BKL - Blackmores Limited

[jkool]

I searched around here for few times now and never seem to find any post regarding this excellent Aussie company. I find that rather suprising that nobody would be interested in it. Is it perhaps too boring of a stock?

I looked at this share about 6 months ago at around $13-$14 on P/E 16 and I thought than it was dear but what to say now when the price is almost breaking $20 on PE of 23 or so.

BKL is undoubtedly a great business and major player in its industry. It has great reputation amongst its customers and big stake of the stock is still owner by the company's founding family (i.e. their interests are aligned with the interest of a shareholder). To me all these are great signs of a stock for a long haul.

I have also add some of my own analysis to my security analysis part of my Sound Of Gold web at http://sog.shopinthemall.com/ web if anyone is interested.

What is your opinion about this share?

 

[Kauri]

What is your opinion about this share?

Liquidity.....

 

[jkool]

Yes that may be problem for someone cashed up to their eyeballs But seriously around 10k-20k shouldnt be difficult to obtain/discard on daily basis however if you wanna trade it in/out very frequently than yes you better look elsewhere.

Stock for me its a buy and hold for a long term gain.

 

[Kauri]

Yes that may be problem for someone cashed up to their eyeballs But seriously around 10k-20k shouldnt be difficult to obtain/discard on daily basis however if you wanna trade it in/out very frequently than yes you better look elsewhere.

Stock for me its a buy and hold for a long term gain.

Long term might be alright, but if you don't happen to be the only one trying to move 10k-20k a day it may be difficult.

 

[TheRage]

BKL is on my watchlist as are other quality companies such as ARP and HNG. Unfortunately these companies are suffering low turnover at the moment due to the commodoties run and in the shortterm are likely to be forgotten. I think there maybe some room for going long on these stocks if we get another correction like in May last year. BKL like ARP has consistent earnings growth and the case of ARP the Net profit Margin has actually been improving over the last 10 years. What this says to me is that companies like these are being managed by smart people as they have worked out how to improve their cost efficiencies not just expand to the hilt and do buyouts all day long.

Dislcaimer: This is my opinion and should not be construed as financial advice.

 

[jkool]

For me this kind of liquidity is ok because I don't see liquidity as a major hurdle in my investing. Of course it adds to convenience but doesnt affect the profitability or market position of the business which are my major concerns.

I would not pass on the earning opportunity such is this only because I won't be able to sell instantly. This company is making around 30% returns on equity in last few year. So if they continue to do just that or even if they underperfom by their own historical averages my money invested there would still be earning quite satisfactory returns.

Not sure if that make sense to anybody else

 

[jkool]

TheRage: We both seem to be fishing in the same waters as I am too closely watching both the stocks you mentioned. In fact I am just working on my own analysis of ARP as we speak. Personally I don't like their exposure to volatile car market. But this should really go to an ARP thread if there is one.

I agree with you on the quality of management as its one of my major requirements for an investment.

 

[jkool]

BKL upto 21.35 today trading than on P/E of about 25. No news from the company since 22 Dec yet the stock just keeps going up.

How does it look from technical point of view? Where do you guys have your next resistance / support levels?

Thanks

Jkool

 

[Garpal Gumnut]

Technically it appears that the time to get in to BKL would have been late Sept/Oct 06 when it went from $14 to $16 and all indicators and moving averages went up and up. Its a bit ballistic at present with fair value agreed now at $21-$21.50. Any fundamental views?

 

[Buffettology]

No chat on this thread in a while.

JKool, you still holding BKL?

Good profits were announced on 23rd Feb.

I will be interested to see the returns of their investment into Taiwan, this is a very exciting time for BKL, and could mean much more international investment if the Taiwan venture is profitable.

I am currently not holding BKL, but will probably put a small portion of my portolio back into the company tomorrow or the following day.

Great company for us long-term investors. Its interesting to see the same names coming up in all the threads I am scanning at the moment. Too bad I spent 12 years trading, before I became an investor recently. Obvious long-term companies such as TRS, JBH, LEI, BKL and WOW would have made me a fortune! Never will I go back to trading after discovering the keys of long-term investing. Much easier to do, much more risk free, much more profitable in the long-term once compounded rates of returns are taken into account.

Other than that, I agree with absolutely everything Kjool has said. Another buffettologist right there!

 

[jkool]

Hi Buffettology,

in true Buffett's spirit I still hold on pehaps "forever" However I dont need to stress out that I am quite tempted to sell at current levels, even though I know that cashing in on a short term gain is somehow shortsighted.

Since nothing seems to have changed in earnings or BKL's propective future growth and earning power, this stock is a keeper. There is not much news coming from the company lately (for me no news is good news ) apart from the recent article in SMH:

Date: 12/4/2007
Author: Margie Sheedy
Source: The Sydney Morning Herald --- Page: 27
There is often a lot of staff churn in the healthcare sector in Australia. This is not the case at Blackmores, which sells vitamins and health supplements. This company actively helps staff further their careers, nurtures them, gives them time to train for different roles and gives them family leave. Blackmores believes in nurturing the health and well-being of staff, who becoming living examples of the company's approach to health. Recruiters believe that companies have to actively work to keep staff. They cannot just give money, because many staff members want career development and flexible working routines. Blackmores is an ideal employer and others will have to copy it in order to keep the best staff.

So yes I continue to keep a keen eye on this stock in hope that Mr. Market is going to make me some foolish offer (eg. price drop to Sep06 levels would be welcome so I could grab some more )

Did you manage to get in also? I think the stock (and overall market) is now overpriced so I wait on the sidelines for a while.

 

[Buffettology]

Yeah, BKL has been quiet.

I did not get in, the price is volatile at the moment, jumping nearly 4% day by day.

I think I will wait for "Mr Market" to make me a foolish offer also. Perhaps on the first Wednesday of May

 

[Buffettology]

No talk on this one for a while, and for good reason, it hasnt been doing much.

But its getting towards the $20 mark again, which is a pretty decent price.

Anyone buying this one at current prices?

 

[sutti]

Blackmore's has always been a strange share. It still has a great growth rate of about 10%. It's balance sheet is in great condition and cash flow is strong.

The company is undervalued a little and properly should be trading at around $24 again. There is no reason why it shouldn't be trading at around that price as their market is never really going to suffer as people need health care products no matter what economy we are in.

I would say it is a long term hold - but then again I don't have any of Blackmore's shares.

 

[michael_selway]

Blackmore's has always been a strange share. It still has a great growth rate of about 10%. It's balance sheet is in great condition and cash flow is strong.

The company is undervalued a little and properly should be trading at around $24 again. There is no reason why it shouldn't be trading at around that price as their market is never really going to suffer as people need health care products no matter what economy we are in.

I would say it is a long term hold - but then again I don't have any of Blackmore's shares.

It appears to be a good growth company with little risk

but might be a bit pricey atm?

Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 104.1 117.6 122.8 135.2
DPS 81.0 92.8 97.0 106.7

thx

MS

Business Description
Blackmores (BKL) is focused on vitamin and mineral supplements and natural skin and hair treatment products throughout Australasia. The company also provides information services and carries out research and development into natural preventative health care.

Company Strategy
Organic growth is driven by high levels of research and development focusing on areas where health awareness is high such as obesity, cardiovascular and joint problems. Offshore diversification is ongoing, particularly across Asia where the regulatory burden is lower. As production capacity at the new Sydney facility increases BKL will target additional regional Asian markets with similar demographics. BKL reported underlying FY07 NPAT up 15.4% to $16.7m compared to our $17.6m forecast. Sales revenue grew 16% to $171.7m driven by new product launches and strength across all business units. Gross profit margins firmed 77 bpts to 58.2% mainly due to improved sourcing and scale benefits in the production process. EBIT grew 21.2% to $24.2m with EBIT margin up 60 bpts to 14.1%. A final dividend of 46 cps is payable September 24, bringing the fully franked full year dividend to 81 cps.

 

[Buffettology]

I just snapped up quiet a bit of this at $20.40

I am thinking of picking up even more. This is the kind of stock that is as solid as they come and is not going to dip much below $20.00 before springing up between $22.00 and $24.00 again.

 

[TheRage]

BKL is certainly one of my favorites. Comments like it is too pricey don't surprise me as it trades on a high multiple but at what point does too pricey become a bargain. Do you wait hoping for an Sp correction, which in the case of BKL will be very minimal due to growth and low liquidity, or do you buy hoping that earnings continue to grow. The answer is that you need to look at what your own required rate of return is and then you can determine whether BKL is an opportunity. Companies of quality very rarely present great buying opportunities unless they befall bad times. It took Warren Buffett a long time by his own admission to work out that a great company that is dear is much better than an average company which is cheap.

 

[sutti]

BKL is certainly one of my favorites. Comments like it is too pricey don't surprise me as it trades on a high multiple but at what point does too pricey become a bargain. Do you wait hoping for an Sp correction, which in the case of BKL will be very minimal due to growth and low liquidity, or do you buy hoping that earnings continue to grow. The answer is that you need to look at what your own required rate of return is and then you can determine whether BKL is an opportunity. Companies of quality very rarely present great buying opportunities unless they befall bad times.

The stock price is still going down so you might be able to pick it up for a cheaper price in the next few days (thats if a few cents matters to your bottom line

Your right about pricey part .... look at Google a few years ago when it was trading at $350. A quick few calculations with there P/E ratio and growth rate showed that they were undervalued by about 40% ... look where there trading now.

Once again, I don't know why theres not more support for this share when it has a fantastic growth outlook, dividends are fine for me and their balance sheet and cash flow is in sound condition.

All the best.

 

[prana]

Looks like Roger Montgomery's talk ramped the share price of Blackmore's quite a bit. Perhaps people have suddenly forgotten after a few months, what Roger's been drumming about as RoE and RoA capabilities. Just a side statement, I don't own or analyse, I'm sure it's a great company if Roger likes it.

 

[TheRage]

I'm sure it's a great company if Roger likes it.

It's interesting if you look Climes holding in CCP and TRS their payout ratio's are lower than blackmore's and therefore retain greater earnings as part of equity reserves. Shareholder Equity growth is the corner stone for real investment performance not just dividends paid out according to the institutional imperitive. Look at TLS they are currently paying out all earnings and using a bit more debt to provide a dividend. Therefore retained equity has not been growing but rather decreasing. How can a company's share price grow if the equity remains the same or declines.

Blackmore's retained equity has been growing but perhaps not at a rate that I would prefer. However the amount that they do retain grows phenomanlly well. Look at it this way Blackmores pay us back 78% of the companies earnings by way of dividend. On current share price this relates to a return for the investor of 4.3%. On the remaining 22% Blackmores uses this money to invest into R&D, infrastructure etc. This 22% retained helped to increase earnings by 14% last year. Imagine if Blackmores kept all of the money and didn't pay a dividend how much the earnings would increase by. If the earnings are linear we could expect an increase of 70% in earnings if no dividends were returned to investors (I don't think it would be linear). A 70% increase in earnings would increase SP considerably, giving a far better return to the investor than a 4.3% dividend. I own blackmores and will continue to do so as long as Marcus Blackmore remains at the helm.

DYOR