# EZL - Euroz Hartleys Group



## battiwallah (25 December 2008)

Euroz (EZL).  This is a stockbroking and financial services (advice and funds management) company.  It is substantially owned by company staff.

Return on equity has been very high over the past few years and debt is low.  The price appears to be good, its current price of $0.63 is only a quarter of the price last year of $2.60, and I think represents excellent value.

If anyone has any thoughts on this stock I'd be glad to hear it.

Disclosure: I have a small holding in this stock and plan to purchase some more next year, that is, average down!


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## justiceotp (26 December 2008)

The result they will show this financial year will be nothing like the results they have previously shown have a look at the YTD figures they gave (Can be found in the announcement to market on 25/11)  it is around 1 million vs 14 million in similar time frame last year, if this was to continue throughout the year you will be lucky to get a dividend at all.


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## battiwallah (26 December 2008)

Your comments noted justicotp.  On the plus side most of the 1H profit fall was a non-cash accounting write-down.  NTA per share is about $0.67 of which $0.47 is cash.  So I think that at least it's in a fairly sound financial position for the long term.

Thanks for your feedback.


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## brendoz (21 March 2011)

Euroz up 10% this morning from fridays close, and even friday packed on 4% 

they've been powering along lately. i have been looking up any info i can find on them, does anyone have any news?


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## Noddy (11 July 2011)

brendoz said:


> Euroz up 10% this morning from fridays close, and even friday packed on 4%
> 
> they've been powering along lately. i have been looking up any info i can find on them, does anyone have any news?




Solid result for the full year including a 15c final dividend ( about 10% grossed up) and about 13% (grossed up) for the full financial year.
Business has no debt and looks a good investment to me in a current market that's going backwards.
So I bought a heap of them.
13% is a better return than I can find anywhere else at present.


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## tremmas (14 October 2011)

Hi there,

I've been having a look at various LICs and financial companies, mainly for dividend return, and just couldn't go past EZL. I've only just started going through their history but at this stage I’m liking what I see. They seem to be led by capable people, have an excellent balance sheet and are cashing in on the western resources boom, which I still think has plenty of legs in it.

My question is with regard to their dividend – a total dividend of 18c fully franked represents almost a 13% return at current sp without even counting the franking credits! Is this dividend sustainable?? Is there something I am missing??


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## skc (14 October 2011)

tremmas said:


> Hi there,
> 
> I've been having a look at various LICs and financial companies, mainly for dividend return, and just couldn't go past EZL. I've only just started going through their history but at this stage I’m liking what I see. They seem to be led by capable people, have an excellent balance sheet and are cashing in on the western resources boom, which I still think has plenty of legs in it.
> 
> My question is with regard to their dividend – a total dividend of 18c fully franked represents almost a 13% return at current sp without even counting the franking credits! Is this dividend sustainable?? Is there something I am missing??




EZL is a very good outfit for leveraged exposure to the mining boom. It makes very good money on boom times, esp through the small/mid-tier miners raising capital (which happens a lot more towards the later part of a boom). 

Last year they raised $1.2B for various miners. At ~2-4% fee that's $30-40m of pretty high margin revenue. They also hold stakes in 2 LICs that focus on resources so it is a turbo-charged company for resource exposure.

The sustainability of the dividend is obviously a function of the sustainability of the resource boom. Their recent investor presentation showed what a downside scenario looks like. In FY09 EPS was only 8c... clearly that doesn't support a dividend of 18c.

EZL is pretty cheap imo if the resource boom continues, but the market isn't banking on that based on the current share price. And the profits can fall quickly in a slowdown or an underwriting deal gone bad.


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## tremmas (14 October 2011)

skc said:


> EZL is a very good outfit for leveraged exposure to the mining boom. It makes very good money on boom times, esp through the small/mid-tier miners raising capital (which happens a lot more towards the later part of a boom).
> 
> Last year they raised $1.2B for various miners. At ~2-4% fee that's $30-40m of pretty high margin revenue. They also hold stakes in 2 LICs that focus on resources so it is a turbo-charged company for resource exposure.
> 
> ...




Thanks for your input, skc. As usual your post was helpful and informative.

It makes sense that the depressed price is due in part to uncertainty about the resource boom.

As I mentioned, I believe the boom has a little way to go yet - but maybe that's because I work in the industry and no-one I know is planning on a slow-down.

I'll keep researching but if I can get a 13% return plus tax credits then it certainly takes the pressure off capital growth.


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## skc (14 October 2011)

tremmas said:


> Thanks for your input, skc. As usual your post was helpful and informative.
> 
> It makes sense that the depressed price is due in part to uncertainty about the resource boom.
> 
> ...




The vibe of the people in mining (some personal friends) is that they don't know there is a crisis if they don't read the newspaper. Things are as busy on the ground as they've been for the last year or two.

But... these are staff on the coal face (some literally) and they are not in positions where they negotiate contracts or make large capital investment decisions. We saw how quickly the commodities market can turn for the worse back in 2008... and I bet you those in the industry didn't see it coming either... remember "Stronger forever"?

The good thing with EZL is that they have a fairly sizable cash holding and no debt and should be well placed to weather any temporary downturn. The question then becomes whether the the downturn (if any) will be temporary or prolonged, and whether one should wait for a better price...

I mentioned it elsewhere that a lot of materials / mining services stocks appear cheap... but look at their value relative to BHP, which is the lowest risk exposure to the mining boom, and you start to wonder if that's not a better risk-adjusted opportunity.


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## tremmas (14 October 2011)

skc said:


> The vibe of the people in mining (some personal friends) is that they don't know there is a crisis if they don't read the newspaper. Things are as busy on the ground as they've been for the last year or two.
> 
> But... these are staff on the coal face (some literally) and they are not in positions where they negotiate contracts or make large capital investment decisions. We saw how quickly the commodities market can turn for the worse back in 2008... and I bet you those in the industry didn't see it coming either... remember "Stronger forever"?
> 
> ...




Fair points.

I work in consulting and while I’m certainly not making big capital investment decisions, our main clients are the BHPs, FMGs, Rios and Woodsides of the world who are. The feeling that I get is that even though there is a lot more concern about budgets, finance and planning than pre-2008 (it used to be “get it done ASAP no matter the cost”), there are still big projects getting the green light pretty consistently.

All the major ports are getting expanded in WA and BHP’s shiny new building has just eclipsed the Perth skyline. It’s that peripheral infrastructure as opposed to the actual mining that makes it feel like there’s plenty more to come. It’s not all spend, spend, spend, dig, dig, dig these days but if the price of a cup of coffee over here is anything to go by there is still a lot of money getting thrown around!! 

It's an interesting environment - as our company bigwigs like to remind us we are dealing with a "multi-speed" economy with QLD and WA pumping work through to the other offices.

I appreciate your point re: BHP. The strategy I’m trying to develop right now is to slowly start building a section of my portfolio that is generating returns through dividends and credits and that has a reasonably low turnover rate. Hence why the excellent dividend of EZL appeals to me. Although I definitely agree that BHP is low risk and has a lot of room to grow. If I had a big pile of spare cash lying around right now (who doesn’t right?), it would be very hard to look past.


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## skc (6 January 2012)

tremmas said:


> I appreciate your point re: BHP. The strategy I’m trying to develop right now is to slowly start building a section of my portfolio that is generating returns through dividends and credits and that has a reasonably low turnover rate. Hence why the *excellent dividend of EZL *appeals to me. Although I definitely agree that BHP is low risk and has a lot of room to grow. If I had a big pile of spare cash lying around right now (who doesn’t right?), it would be very hard to look past.




First half result update. H1 NPAT $2.72m (1.89cps) compared with $18.5m pcp. Dividend reduced to 1.5cps compared with 3.0c pcp.

That's a pretty volatile earning profile on display here.

Ignoring the fall in profit from equity accounting of their LICs holdings, operating profits pre tax is still down ~30% from $12.3 to $8.9m.

They do tend to pay a much larger dividend in H2 but I think there are a lot of ifs and buts for the 18c total from last year to be matched.


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## McLovin (7 January 2012)

skc said:


> First half result update. H1 NPAT $2.72m (1.89cps) compared with $18.5m pcp. Dividend reduced to 1.5cps compared with 3.0c pcp.
> 
> That's a pretty volatile earning profile on display here.
> 
> ...




I had a look at these guys about a year ago. I came away feeling that they were a classic value trap. Way too much leverage to resources M&A activity to be confident in the dividend.


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## robusta (26 June 2012)

McLovin said:


> I had a look at these guys about a year ago. I came away feeling that they were a classic value trap. Way too much leverage to resources M&A activity to be confident in the dividend.




Interesting perspective but I am not so sure it is a value trap. I like the way they handle capital. Mining boom or not this industry will still need the services of these guys. With a long term view M&A will continue and the world will still need the stuff we dig up IMO.

Anyway today is the first time the sp has been below $1.20 since we were last this worried about Europe. I picked up a nice parcel for my super today at $1.16.

I expect the dividend to be lower than last year but the yield should still be ok.


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## robusta (6 July 2012)

NPAT down 56%, dividend down the same amount, I knew the result would be softer but I am actually happy with this, these guys are good allocator of capital, particularly when you compare to Bell Potter. M&A will happen again one day.


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## robusta (7 January 2013)

Half year results out today.

http://www.asx.com.au/asxpdf/20130107/pdf/42c9qbrr45qfp0.pdf

Operating profit was not too flash, due to low volumes and deals. The returns from the two LIC's were a positive however.


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## Knobby22 (8 January 2013)

robusta said:


> Half year results out today.
> 
> http://www.asx.com.au/asxpdf/20130107/pdf/42c9qbrr45qfp0.pdf
> 
> Operating profit was not too flash, due to low volumes and deals. The returns from the two LIC's were a positive however.




Dividends should rise next year. I'm in.


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## robusta (8 January 2013)

Knobby22 said:


> Dividends should rise next year. I'm in.




I think so too Knobby. Just a couple of random thoughts;

Brokerage businesses are at a all time low at the moment so there is a shed load of competition for any book builds etc.

EZL does seem to have a advantage in the WA market where a lot of businesses seem to want to support the local guys. This could be a liability is WA enters a recession, business confidence is very low there at the moment.

http://au.news.yahoo.com/thewest/bu...54/business-confidence-plunges-on-high-costs/

I do like the way this business handles capital.

http://www.theaustralian.com.au/bus...-in-the-doldrums/story-fn91wd6x-1226549150750


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## skc (8 January 2013)

I don't understand why EZL needs to hold equities in the 2 funds.

They should make in-specie distribution of the two funds to the holders and operate as a pure play brokerage business.

It's not like there's any real hedge or synergies between the two businesses. Both are pretty much exposed to second tier WA mining.

Let the investors do the diversification themselves.


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## So_Cynical (8 January 2013)

skc said:


> I don't understand why EZL needs to hold equities in the 2 funds.
> 
> They should make in-specie distribution of the two funds to the holders and operate as a pure play brokerage business.
> 
> ...




I like the LIC's, i think its something different and very much ties Perth Based EZL to mining, exploration and small caps...making EZL a WA focused play.

I think there is a place for stocks that are a little quirky and doing there own thing.


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## robusta (9 January 2013)

skc said:


> I don't understand why EZL needs to hold equities in the 2 funds.
> 
> They should make in-specie distribution of the two funds to the holders and operate as a pure play brokerage business.
> 
> ...





There are a few reasons I like the holdings in WIC and OZG. The main reason I am invested in EZL is the high ROE from the brokerage side of the business but I sleep a little better knowing these assets are there to prop up the sp in the event they went the same way as Wilson HTM for example.

The investments in WIC and OZG make up about three fifths of the NTA for EZL. WIC yields about 3.4% while OZG is yielding around 5.6% this helps to support the dividend through tough trading conditions.

Both LIC's are trading at a discount to NTA and are undergoing a buyback.

This sounds like peanuts but I like the fact that they pay a management fee to themselves to run assets they own.

Management get to advertise the LIC's with the invest where we invest line.






So_Cynical said:


> I like the LIC's, i think its something different and very much ties Perth Based EZL to mining, exploration and small caps...making EZL a WA focused play.
> 
> I think there is a place for stocks that are a little quirky and doing there own thing.




Quirky can be good, not many people look at them.


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## skc (9 January 2013)

robusta said:


> There are a few reasons I like the holdings in WIC and OZG. The main reason I am invested in EZL is the high ROE from the brokerage side of the business but I sleep a little better knowing these assets are there to prop up the sp in the event they went the same way as Wilson HTM for example.
> 
> The investments in WIC and OZG make up about three fifths of the NTA for EZL. WIC yields about 3.4% while OZG is yielding around 5.6% this helps to support the dividend through tough trading conditions.
> 
> ...




You missing the point. 

The LICs may be fantasic and you might like to hold them. In that case, just go and buy them. You can buy them in the same ratio as EZL holds them, and you can construct an exposure that is identical.

There is no added value for EZL to hold the LIC's on your behave. You can't sell them if you want to. You can't hold them if EZL chooses to sell. The only effect is a discount being applied to EZL's share price.


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## robusta (9 January 2013)

skc said:


> You missing the point.
> 
> The LICs may be fantasic and you might like to hold them. In that case, just go and buy them. You can buy them in the same ratio as EZL holds them, and you can construct an exposure that is identical.
> 
> There is no added value for EZL to hold the LIC's on your behave. You can't sell them if you want to. You can't hold them if EZL chooses to sell. The only effect is a discount being applied to EZL's share price.




I think I get your point, the sum of the parts is worth more than the whole. EZL has a good history managing capital however and maybe in the future that discount will not be applied to the share price.


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## skc (9 January 2013)

robusta said:


> I think I get your point, the sum of the parts is worth more than the whole. EZL has a good history managing capital however and maybe in the future that discount will not be applied to the share price.




The discount will always apply to the share price. Here's why...

Suppose there are one group of investors who really like EZL's brokerage business... call them group A.

Suppose there are another group of investors who really like the LICs currently owned by EZL... call them group B.

Now how many investors like EZL's brokerage buiness as well as the LIC's? This group (call them group C) is a union of group A and B (union as in set theory). And by definition, the union of group A and B cannot be greater than A + B.

So the combination of brokerage and LIC does not make EZL any more attractive. Any person belonging to group C can simply go and buy separately the brokerage business and the LICs and control the exposure they want. While any investors who are in group A or group B, but not group C, can simply buy the part they like.


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## Knobby22 (9 January 2013)

I don't believe in that theory. 
Wesfarmers is a true conglomerate and it gets rated appropriately.
Its true that broking firms and analysts etc. dislike companies that have more than one arm, but I think that if they are well run they can really add value. That is if management is capable enough.


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## Ves (9 January 2013)

Knobby22 said:


> I don't believe in that theory.
> Wesfarmers is a true conglomerate and it gets rated appropriately.
> Its true that broking firms and analysts etc. dislike companies that have more than one arm, but I think that if they are well run they can really add value. That is if management is capable enough.



Except Wesfarmers don't run LICs that traditionally trade on a discount to NTA.


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## skc (9 January 2013)

Knobby22 said:


> I don't believe in that theory.
> Wesfarmers is a true conglomerate and it gets rated appropriately.
> Its true that broking firms and analysts etc. dislike companies that have more than one arm, but I think that if they are well run they can really add value. That is if management is capable enough.




You can't go buy the different parts of WES on market and construct the same portfolio.

You can with EZL.

If they hold two unlisted investments trusts then it's a different story.

But when both are simply listed there is no value-add.


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## robusta (9 January 2013)

skc said:


> You can't go buy the different parts of WES on market and construct the same portfolio.
> 
> You can with EZL.
> 
> ...




EZL have been increasing their holdings in the two LIC's since the start of the GFC. Also those LIC's have had a share buyback operating for the same period. That sounds like a smart allocation of capital if you think the LIC's hold decent assets. 

It will be interesting to see how they manage these assets in the future, directors and staff hold over 55 million of the 144 million shares on issue.


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## ParleVouFrancois (10 January 2013)

What SKC is trying to highlight is that you can in effect go "short" only the brokerage operations of EZL, that is by selling short say $20,000 worth of EZL, and using the proceeds to buy the same weighting that EZL hold in both WIC and OZG (it should cost less than the $20,000 to construct this long portion).

In theory you are net short only the brokerage/finance operations of Euroz, having cancelled out the investment holdings of the company (which don't add value at all). Euroz should simply distribute all of their WIC and OZG shares out to shareholders pro-rata in order to simplify company operations. This however would probably cause a blow to both the ego of the people in charge as now EZL would be a much smaller company by market capitalization and the tenure of their positions in Euroz would be more at risk should the brokerage arm fall under duress.

The listed investment companies themselves look interesting, discounts from share price to NTA of around 25% and nice projected dividends of ~11% for OZG and ~7.5% for WIC if you include the franking. Both LIC's portfolios are relatively similar except for OZG having a massive position in Cedar Woods Properties, which isn't replicated in WIC. Only OZG has a share buyback going at current and is a less liquid (and therefore a bit cheaper) of a LIC, and if I had to choose between the two I'd go with OZG, but there if I had to choose between them and the rest of the managed funds on offer I'd choose someone else to manage my money.


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## robusta (20 February 2013)

Revenue up 29.84% NPAT up 280.7%, diluted EPS 7.14 cents compared to 1.87 pcp. Much of this result comes from OZG and WOZ holdings. The brokerage side of the business is still doing it tough.


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## jbocker (16 July 2013)

Not sure I am impressed with the latest dividend, not the amount, but conditional payment of it. While I might be naive in these matters, it smells of giving a dividend but making it difficult to receive.
Has anyone read it and feel the same?

An options exercise is to be conducted on the 22nd to allow holders to participate in the dividend payment. Exercise forms  and payments for options exercise must be received at the registered office by close of business 19th July. Exercise forms received after this date will not be exercised prior to the ex dividend date and will NOT partipate in the dividend payment.

So you effectively pay for option to get a dividend. That is Pay for you dividend.

As a holder, I have not seen any exercise forms to date.


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## robusta (17 July 2013)

Hi JB, the options exercise is to allow holders of options, code EZLO to participate in the dividend.


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## jbocker (18 July 2013)

robusta said:


> Hi JB, the options exercise is to allow holders of options, code EZLO to participate in the dividend.




Thanks Robusta. That explains it, apologies for casting some doubt about the company.
jb


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## robusta (17 February 2014)

Half year report released today; Revenue up 13.77%, NPAT up 22.9%. Outlook statement sounds a bit more positive and the NTA per share has also risen.


http://www.asx.com.au/asxpdf/20140217/pdf/42mrz3rtf7jxyy.pdf


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## robusta (15 May 2014)

EZL have just acquired Blackswan securities

http://www.asx.com.au/asxpdf/20140514/pdf/42pmp4zk0lzp4w.pdf

Haven't seen the numbers yet but they seem like good operators.

http://www.blackswanequities.com.au/

Could  be a good fit.


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## DB008 (5 June 2014)

EZL have announced a DRP.

I have opted in...


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## robusta (15 June 2014)

DB008 said:


> EZL have announced a DRP.
> 
> I have opted in...




Nice dividend yield with a decent chance of growth...
http://www.professionalplanner.com....ish-new-investment-management-business-28565/

I'm also thinking about the DRP.


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## robusta (8 July 2014)

Profit result out today, NPAT up 139%, ESP up 138% and dividends up 65%

http://search.asx.com.au/s/search.html?query=ezl&collection=asx-meta&profile=web


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## jbocker (8 July 2014)

robusta said:


> Profit result out today, NPAT up 139%, ESP up 138% and dividends up 65%
> 
> http://search.asx.com.au/s/search.html?query=ezl&collection=asx-meta&profile=web




That is a great result. Good to see the dividends on the way up.  Hopefully they continue on their way to 2006-2008 levels.


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## pixel (1 September 2014)

Volume spikes are often followed by a price breakout.
Hasn't happened yet, but my scan suggests I keep an eye on EZL.


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## robusta (4 July 2015)

This is a long term growth story with a rock solid balance sheet in my opinion.

Another acquisition just announced.

http://www.asx.com.au/asxpdf/20150703/pdf/42zm6khhmdj3mq.pdf


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## System (25 November 2021)

On November 25th, 2021, Euroz Limited changed its name to Euroz Hartleys Group Limited.


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