michael_selway
Coal & Phosphate, thats it!
- Joined
- 20 October 2005
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Devil_Star said:
so you are bearing on abs?
thx
ms
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.
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.michael_selway said:so you are bearing on abs?
michael_selway said:so you are bearing on abs?
thx
ms
UMike said:What a fantastic result.
Why then did the sp get hit so hard. Down 4% despite such a great half year result.
LOL same here.mrWoodo said:Yeah my timing was perfect - Bought these on Thuthinking 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.
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.
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
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.
Investing/financing activities will be negative obviously due to all the debt and capital raisings!
****Im only interested in net cash flow from the daily operations of the centres
the investment licenses become an asset to the company like intangibles or goodwill and hence add to the equity of the company - so in accounting terms we're debiting an asset and hence the equity will get re-valued up by some 'credit' entry.
im going to look into it to see if something like 'license revenue' is increased to increase the equity. If thats the case then i may be able to see w buffets concern, but just remember:
the operating cash flow should be more or less similar to the net profit.
In any case, even if they increase revenue by increasing their child-care license assets, it IS IN FACT unrealised revenue which will be realised once the licences are SOLD in the event of a takeover.
Its similar to revenue derived from re-valuing property assets like a tonne of the property trusts and developers do. Companys like FKP or City Pacific etc re-value their proprty assets and so this increases their revenue BUT they DO pay TAX every time they do this. Once the asset is sold - the property - thats when the REVENUE is MATCHED with the CASH you receive for it.
Likewise I assume, with ABS - Once the childcare license is sold the REVENUE is MATCHED with the CASH received.
revenues and expenses are not to be confused with cash-flow cause revenues/expenses can reflect future cash flows and are matched to cash at bank when that flow occurs. In the meantime like accounts receivable - they are assets of future flows and matched accordlingly when the flow occurs.
But I see some of your point re this sitch
I guess its more commonplace for a proprety developer to eventually sell a property asset when it feels the time is right than it is for a childcare operator to sell some of its licenses???
then again, a company like FKP isnt gonna sell its prime retirement properties that they derive most of their revenues from unless its under takeover
Likewise ABS isnt gonna sell the licenses unless they get taken over
FKP will continue to re-value proprty up and make revenues (that increase the equity) from this. Once they eventually sell the property the 'credit' to revenue will be matched with a 'debit' to cash at bank. In the meantime it remains an 'asset' from which the company can derive a future cash flow from.
Ill look into this further....
In any case just look at operating cash flow and see the net operating revenue figure and see if its high enough for the company to claim that its doing OK to maintain operations and pay divvys.
It may be low now, but when the company matures the cash flow should be good enough to maintain operations and pay a divvy.
Dont forget - like property assests, the 'licenses' will be re-valued up I would suspect over time as well.
Ill get back to you, but property companies also cop their fair share for getting their revenue from re-valuations!
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.......
But like I say, their balance sheet is running out of steam....... Wouldn't be investing my hard earned here....
Cheers
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?
Is your analysis based entirely on the assumption that these childcare licences don't exist? If ABS was to be taken over, I'm sure these licences would be included in their assets.
WHAT IS A CHILDCARE LICENCE? YOU CAN'T SELL THEM OR TRADE THEM. IT IS MERELY AN APPROVAL FROM THE GOVERNMENT THAT YOU ARE MEETING THE STANDARDS OF CARE REQUIRED. A MUM & DAD OPERATOR CAN GO AND GET ONE FOR MINIMAL COST SO WHY AM I GOING TO PAY ABC LEARNING TO BUY THEIR LICENSES. ABC LEARNING WILL NOT GET TAKEN OVER BECAUSE AS SOON AS ANYONE LOOKS AT THE BOOKS THEY WILL SEE THE CASHFLOWS DON'T MAKE IT WORTHWHILE. THE PRIVATE EQUITY BINGE IS ALL ABOUT USING THE COMPANIES CASH FLOW TO FUND THE HIGH LEVELS OF DEBT AND SELL IT OFF DOWN THE TRACK. MY CONTENTION IS THAT PRIVATE EQUITY COULD NEVER BUY THIS BECAUSE THEY DON'T HAVE THE CASHFLOW TO SUPPORT THEIR VALUATION.
If we assume that ABS make no acquisitions for the next financial year, wouldn't they still make a nice profit and be cashflow positive?
ASSUMING NO ACQUISITIONS AND NO DEVELOPMENTS I WOULD ASSUME THEY WOULD ONLY MAKE A SMALL PROFIT AND SIMILARLY THE CASHFLOWS WOULD ALSO BE SMALL.
michael_selway said:Hi reece, thats true, what about falling operating cashflow compared to the previous corresponding period (25783 from 44670)?
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.
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.
"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."
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
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
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