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ABC - Adbri Limited

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~15% p.a. compound over 10 yrs.

But it's probably more like +30% p.a. from year 1 to 5, and 0% p.a. from year 6-10.

Just got to get the timing right.
 
Hi all

I'm not approaching this advice from a stock point of view but from one who has been in the building game for a couple of years. I'm sure the carbon tax has been widely discussed in this forum so we won't go into that. But by around 2016 Australia is moving to a carbon neutral building code of Australia. If anyone has built before your building will has to comply with the bca or it won't be built. There are a range of mechanisms to achieve this. However, cement is one of the heaviest emitters of co2 in the world. My advice is to find out whether they are investing in fly-ash substitution tech or another means of reducing the carbon footprint of cement!

Good luck!
 

Google search for "carbon neutral building code of Australia" turns up nothing.

Are you just another denier?
 
Capital intensive, heavily diluted in the past, poor capital structure, no organic growth (and certainly not a scalable business model). Pass for me.

Earnings will grow at GDP growth at best going forward. Low Return on Capital, plus fairly high payout ratio almost gaurantees this.

If I was a librarian, then maybe, but the problem is the massive tailwinds in businesses like this provided by the real estate & mining boom of the last twenty years are not with us any more.

If we have a steep recession then it might become a lot cheaper quickly. If this eventuates, and it is inevitable, they will raise capital again and holders will be further diluted.
 
I know you like the stock SC but honestly the dividends theyve been paying has been financed by debt, how long do you think they can maintain that yield for if its being financed by debt and not cash flow? As Ves has implied, what happens in a domestic downturn (or just a business downturn) to their cashflow, when they cant even finance dividend payments now in a 'not really so bad' time ?

Just like the larger miners and larger oils, I have a weak spot for these sorts of business (they get me all warm and fuzzy) but I know I probably shouldnt touch them, and so it is with ABC for me now.
 

Super Star Stock

Duopoly or Triopoly player across is operations, Aust wide operations, construction has bottomed, look at the latest new housing start figures...ABC is locked into the Aussie domestic growth story and now in the ASX100.

I just don't know how anyone can not like ABC..i just don't get it.

--

But i wouldn't be buying at over $2.90 personally.
 

ok. in the last annual report, they only took in 64 million in cash over the year ... (once you take out the ppe that they expend on every year(its necessary for them to run the business)) yet paid out over 120 million in dividends ... the formula is pretty simple.

64-120= 56 million in new debt for the business to carry for the sake of that dividend.

The latest half yearly also points in the same direction

cash inflow for latest half year was 15.7mill yet they paid 57 million in dividends.

15.7mill-57mill= 41 milion in new debt for the business to carry for the sake of that dividend.

so 18months in total of business performance, theyve increased debt by about a 100mill (in fact more then that because they made a 50mill acquisition) Purely for the sake of maintaining or increasing the dividend to shareholders.

Where do you think this trend puts them ? they can either hope that the construction industry and demand for concret lifts in Australia, or they will at some point have to reduce the dividend significantly. No doubt there is a time to hold this business (when construction industry is boooming) and the concrete is flowing in greater volumes. But is that time now? Its definitly not something to hold through the cycle imo.
 

When was it declared a crime to look after share holders? you make it sound like a bad thing..personally i like it, ABC is a great business that generates a lot of cash and when times are good ABC pay regular and special dividends and when times are bad they try and maintain dividends...i think that's great.

I looked at the last half year report and saw this.
  • Revenue up 8.3%
  • EBIT up 6.6%
  • EPS up 9.3%
  • Profit before tax up 6.7%
  • Dividend no change (responsible?)
  • Dividend payout ratio of 70.8%
  • Gearing – net debt/equity 29.7%

And this is in a bad half year...seriously a bad half year in a bad 3 or 4 years.

http://www.adbri.com.au/pdfs/2012/august/ASXJun12resultspresentastionFINALICoverSheet.pdf
 
So_Cynical said:
ABC pay regular and special dividends and when times are bad they try and maintain dividends...i think that's great.
Click to expand...

Great?
I think that's common sense.
Pitty there is so little of it elswhere.
That's an oxymoron.
 

Are you assuming that the last couple of years has been the bottom of the cycle for ABC ? You say the last 3 or 4 years has been bad for them, yet the last couple of financial years have had the highest revenues in ABC history. Indeed of the last few financial years the only one not to hit a record profit (and it was only by a very small margin) was 2012.

This is my point im trying to make, yes, performance has been good, they have had a great decade. But on its current path of simply not generating enough cash to fund both ppe and shareholder dividends, what do you think the future holds if volumes/revenues decline at some point (which they inevitably will) As such it is not a stock to hold through a bad business cycle in Aust. Its definitly a decent ok business ... and a good stock to hold during a part of the cycle.

But Super Star Stock .... it aint IMO
 
RandR said:
Are you assuming that the last couple of years has been the bottom of the cycle for ABC ?
Click to expand...

Lets examine this in isolation, ABC is in the Australian building supply business, Cement, Concrete and manufactured building products.

New home and units starts have just bounced of a 11 year low (GFC excluded) are you suggesting that Australian housing will never recover? in spite of the ever increasing underlying (immigration and birth rate) demand? in spite of Australia's continuing GDP growth? in spite of the Continuing rise of Asia? in spite of the continuing 10 year commodities boom? in spite of the Soft commodities boom of the last decade, in spite of rising world consumption.

In spite of all that...Really?

I think we will have a continuation of normalcy, i think the world will go on, i think Asia is the centre of the post GFC world and i think Australia will benefit enormously from that, our geographic position and our core commodity industry's, ABC will benefit greatly from the flow on affects of that...and i think that's a no brainer.

RandR said:
You say the last 3 or 4 years has been bad for them, yet the last couple of financial years have had the highest revenues in ABC history.
Click to expand...

Look back over the annual reports (1 decade) and you will see a lot of new highs for ABC, record high revenues, record high debt, record high profits, record demand for cement and record high dividends from a few years back.

The last few years have been bad because the Aust housing industry has been in a downturn, there is a reluctance to spend money in the community and there is a well founded perception that house prices are to high, investors are sitting on the side lines in cash (more than half of all SMSF money is in cash) so i just cant see any other way to view the last 4 years for ABC other than bad.

And yet the profits continue, the business goes on, the acquisitions are just as important as ever and the dividends keep coming...and ill buy more at under $2.90
 
Are we looking at the same company?

EPS is more than 10% less than what it was in 2006. Any growth they have achieved has been funded by debt and shareholder equity (which means it is certainly not "organic" as I mentioned in my previous post in this thread). Equity holder returns (free cash flow etc) looks diluted to me. You get less now than you did in 2006.

EBIT, revenues are all great figures - but when you need take recourse to funds from the bank and shareholders to achieve this headline growth - then it becomes questionable to me and certainly not a "no brainer."

I cannot say with any certainty that a dollar re-invested by this company will be worth more than a dollar in the future.
 
Ves said:
Are we looking at the same company?
Click to expand...

Everyone is looking at the same company, just seeing different things, things influenced by all sorts of personal factors and life experiences...we can look at the factual numbers and see a glass half full or a glass half empty, a glass full of potential or a glass full of debt.

Remember CKF and the discussions we had in that thread?
 
RandR said:
(12th-January-2013) Super Star Stock .... it aint IMO
Click to expand...

Ves said:
(12th-January-2013) I cannot say with any certainty that a dollar re-invested by this company will be worth more than a dollar in the future.
Click to expand...

After close to 4 years thought it was time for an update. ABC share price has gone from $3.20 to $5.30 and paid 85 cents per share in FF dividends, a 200% (approximate) out performance of the ASX200

Super Star Stock.
~
 

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A new all time high of $6.80 today, no announcements, perhaps someone knows something?, yield keeps falling as the share price goes higher, the share price has more than doubled over the last 3 and a half years, the market must be expecting good results.

2017 Full year result announcement 28 February 2018.
 
Price took a hit when the results came out, but quickly recovered. Since then price has gone down with the market (index). Now that the market has bounced ABC is going higher as well.

There was an opportunity for a short term trader to buy the BO. I was a one day too late since my order wasn't itm (my mistake). If price goes back to the recent high near 7.00 it would provide an acceptable RR. I've put this trade into the P2 trade book.

 
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