ABS - ABC Learning Centres

[hyperterminal]

Hyperterminal, you raise some interesting issues.......as you can see from previous posts....I considered this stock but its mainly the frequent equity raisings and high level of debt that turned me away...Also figuring in my decision is my chronic distrust and dislike of Eddie and his way of business...I may consider at lower price points however.....hehehe

Bottom line: do your research, don't just trust a broker or someone els's viewpoint........ABS could still be an outstanding performer, but it is certainly not the most conservative stock on the market.........imagine all the people who bought Centro thinking it was just a boring property trust.....ABC is not just a boring owner and operator of childcare centres......for example, I don't know if there are any hard assets on their balance sheet and I do know they run off something like a franchise model

haha - yeah everyone has there price rainmaker even if its headed by slippery eddie =) Yes, debt levels are a concern (rainmaker I think the centro analogy fits ) growth, traditionally when soley offering one market service should bring synergies in adminstration, logistics, third party strategic partners etc etc.... therefore further aquisitions should bring increased ROI.... this is something I fail to see as of yet.... and questions Im sure the shareholders would like answers from the board about...

 

[oremo]

Hyperterminal

Open thanks for the sound advice. Different from Rainmaker but also valid. I guess it's a personal decision. I don't feel comfortable with the stock. It makes me sad to log on and see the price constantly see-sawing and trending down.

Made my mind up...I'm getting ou.

Cheers

Oremo

 

[Miner]

Hyperterminal

Open thanks for the sound advice. Different from Rainmaker but also valid. I guess it's a personal decision. I don't feel comfortable with the stock. It makes me sad to log on and see the price constantly see-sawing and trending down.

Made my mind up...I'm getting ou.

Cheers

Oremo

Dear Oremo

I am not well qualified to advise you on ABS as I saw already there have been good postings at your request by others.
What prompted me to post this is at one instance you have said that you would be holding ABS for long and last posting you said "made my mind and I am getting out". Is your mind following the same volatility as ABS. My candid advise will be please DYOR. Please also consider if you want to put your hard earned investment on Eddie who has reportedly done a favour to his brother in law by awarding a cleaning contract. When the CEO is not transparent and there is a suggestion to be having party related transaction then I would keep myself away and will not join the club. Personally I have had ABS and even after reading Bell Potter recommendation and other brokers ABS as a buy - I sold it off to cut my losses. I am happy as the share price has gone down by about $1 since I sold at a marginal loss.
I have the intention to attach two pdf reports (could not do so as each of them 600 kb and there is a limit of 480 kb) from BPS published in Nov 07 just to help you to read some data. However DYOR again and just DO NOT FOLLOW what Bell Potter said. Often they have turned out to be inconsistent as per my observation.
I would try to post separately.
Good luck

Regards

 

[Miner]

SORRY TRIED TO ATTACH SEPARATELY BUT THE FORUM HAS LIMITATION ON SIZE.
Hello Joe - can you please suggest how to get around it ? It is a pdf downloaded document so I can not truncate it and only 680 kb.

Regards

 

[TheAbyss]

SORRY TRIED TO ATTACH SEPARATELY BUT THE FORUM HAS LIMITATION ON SIZE.
Hello Joe - can you please suggest how to get around it ? It is a pdf downloaded document so I can not truncate it and only 680 kb.

Regards

If you use one of the compression programs you can specify volume sizes(convert the pdf to 2 x files at the ASF max capicity).

Winzip or Winrar will do the job

 

[nikki]

Oremo,

if you decide to sell make sure you know why and not because you are fearful of the SP going below 4.5 or whatever.

i have done exactly what you are considering - with ABC in fact (when it was trading above 7 and would keep falling just below it) - and i sold out without understanding any fundamentals of share investing/trading. this was a mistake because i did the same with another stock the other day and lost money yet again! so i went from 10K to 7K to 5K because i did not learn from my mistakes.

i realised - after selling the other day - that i was buying the stock as an investor and selling them at a loss because i was behaving like a trader by watching it and analysing its day to day movements.

hope my mistakes help you in some way with your choice.

 

[Rainmaker2000]

The point you make Nikki is exceptional and shows how 90% of people think they are investors and yet the average ASX stock is held for less than 10 months on average....in reality, 90% of people are traders...I find it tough to comprehend.........the purchase of stock is a purchase of part of a business........people usually don't buy real property on impulse or buy a small business without due diligence and yet people buy and sell stocks without such preparation.......stock prices do not always go up but then they are not always a good barometer of business progress either......

 

[oremo]

Hi guys

Appreciate the feedback.

Saw ABS go down 3 cents, 5 cents and 23 cents yesterday respectively. Glad to say I sold out and missed out on the above losses.

Fells like a win only I still lost. Where do I go from here? keep the cash in the trading account and try to pick up a bargain or tranfer out and put it in the Savings Bank? I'm serious. What do I do?

Thanks in advance

Oremo

 

[Rainmaker2000]

Even in this overvalued market, there are bargains to be had out there.....far more than say 2 years ago for me....maybe read a few classic books like 'One up on Wall Street' and you'll be ready to pounce.............unfortunately, I don't see much benefit in savings accounts....they don't pay franked dividends, they pay the opposite with no prospect for capital gain........having said that, if rates hit 12%, then I'm into bonds or a savings account........basically, the way our tax system works, I'd be made to have savings accounts...hehehe

 

[ROE]

I personally wouldn't touch this stock at this price dont know why someone would pay $7-$8 for this stock a while ago.

Two column of this guys financial statement is enough to keep me well away.
1. 92% debt level
2. low ROE/ROC and declining.

as US head into recession more people are out of work ..they wont send their kids to childcare

 

[oremo]

Hi Roe

Gotta contradict you. With domestic debt levels so high more moms are going to get into the workforce to help with debt. Necessitate childcare which is becoming increasingly Govt. subsidised.

Govt pays their fees every time..on time

 

[TheAbyss]

As i understand it there is some concern that ABS are bidding for another 50 centres in the UK which adds fuel to the fire regarding debt (50 centres to go with the 130 they already have).

You have to ask how they are getting more funding in the current credit climate unless their books are an acceptable credit risk to the lenders. If they can get the funds then that would have to be a positive, dependent on the conditions of course.

CBA also sold down last week which would have caused more downside to the SP.

I am not ignoring the issues also stated by others in this thread however i am willing to stay on board though it is an easier decison when you are free carrying then if you bought in on a higher price.

My opinion is that when we look at ABS in a few years time they will be in good shape so long as EG is still at the helm. The guy has moral fibre and add to that his passion and drive, the future of ABS is solid. Sure he is out for himself first but that is a positive as if he wins the share holders win as he will not let anyone down intentionally.

 

[ROE]

Hi Roe

Gotta contradict you. With domestic debt levels so high more moms are going to get into the workforce to help with debt. Necessitate childcare which is becoming increasingly Govt. subsidised.

Govt pays their fees every time..on time

Not all ABS earning comes from Aus .. the US play a big part, how can people sending their kids to childcare if they don't have a job .. citigroup about to down size 5-10% of work force...

and their debt level is scary in these environment.....if it's a good business you dont need that much debt...bad business tend to get into bigger and bigger debt and lower and lower ROE

If you have kids, it cheaper for a mother with 2-3 kids not to work and live off the system than working in Australia.

 

[dhukka]

I personally wouldn't touch this stock at this price dont know why someone would pay $7-$8 for this stock a while ago.

Two column of this guys financial statement is enough to keep me well away.
1. 92% debt level
2. low ROE/ROC and declining.

All you really need to know isn't it. Definitely one to stay away from unless they can turn their returns on capital around and reduce their debt

 

[tronic72]

I disagree. Not with you reasoning but your view it's a stock to keep away from.

The way I've just looked at it (got in at .455 which is a yearly low). Due to the whole sub prime issue, more and more families will be forced to take second jobs or for both partners to be working. The bottom line for this is more kids in Childcare and ABCs income is virtually guaranteed due to it's close ties with governments. Sure they have high debt but also have high income.

We'll see.

 

[ROE]

I disagree. Not with you reasoning but your view it's a stock to keep away from.

The way I've just looked at it (got in at .455 which is a yearly low). Due to the whole sub prime issue, more and more families will be forced to take second jobs or for both partners to be working. The bottom line for this is more kids in Childcare and ABCs income is virtually guaranteed due to it's close ties with governments. Sure they have high debt but also have high income.

We'll see.

Agree, different people have different view on stocks and that what make the market ticks.

for me I have a few simple rules that filter out what I want to buy.
I usually don't break the rules and breaking the rules usually makes me lose capital which happen here and there because I'm human.

one of the rule is High Debt company. In my opinion high debt business are bad business model in the first place. You use leverage to get earning
so the fundamental of high profit margin and high return on equity is not there so when debt dry up what will happen to your earning? no one really know and that unknown keep me away. I do have exceptions however but again it's something I use when I decided to run my ruler on a stock.

 

[Rainmaker2000]

I guess ABS is getting a little more scary than I thought it might.......that is a high debt ratio, there is substantial acquisition risk remaining and no doubt some non-cash write downs on intellectual property coming in the future.......does anyone know the stock well enough to know how much real property (real assets) is on the balance sheet......as in, are all the child care centres in a separate property trust?

 

[mrgroundwork]

anyone still watching/holding? never thought it would go sub 4...

i think im going to get back in... might be some short term pain, but to me this has been punished too hard...

i heard a theory that hedge funds are aggresively short selling the stock, as eddie groves has large positions on margin... idea being that if they can get the price to tumble (which it has), force him to sell when he gets margin called, price will tumble further, then they can load up on the cheap... interesting theory...

 

[josjes]

Lazard Asset Management apparently has a lot of faith on this company, increasing its position and has been filing substantial holder notice from $7 down to $4.

LAM recognized the value of Flight Centre and sticked with it even when its share was in down trend from $16 to $9, and when Graham Turner along with the private equity tried to pick up the company on cheapo for $17, it defeated the scheme of arrangement for the $1.6 billion private equity bid for Flight Centre. Flight Centre has since hit $32 and now is sitting around $26.

I am sticking with ABC for now by following LAM's action, until proven otherwise of their substantial holding notice.

 

[reece55]

UMIke
If ABS can't perform in this market, the most liquid, cash filled environment possible, then what makes you think it will do well long term??

I have said it before and I will say it again, this is both fundamentally and technical a weak company...

Technically, lower lows and lower highs.....

Fundamentally, the accounting is shonky and they have really poor returns....

It's a no brainer to me. The only thing I would say is that they have insto support, so this will prevent them from dropping too much.

Cheers

Wow, can't believe where this stock has gone since I posted this message.... Even I thought it would find support at $4, and I have been a big bear on this stock for ages.....

I think we were at about $7 bucks when I said this...... This stock is a pure example of when the going gets tough, those with poor fundamental records and positions will be hammered....

I say to anyone who says the following:

* But Lazard keep increasing their holding;
* It pays a nice dividend;
* But childcare is recession proof; and
* But look how low the price is -

LOOK AT THE CHART....... The answer is already there, even if you don't believe Dhukka and myself when we say the funnymentals are knackered.... Picking bottoms is a poor mans game and ABC Learning Centres is in the mother of all downtrends... You might get a bounce, but this stock has a lot of repair work to do before we get back to $7.00......

Cheers