ABS - ABC Learning Centres

[3 veiws of a secret]

What a brilliant day today ,for those who speculated from early trading to close ......I bagged my profit and it looks like Turkey, Syria , Northern Iraq ,or perhaps Bulgaria might be on the holiday horizon at the end of the year!
Those holding good luck..... I'm outta here!

 

[grace]

Story on ABC 7.30 report which I missed but my husband said it all looked doom and gloom for them. Not online yet.

 

[benwex]

I watched the show and must disagree...

If anything it was a shot at the private sector operating in the child care industry. This is a pet topic that has been dogging ABS and the rapid shift in the industry as consequence of the governments lack of commitment and resources..

The comments from some lady invertiewed, who is head of some child care association is in no real position to comment on the viability of ABS business model or debt levels.

The analyst had a more intelligent view but still failed to inpress...

A beat up if you ask my opinion and the price drop today was a classic margin call sell.

Time will tell but I think their is going to be some strong support for the stock at $2.00

Eddy Groves is a very smart and cluey guy (Ex Mckinsey) and the rumours of hedge fund shorting it to wash out the large margins on ABS has merit..

will see.

benwex

 

[3 veiws of a secret]

I just wonder if this was a corporate raid that forced the hand for Groves (into selling ?) ....sort of Warren Buffet wager on the sterling pound that made him a 'billion dollar baby'.
If so ...it was a masterstroke play.....any other companies in the same position that might be targeted must be as nervous as Groves. "Are you Ready Eddy"

 

[korrupt_1]

There are allegations and rumours that some fund managers have been conspiring together to push weaken stocks to ridiculously low prices so they can get them at dirt cheap prices...

I cant find the source,.. but it's posted around here in one of the other threads.

Perhaps ABS was another victim - that got carried away?

 

[grace]

Leverage on Leverage, don't you just love it. Just how much actual personal and company debt exists on those assets (not that ABS is alone in that one, just a sign of the times).

But then, they have plenty of US property that will hold up when being valued!

 

[roland]

There are allegations and rumours that some fund managers have been conspiring together to push weaken stocks to ridiculously low prices so they can get them at dirt cheap prices...

I cant find the source,.. but it's posted around here in one of the other threads.

Perhaps ABS was another victim - that got carried away?

Interesting comment ... I can't help but feeling that there are a group, or groups of investors that are on the hunt for companies that can be negatively linked to the credit crunch in order to push them over the edge on some bad sentiment or negative news.

In our current nervous market environment any hint of credit problems can cause a huge avalanche of selling, driving the SP well below what it is worth.

Now if you were in a position to do this and profit from this, wouldn't you do it?

 

[michael_selway]

Hey check thsi out

Net Tangible Assets 31/12/06 31/12/05 cents cents
Net tangible assets per share (76.5) 24.1

NTA negative?

Also check out falling operating cashflow (payment to suppliers) and also high investment cashflow (childcare licenses capatilised but not expensed?)

thx

MS

--------------------------------------

Also quote from anoterh forum

Unbelievable today, who woudl have thought!

Date: 26/2/2008
Author: Fiona Tyndall
Source: The Australian Financial Review --- Page: 17
ABC Learning Centres CEO, Eddie Groves, has dismissed rumours he had to divestshares in the Australian child care group because of margin calls. The marketspeculated Groves faced margin calls when ABC shares were trading at between$A3.50 and $A4. Groves said he has not sold any stock and only faced margincalls at a much higher level than speculated by the market. ABC shares fell$A0.03 to a year-low of $A3.74 on 25 February 2008. The company reported a 42%fall in net profit to $A37.1m for the first half of 2007-08, associated with theimpact of the summer holiday period in the US, but has maintained its forecastof earnings per share growth of 15% for the full year. US earnings will besignificantly higher in the second half

Date: 26/2/2008
Author: Vanda Carson
Source: The Sydney Morning Herald --- Page: 19
The profit of Australian child care centre group, ABC Learning Centres, has beenaffected by its US expansion. The company has posted a net profit of $A37.1million for the six months to 31 December 2007, a fall of 42 per cent. It blamedthe drop on the "seasonality" of its US earnings, but also had one-offcharges of $A63 million. The US expansion was attributed with the 62 per centrise in profit in 2006-07

Back
Date: 26/2/2008
Author: Fiona Tyndall
Source: The Australian Financial Review --- Page: 17
ABC Learning Centres has reaffirmed its full-year forecast of 15% growth inearnings per share despite a significant decline in interim profit. TheAustralian child care group has reported a 42% fall in net profit to $A37.1m forthe first half of 2007-08, with the summer holiday period in the US a majorfactor. Group revenue increased 65% to $A1.1bn in the half, with US earningsexpected to be significantly higher in the second half. Shares in ABC closed$A0.03 lower at $A3.74 on 25 February 2008

 

[annalivia]

I am not quite ready to completely forgive Roger Montgomery for CCP. However he definitely helped me stay clear of this dog(ABS) a long time ago.
I always had it in the back of my mind to short this stock but whatever...

The following was sent to Stockval subscribers today.

Today both Eddie Groves’ worst nightmare, and Roger Montgomery’s 4-year prediction, became a reality. The result? ABC Learning Centres’ share price dropped over 60% this morning to $1.40, down from $8.00 in 2006.

As many of you would know, Roger has consistently questioned the impact of ABC’s capital raisings over the past four years on the company's profitability.

In 2006 the declining profitability saw StockVal place a $3.00 valuation on ABC Learning Centres despite its share price trading at around $8.00. The insanity of such a different valuation to the market and other analysts was not lost on journalists at The Sydney Morning Herald, who on April 14, 2006, wrote;

"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."

Roger is a firm believer in using StockVal to analyse the entire business and all of its cash flows both in and out. Such a method is not popular amongst private and professional investors, but over long periods of time, should produce results.

 

[dhukka]

I am not quite ready to completely forgive Roger Montgomery for CCP. However he definitely helped me stay clear of this dog(ABS) a long time ago.
I always had it in the back of my mind to short this stock but whatever...

The following was sent to Stockval subscribers today.

Today both Eddie Groves’ worst nightmare, and Roger Montgomery’s 4-year prediction, became a reality. The result? ABC Learning Centres’ share price dropped over 60% this morning to $1.40, down from $8.00 in 2006.

As many of you would know, Roger has consistently questioned the impact of ABC’s capital raisings over the past four years on the company's profitability.

In 2006 the declining profitability saw StockVal place a $3.00 valuation on ABC Learning Centres despite its share price trading at around $8.00. The insanity of such a different valuation to the market and other analysts was not lost on journalists at The Sydney Morning Herald, who on April 14, 2006, wrote;

"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."

Roger is a firm believer in using StockVal to analyse the entire business and all of its cash flows both in and out. Such a method is not popular amongst private and professional investors, but over long periods of time, should produce results.

I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.

 

[reece55]

I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.

I agree with you dhukka - if he was that confident, why didn't CAM have a short position in the entity - I mean, looking backwards now, it was the trade of the century. It's easy to say what could have been, but harder to say what has come to pass IMO......

Back on ABS - At the open of $2.00, I would have thought this sell if is now over done, low and behold it went all the way back to 1.15. Just looked like margin calls being hit to me, more than anything else. The bar for today is positive, with a large hammer indicating buying support. If you look at CNP and Rams, they didn't have anywhere near the same positive closes when they announced the terrible news. Note that doesn't mean I would buy in yet because fund managers obviously won't want to have a slice of the equity pie for some time to come, but at the end of the day if ABS is still complying with it's debt covenants and has sufficient cash flow to support the debt, then it's probably going to get through the crunch. You may be waiting a very very very long time to get any growth though, the market is always once bitten twice shy....

Cheers

 

[Rainmaker2000]

All this talk of hedge funds and fund managers conspiring to lower the prices of ABS seems a bit far fetched to me.....Why would anyone go to the trouble and risk to pick up a stock which is looking more and more unlike investment grade anyway...this is all just good media at the moment.

No doubt the stock may have been oversold at $1.15 but why is it unreasonable for the market to undervalue this thing in the current climate, especially since Eddie is refusing to tell about a margin call and the market guidance of this highly leveraged story has been well, a little vague

I'm still getting over the prospect of margin loaning a company with already 100% debt to equity.....and I thought I was a thrill seeker......

 

[dhukka]

All this talk of hedge funds and fund managers conspiring to lower the prices of ABS seems a bit far fetched to me.....Why would anyone go to the trouble and risk to pick up a stock which is looking more and more unlike investment grade anyway...this is all just good media at the moment.

No doubt the stock may have been oversold at $1.15 but why is it unreasonable for the market to undervalue this thing in the current climate, especially since Eddie is refusing to tell about a margin call and the market guidance of this highly leveraged story has been well, a little vague

I'm still getting over the prospect of margin loaning a company with already 100% debt to equity.....and I thought I was a thrill seeker......

Exactly, this stock is being re-rated where it should be, I wouldn't say sub $2 is cheap as the company continues to go from bad to worse.

ABS is actually a perfect case study in how to take a perfectly good small business and run it into the ground by turning it into a large debt ridden low return business. Someone mentioned earlier that Eddy Groves is a very smart guy. Whatever his smarts are, they don't appear to business related.

 

[hangseng]

I watched the show and must disagree...

If anything it was a shot at the private sector operating in the child care industry. This is a pet topic that has been dogging ABS and the rapid shift in the industry as consequence of the governments lack of commitment and resources..

The comments from some lady invertiewed, who is head of some child care association is in no real position to comment on the viability of ABS business model or debt levels.

The analyst had a more intelligent view but still failed to inpress...

A beat up if you ask my opinion and the price drop today was a classic margin call sell.

Time will tell but I think their is going to be some strong support for the stock at $2.00

Eddy Groves is a very smart and cluey guy (Ex Mckinsey) and the rumours of hedge fund shorting it to wash out the large margins on ABS has merit..

will see.

benwex

The "analyst" Roger Montgomery is one of the best and is worthy of listening to.

When others were saying to buy ABS at over $6, he was saying stay away and has done for some time. In case you haven't noticed ABS has trended down since December 14 2006 high of $8.62 and has been in steep decline since Sep2007.

He is definately worthy of taking up some of my time and gives sound investment advice.

 

[Gekko]

There are allegations and rumours that some fund managers have been conspiring together to push weaken stocks to ridiculously low prices so they can get them at dirt cheap prices...

I cant find the source,.. but it's posted around here in one of the other threads.

Perhaps ABS was another victim - that got carried away?

I would love to know how these hedge funds knew the directors/founders were levered up on margin loans. From what been spoken, many os funds colluded to short sell and drag down AFG and ABS knowing that founders would have margin calls if falls were large enough. But how did they know they were leveraged up?

 

[Miner]

I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.

Thanks for the post.
It is nice to see Montgomory's prediction. Why one has to wait 2 years for a catastrophe. Stock market commentary on ANZ by stock val was done at $28. What does Roger's team say about that prediction for ANZ. Wait for 5 years and then say WE SAID IT.

It is a bad sign for many investors to see the share price dived down like that. It is just not the directors but also the accountants should be hung until their brain matter comes more fertilised not to deceive public.

 

[ROE]

Thanks for the post.
It is nice to see Montgomory's prediction. Why one has to wait 2 years for a catastrophe. Stock market commentary on ANZ by stock val was done at $28. What does Roger's team say about that prediction for ANZ. Wait for 5 years and then say WE SAID IT.

It is a bad sign for many investors to see the share price dived down like that. It is just not the directors but also the accountants should be hung until their brain matter comes more fertilised not to deceive public.

The true of the fact is no one can predict stock price. You can only buy based on sensible figures... ABS figures is there I can see it doesn't take a genius to work out this is a dog stock.

You don't need to pay someone thousands of dollars to show you some fancy software where all it does is look at EPS growth rate, ROE/ROC rate, Sale figures and a bit of DCF. You can do this is about 5 minutes to see if a stock is worth buying.

All the so call expert they get as much correct pick as any person who can understand the balance sheet. Sometimes you get it right, sometimes you get
wrong

 

[annalivia]

I don't know about you anna but I thought this email (I received it too) was a bit over the top. It seems to me Clime was desperate to prove themselves after the CCP debacle. I replied to the mail and asked whether Roger was going to talk about CCP on the show as well. I don't expect to get an answer. I respect Clime's analysis of ABS but it just sounded like a bit of chest beating to me.

I agree. A little humility after CCP wouldn't have gone astray. However I still think Stockval is a great tool and that Roger Montgomery is worth listening to. I don't have the time to do any decent valuations on companies so this is the best way for me to get some sort of an idea on intrinsic valuations. I think Clime will become a little more diversified after CCP and pay more attention to profit downgrades.

 

[Real1ty]

Exactly, this stock is being re-rated where it should be, I wouldn't say sub $2 is cheap as the company continues to go from bad to worse.

ABS is actually a perfect case study in how to take a perfectly good small business and run it into the ground by turning it into a large debt ridden low return business. Someone mentioned earlier that Eddy Groves is a very smart guy. Whatever his smarts are, they don't appear to business related.

Exactly, this stock is being re-rated where it should be, I wouldn't say sub $2 is cheap as the company continues to go from bad to worse.

Traders will probably play with this stock for awhile yet so it's short term price might remain quite volatile.

ABS is actually a perfect case study in how to take a perfectly good small business and run it into the ground by turning it into a large debt ridden low return business. Someone mentioned earlier that Eddy Groves is a very smart guy. Whatever his smarts are, they don't appear to business related.

Couldn't agree more and there is no doubt Eddie is a really smart guy, as who else could have taken such a promising company and destroyed Shareholder value to such and extent that you could receive a higher return from having your money in a high interest bank account with one of the big 4 banks, he's a genius

 

[Prospector]

In case you haven't noticed ABS has trended down since December 14 2006 high of $8.62 and has been in steep decline since Sep2007.

That surprised me too Hangseng - I had thought about ABS for a while without doing the research so hadnt really proceeded further - too many other dramas. Yesterday I checked the graphs and the story was all there for people to see. As this is the first thing I do before I actually buy, I would have seen this before committing, but after letting MFS do the same thing to me (and look where that is now) thank god I didnt get into it.

What impact will this have on the operation of all the ABC child care facilities? That will have a huge impact on a lot of young families?