A2B - A2B Australia

[Knobby22]

The market is going bearish.
Just wait till it turns. You are more likely to get a better price later.

 

[ROE]

I got some more today

combination of regulation uncertainty and the lost of 2 bus routes

those 2 bus routes CAB doesn't earn much from them the hillbus route is the money making machine.
so it could be a blessing in disguised because they can recovered capital on those 2 routes and deploy
to other part of the business for better return.

Regulation uncertainty but current price I reckon more than factor in for any negative effect if any...

Remember CCV regulation uncertainty, people scream CCV could lose up 50% of the profit etc..etc..
look where CCV now, top of the world and market darling...

 

[prawn_86]

The trend is still down for the shorter term that is for sure. How many fundies are still buying as the price goes lower and lower??

Will $4 act as technical support level?

So many questions, so many different answers

 

[Boggo]

The trend is still down for the shorter term that is for sure. How many fundies are still buying as the price goes lower and lower??

Will $4 act as technical support level?

So many questions, so many different answers

The trend is down for the longer term too, it has lost around $10 since June 2007.
I am looking at a potential short term trade if it turns back up and finds support above 4.27, if that doesn't happen then the next target is 3.75. There are a few gaps on the last leg down and the market has a tendency to go back and overlap the gaps.
To get to 3.75 it also has to pass a significant level (low) on the weekly chart of 3.95 (support ?).

Its always fun watching how stocks behave at certain levels (TGA being another recently discussed example of predictable behaviour at various points).

Thats my worth, daily chart below (click to expand).

 

[skc]

Something isn't right with these guys from 3:45pm. It was bouncing nicely today and then lost 8% in the last 15 minutes.

What's the news? Taxi inquiry out?

 

[Boggo]

To get to 3.75 it also has to pass a significant level (low) on the weekly chart of 3.95 (support ?).

Massive offload at the closing auction, took the 3.95 out easily.

It's now back at Nov 2004 prices !

 

[prawn_86]

Massive offload at the closing auction, took the 3.95 out easily.

It's now back at Nov 2004 prices !

Nearly 600k worth of shares dumped in closing auction. Lets hope someone is just panicking and its not a case of someone knowing more than the market

 

[TikoMike]

Nearly 600k worth of shares dumped in closing auction. Lets hope someone is just panicking and its not a case of someone knowing more than the market

Maybe Mr Kermode sold the rest of his holding lol.

 

[notting]

You could hope it was the same guy who was playing RIO today at 12:25:grenade:

 

[DocK]

You could hope it was the same guy who was playing RIO today at 12:25:grenade:

I notice those particular trades on RIO had a code of EQ - Commsec tells me that this stands for Equity Combo but I can't find what that actually means. Would appreciate an explanation, thanks.
Apologies for taking thread off topic

 

[brty]

Couldn't help myself. I bought a few thousand shares at 3.64. What is not to like about a 9.6% fully franked dividend of a company with good financials. Looking at the technicals, breaking the $4 looks bad, yet I wont be surprised to see a large reversal sometime soon.

As the company release basically stated nothing materially wrong, it would be a very bad look for directors to announce something bad next week, hence downside should be limited.

 

[McLovin]

Question: The RBA has said that taxi payments are not surcharges because the merchant (Cabcharge) is actually providing the payment system as a service. Does that mean CAB falls into state government legislation because it now falls outside the remit of the RBA? So the issues around its surcharging now become a prime target for the Fels inquiry. This would mean the SP fall is actually because the RBA has said CAB's business is outside the payment system.

 

[skc]

The additional costs that the Bank considers are appropriate to include in the reasonable cost of acceptance are limited to those specified in paragraphs (a) to (e) below, where those additional costs can be separately identified and costed as a direct cost of card acceptance. The additional costs include and are limited to:

Merchants' own costs related to card acceptance. This cost category includes, and is limited to: the merchant's costs of purchasing and maintaining their own card acceptance infrastructure; scheme fees levied on the merchant by the scheme; and line rental and communications charges directly related to the use of payment card terminals.[2]

Footnote 2

In cases, including some business models in the taxi industry, where the ‘merchant’ is a payment services provider that charges fees directly to the end-user, the reasonable cost of card acceptance would also include some allowance for the capital cost of the provider. In the case of the taxi industry, the Bank notes that the 2012 draft report of the Taxi Industry Inquiry in Victoria suggested regulating service fees so they did not exceed the resource cost of providing electronic payment services – i.e. excluding financial flows between processors, operators and networks – and found no evidence that this should exceed 5 per cent of transaction value.

So it reads to me that taxis should also falls under the "reasonable cost of acceptance" umbrella, regardless of how the charge is broken down between surcharge and other costs.

 

[McLovin]

Footnote 2

So it reads to me that taxis should also falls under the "reasonable cost of acceptance" umbrella, regardless of how the charge is broken down between surcharge and other costs.

Yeah I read footnote 2, which prompted my question. It seems almost as though the RBA is washing its hands of the issue and saying wait for the Victorians to say something. Given the tone of Fels in attacking the industry, I can't imagine a finding that is favourable to CAB's business.

The next bit is what happens if Victoria mandates a price-cap of 5%. CAB won't look as cheap then even at these levels. I could easily see NSW following, they seem to just be waiting for Victoria.

 

[Ves]

The next bit is what happens if Victoria mandates a price-cap of 5%. CAB won't look as cheap then even at these levels. I could easily see NSW following, they seem to just be waiting for Victoria.

Have you done any work on earnings models if the 5% cap comes in? I haven't had a look in a while, but I remember calculating about 25% earnings loss.

Which, means it is still on a P/E of 10. That isn't bad for a quality business.

 

[ROE]

Couldn't help myself. I bought a few thousand shares at 3.64. What is not to like about a 9.6% fully franked dividend of a company with good financials. Looking at the technicals, breaking the $4 looks bad, yet I wont be surprised to see a large reversal sometime soon.

As the company release basically stated nothing materially wrong, it would be a very bad look for directors to announce something bad next week, hence downside should be limited.

Same load up a bit more today.
Market always over-react to negative news but we can only find out in hind insight.

but you cant get good price for stock if there are a lot of buyer

 

[McLovin]

Have you done any work on earnings models if the 5% cap comes in? I haven't had a look in a while, but I remember calculating about 25% earnings loss.

Which, means it is still on a P/E of 10. That isn't bad for a quality business.

I haven't, sorry. To be honest, it's all so up in the air at the moment I don't know how to create a valuation that is anything more than speculative. FWIW, Macquarie is forecasting a 30% decline in EPS if the cap is put to 5%, which is about what you are saying, although they added the caveat that they don't really know what's going on. Also, they think that CAB will be captured by the RBA payments system.

The RBA‟s announcement is at odds with Cabcharge's view that its
business "applies fees on financial services rather than a surcharge on the
underlying transaction". In our view the announcement provides a clear
reference that taxis are caught under the Payment Systems Regulation Act.
We suspect this is the ammunition schemes such as Mastercard and Visa
have been waiting for in order to begin an effective arbitration process with
the taxi industry.

Cabcharge‟s business model is now under attack on a number of fronts.
Regulatory overhangs are the key near term concern with the VIC
Government‟s response to the Fels Taxi Inquiry due out mid-December. CDC
is facing significant bus contract re-sign risk in CY13 and technology change
is also posing a threat to traditional taxi networks and payment processing
terminals. The stock has fallen significantly from its recent highs, however,
with so much uncertainty we expect this deterioration to continue. Maintain
Underperform.

Obviously make of the analyst report what you want. I don't take them as gospel but they are good for reference and to add a bit of colour to the discussion. I can PM you the full report if you want.

 

[skc]

Have you done any work on earnings models if the 5% cap comes in? I haven't had a look in a while, but I remember calculating about 25% earnings loss.

Which, means it is still on a P/E of 10. That isn't bad for a quality business.

P.46 of last accounts... Taxi service fee income = $89.55m.

So if you half that, I think it's more like 25% (~$40m) revenue loss. How much falls straight to the bottom line? I don't see much reduction in associated costs. Considering the NPAT was ~$60m, the earnings impact is massive if it comes to bear.

 

[Ves]

P.46 of last accounts... Taxi service fee income = $89.55m.

So if you half that, I think it's more like 25% (~$40m) revenue loss. How much falls straight to the bottom line? I don't see much reduction in associated costs. Considering the NPAT was ~$60m, the earnings impact is massive if it comes to bear.

Is the whole $90 mil included, though? How broad is taxi service fee income?

Goldmach Sachs have a report, that someone posted snippets from on HotCopper, suggesting that the EPS change is more likely to be closer to 13% to 21% in 2014/2015.

So many conflicting views out there on what is concluded.

ROE do you have anything to add to this? Happy to do PM if you don't want it made public for whatever reason.

 

[McLovin]

So many conflicting views out there on what is concluded.

From MBL

What are the potential earnings impacts for Cabcharge? We have
revisited our “worst-case” scenario analysis detailed in our June 2012 report
titled “Game Changer?” assuming a reduction in surcharges become a reality
for third party card processing (estimated EBITDA reduced by ~$20m or 30%
impact to EPS). We caveat this analysis by saying the lack of adequate
information available means any impact on CAB‟s earnings is purely
speculative at this stage and should be used as a basis for discussion only. It
is also important to keep in mind that CAB‟s peers are likely to be impacted by
any changes, resulting in potentially positive market share gains.
Earnings and target price revision

 We believe the stock will continue to trade at a significant discount to our
valuation given the uncertainty. Reduced price target to $3 ($4.50 previously).
Price catalyst

 12-month price target: A$3.00 based on a Sum of Parts methodology.

 Catalyst: VIC Government response to Allan Fels Taxi Inquiry, December
2012.

I'm happy to sit and wait, hopefully for you guys holding this ends up being more like MMS and it all blows over.