GOW - Gowings Brothers

[jkool]

Gowings Brothers former retail business now high quality value focused investing fund. Admittedly its not big and its perhaps another boring long term stock.

This company has returned 14%pa in last 4 years and $1000 invested in it in 1986 would today be worth around $17500 (to me this results to 15.4%pa return).

In some way the managent principles and the tone of management-shareholder relations seem to resemble Warren Buffett and his way of running the business.

So the fundamentals look good, management owns lots of shares themselves and therefore manage the business as if its still their own, they seem to be frank in their reporting and apply no nonsense wealth management strategies.

On the downside, as large portion of the funds is assigned to listed and private equities, should a market correction come, the results would not be as impressive. But than which stock would?

Anyone else with a view on this company? And yeah a shameless plug for my analysis of this company follows: http://sog.shopinthemall.com/2007/01/22/australia-gowings-brothers-limited/

 

[TheRage]

I liked your analysis on this stock. To be honest I hadn't given it a second look until now. It still amazes me how many good companys are still trading at book value.

 

[jkool]

Thanks.

You and I seem to be the only value oriented investors on ASF though

GOW looks good but despite me singing praises I am yet to put some money in it. Mainly because it goes against my thinking to purchase on historical highs - something I need to learn how to deal with because todays high will probably be laughable in 5-10 years time.

 

[TheRage]

Jkool,

One thing I don't understand when looking at fundamentals is how reported revenue is 4 million but Net Profit is 25.5million. Is the reported revenue from thier operations and not investing activities. This would maybe make sense as the sales have been declining steadily each year. Personally this would not bother although as you have mentioned they are on a precariously perch with a market correction being heavily weighted in equities. On that note though by buying back their common stock they are making the PE look very enticing compared with history as you mentioned. With little debt this stock with be worth a look in the future. Surely the cash alone in the bank plus all the assets would be looking good to a private investor for maybe a buyout.
Cheers
Ryan

 

[jkool]

If you look at their last year financial statement, you will notice that there is about 18mil profit from sale of their property on George St, Sydney (the Gowings store there).
Such profits do not go to operating earnings. This is also another reason why the results of 2006 look so good - this one off item makes all the difference. This kind of sale will not be repeated by GOW anytime soon as they dont own any such valuable property as far as I know.

So here you need to be careful and not to pay too much attention to last year's stellar performance (and its ROE). This is also why i did not label this stock as GROWTH but put VALUE on its instead if you noticed. I think GOW's return to ROE around 7-8% is likely in coming years and I would not buy it on its growth prospects but on outlooks of getting $1 of value for about 90-90c.

I hope this makes sense,

 

[Alien]

The Market St building they sold was pre Capital Gains tax as well. They had held that asset for a long time. So the profity on the sale was effectively tax free.

I bought and held this stock for about 2 years but sold about 6 months ago. Did quite well from this one.

 

[TheRage]

If you look at their last year financial statement, you will notice that there is about 18mil profit from sale of their property on George St, Sydney (the Gowings store there).
Such profits do not go to operating earnings. This is also another reason why the results of 2006 look so good - this one off item makes all the difference. This kind of sale will not be repeated by GOW anytime soon as they dont own any such valuable property as far as I know.

So here you need to be careful and not to pay too much attention to last year's stellar performance (and its ROE). This is also why i did not label this stock as GROWTH but put VALUE on its instead if you noticed. I think GOW's return to ROE around 7-8% is likely in coming years and I would not buy it on its growth prospects but on outlooks of getting $1 of value for about 90-90c.

I hope this makes sense,

Thanks Jkool I was using you as a filter instead of running straight to the annual report. I had only briefly looked into the ten year fundamentals at aspect huntley. I can be lazy at times especially when running dial-up which takes forever to download 130 page pdf reports.

Cheers
Ryan

 

[jkool]

No problems. I am happy to be of any help.

 

[robusta]

Ok not sure if I am missing something these guys have about $3.20 book value with a SP of $2.50 and they seem to adopt a contraian approach to investment. They increased cash reserves before the GFC and now seem to be picking up commercial property for a song. They have about 50% in equities and little or no debt.

 

[So_Cynical]

This looks like a great little super conservative stock, the trick would be to buy it cheap on a dip and just have the patience to wait for a top to make a partial exit to establish some free carry.

I've added it to a watch-list and will follow with some interest.

 

[drsmith]

Where is their 6-monthly report to Dec 30 ??

Nothing from the ASX about it being late either ????

EDIT: OK, unusual year end (July 31). Never seen that before.

 

[robusta]

I can't beleive these guys are still so cheap. They just sem to cruise along with solid returns year in year out.
Disclosure they are now 10% of my portfolio.
I think they create a nice ballance to more sexy stocks like JBH and CFU

 

[So_Cynical]

I can't beleive these guys are still so cheap. They just sem to cruise along with solid returns year in year out.
Disclosure they are now 10% of my portfolio.
I think they create a nice ballance to more sexy stocks like JBH and CFU

When the hell did a dog stock like CFU get sexy...what did i miss :dunno: anyway agree DOW looks good value at the moment, but looked better a few weeks back, about 10 cents cheaper. LOL just noticed they dipped again....jeez wish i had some money.

 

[robusta]

CFU should look pretty good when the sp doubles.
Green stocks will be a bigger bubble than the IT boom. (I just hope to be able to time it with my 5% speculation money.
I take your point though the rest of my portfolio actually makes a profit with a very high probability of that continueing into the future

 

[So_Cynical]

CFU should look pretty good when the sp doubles.
Green stocks will be a bigger bubble than the IT boom. (I just hope to be able to time it with my 5% speculation money.
I take your point though the rest of my portfolio actually makes a profit with a very high probability of that continueing into the future

We are way off topic here but ive been following CFU since it was 40 cents, years and years ago...agree good green stocks will have there day, however i doubt CFU will be one of those stocks.

But to each there own...good luck.

 

[Dona Ferentes]

nothing for 11 years. I thought it was the eponymous shop, but that is long gone

Gowing Brothers Ltd (GOW) is an investment and wealth management company which manages a diversified portfolio of assets including long-term equity and similar securities, investment properties, managed private equity, property development projects and cash.

Headquarters is in the Gowing Building, but the one in Coffs Harbour (recently relocated from Pyrmont)

Market cap $110 million. the year 2019 looked a bit cathartic, with earnings dipping negative, but a dividend was still paid (10c, after a string of years of 12c.). Current year reported at 8c ff.

What do they do, what are they holding?

Pacific Coast Shopping Centre Portfolio (Borrowings of $90mill)
Sub-regional shopping centres $179mill & Neighbourhood shopping centres $20mill

Other Direct Properties ($27million with limited borrowings)
Sawtell Commons - Residential Subdivision, Harbour Drive - 30 Site, Jones Bay Wharves + Other Properties.

Strategic Investments ($54 million total)
Surf Hardware International (at cost) $16mill, Boundary Bend Limited $12 mill, Carlton Investments (CIN) $5.6mill
+ BBBSA Finance, Dice Mollecules, Murray Darling Food Company, NSX Limited, Hexima, Hydration Pharmaceuticals, Power Pollen Accelerated Ag Technologies, Phalla Pharma Ltd, SYMBYX Biome , EFTsure, Blackfynn, Tasmanian Oyster Company -- all $2mill or less

Private Equity Funds $5million

Perhaps the new generation, the 5th, (Gowings - Enriching Peoples Lives since 1868 is their proud claim) is shaking things up. The strategic sector has tilted in November 2020:
Equity divestments: ANZ, CBA , Djerriwarrah Investments, Event Hospitality, NAB
New purchases: Pearl Global, SYMBYX Biome, Tasmanian Oyster Company, Treasury Wine Estates, Youfoodz

 

[Dona Ferentes]

at a 12 month high. tightly held, only 53 million shares out there.

During the [last half] period we relocated our head office from Pyrmont in Sydney to the 3rd level of the new Gowings building on the corner of Harbour Drive and Vernon Street in Coffs Harbour. The new finance team led by 5th generation family member James Gowing have settled in well and having most of the team located under one roof again has been very well accepted. The last domino in the move up to Coffs Harbour rolled over last week with the sale of Gowings’ offices in Pyrmont, Sydney going unconditional.

At Sawtell Commons, our residential subdivision 10km south of Coffs Harbour, stage 2 is close to completion and nearly ready for land title registration and settlement. Works are progressing on stage 3, which depending on the weather should be ready for sale and settlement prior to calendar year end. In part to fund the next stage and pay out our fixed interest rate hedge we drew down a further $10 million of our revolving facility with CBA during the period. The market for residential property in Coffs Harbour has been very strong and we are cautiously optimistic about the sales for the next stage as there is a lot of demand emanating from Sydney and Melbourne, as families wish to relocate to the regions out of metropolitan areas.

The Coffs Harbour Highway bypass plan was officially approved by the Department of Planning in December 2020. Introductory works have begun and Gowings will be a major beneficiary of this project, not least of all from the significant expected shortfall in rental properties in Coffs Harbour as bypass workers move to the area.

At Surf Hardware International (SHI), the surf has been running high. Sales and earnings have been a record for the first half. SHI has been a major beneficiary of the pandemic, particularly people holidaying at home, stimulus spending and the appreciating $AUD. To reward patient shareholders the board has decided to declare a special 1c fully franked dividend from these windfall earnings.

 

[Belli]

Interesting company which haven't looked at for a long time. Although classified as a Listed Investment Company it doesn't seem to be one in the generally accepted definition but seems to be more of a property developer and incubator.

 

[Tommy Shelby]

I've looked at this previously - trading at a discount to asset value. Good assets within the portfolio and the housing subdivision and shopping centres will benefit from the regional migration from cities as families chase lifestyle.

But, I can't get past the inbred nature of the board and management. Eg the latest report;

I'm sure the reason he got the position had nothing to do with his last name.

The main issue is that I can't see how they would be able to attract really good people to work at their company as there is clear favouritism in promotions to management. then again maybe I'm wrong and they're a family of incredibly hard working geniuses

 

[Dona Ferentes]

5th Generation .... usually they're burnt out by the third. Since 1868.

The company is, as @Belli states, less of a LIC and now a mid N Coast property manager/ developer, with a sideline in incubation. The move from Sydney has been completed and, by Nov last year, the more passive investments; ANZ, CBA , Djerriwarrah Investments, Event Hospitality, NAB were sold, to be replaced by "strategic investments" in start-ups and emerging companies.