groves and his new wife from taking assets out of Australia, including selling them, giving them away or mortgaging them.
> 
> *Mr Groves would still be allowed to spend $10,000 a week on living expenses and to pay legal costs in other cases arising from the collapse of ABC Learning*.




I wonder how much of that $10,000 / week is for "living expenses" ?


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## Investment Guy (3 March 2015)

*ABC Learning Centre CFO pleads guilty to providing false information*

The former CFO of the collapsed childcare operator ABC Learning Centres Limited, James Black, has today pleaded guilty to authorising false or misleading information to auditors during a half-year audit. The charge carries a maximum penalty of five years in jail and/or a fine of $22,000.

For full details, just go to the "Media releases" section of the ASIC's home page.

-IG


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## Julia (3 March 2015)

Interesting.  Thanks, IG.  A lot of people got burned with that one.  Such a market darling until it wasn't, yet people just held on to it all the way down.


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