Australian (ASX) Stock Market Forum

Students of Roger Montgomery's (Buffett's) intrinsic valuation method

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I have been looking at ASG Group (ASG Group). I don't see profit being any more than $13-14 million for the 2011 Financial Year based on the data available. If I am conservative and take $13mil NPAT I get an eps of about 8.1 cents. This is lower than 2010. ROE slightly down at 12%. Possible that the growth in earnings from the recent new contracts will show up in the 2012 year.

Instrinsic value of $0.69 with 11% IRR. Still some way to come down to be solid buy in my eyes, but they do however offer lots of potential.

Does anyone have their own calcs for this? Have I been too conservative?
 
InvisbleInvestor said:
Sounds great to me, I was using 13% IRR and didn't have the same inputs as you. I was being quite conservative actually.

Try checking the IV for LEI. I have it in the $27 mark, current SP @ $22.03. Given its not perfectly stable management is this coming up on anyone's radar as value.able?
Click to expand...

On 16th May 2011, LEI put out a statement that they had ran at a loss for the 9 months to 31/3 2011 of $382 Million.
So this financial year LEI will return a negative ROE.
Many of their projects are runniing at a loss, with more bad news today.
How could you calculate an intrinsic value using a negative ROE ?

LEI also claim they will make a profit next financial year 2011/2012.
They may or they may not.
But their performance would have to be a lot better than this year just to break even.
Using the I/V method of RM, you need to start with a company at least showing a ROE of 12 - 15%, and preferably a lot higher.

For the RM system you are using on this thread, can't understand why LEI would even be worthy of consideration until their results improve considerably.
 
notabclearning said:
Can anyone give me a valuation of mortgage choice. I have it at $1.50
Click to expand...

I'm obviously doing something wrong. Getting around $5. No idea what I've done either lol.


Noddy said:
On 16th May 2011, LEI put out a statement that they had ran at a loss for the 9 months to 31/3 2011 of $382 Million.
So this financial year LEI will return a negative ROE.
Many of their projects are runniing at a loss, with more bad news today.
How could you calculate an intrinsic value using a negative ROE ?

LEI also claim they will make a profit next financial year 2011/2012.
They may or they may not.
But their performance would have to be a lot better than this year just to break even.
Using the I/V method of RM, you need to start with a company at least showing a ROE of 12 - 15%, and preferably a lot higher.

For the RM system you are using on this thread, can't understand why LEI would even be worthy of consideration until their results improve considerably.
Click to expand...

I was using data from Commsec, had no idea about that announcement.
 
InvisbleInvestor said:
I'm obviously doing something wrong. Getting around $5. No idea what I've done either lol.




I was using data from Commsec, had no idea about that announcement.
Click to expand...

Info is on the commsec website.

Tick on News & Research

Company Research

Company profiles

Under ASX code - LEI then enter

Announcements

Scroll down to 16/5 2010 -2011 third quarter results.

PS. LEI had a capital raising, in April from memory, at $22.50 followed by a bookbuild at $22.70. Closed at $21.69 today. Already lost a dollar since the capital raising. LEI has been a cronic underperformer for some time now.
Often pays to go through this exercise before trying to calculate a valuation.
May save you a lot of money.
 
Noddy said:
Info is on the commsec website.

Tick on News & Research

Company Research

Company profiles

Under ASX code - LEI then enter

Announcements

Scroll down to 16/5 2010 -2011 third quarter results.

PS. LEI had a capital raising, in April from memory, at $22.50 followed by a bookbuild at $22.70. Closed at $21.69 today. Already lost a dollar since the capital raising. LEI has been a cronic underperformer for some time now.
Often pays to go through this exercise before trying to calculate a valuation.
May save you a lot of money.
Click to expand...

Cheers, thanks Noddy.
 
I really liking Mortgage choice, High yeild grossed up at almost 15%. No debt. But you gotta believe in australian housing markets for the future.
 
notabclearning said:
I really liking Mortgage choice, High yeild grossed up at almost 15%. No debt. But you gotta believe in australian housing markets for the future.
Click to expand...

Given mortgage lending is a competitive market, what makes MC stand out??

There also have been some interesting articles written about housing in the forseeable future.
In Sydney certain suburbs since 2004 have either remained at the same value or gone slightly backwards.

RM also has added food for thought by commenting on the baby boomers that are retiring selling their home/s to fund retirement. All the extra supply will also lower prices, assuming thats what the baby boomers will do.
 
zac said:
Given mortgage lending is a competitive market, what makes MC stand out??

There also have been some interesting articles written about housing in the forseeable future.
In Sydney certain suburbs since 2004 have either remained at the same value or gone slightly backwards.

RM also has added food for thought by commenting on the baby boomers that are retiring selling their home/s to fund retirement. All the extra supply will also lower prices, assuming thats what the baby boomers will do.
Click to expand...

its an a2 on his list
 
Hey guys, just wondering what people come of for RIO

This is my first attempt at valuing so i just chose RIO for no particular reason.

Here is what i did, please correct me if i did something wrong..

Equity (As of 15th June '11) = 57,397,000
Shares Outstanding = 1,962,000
EqPS = $29.25

EPS = 699 cents
DPS = 106 cents
Payout Ratio = 15.16%

Return on Equity (Could not find NPAT - where do i look?) = 24%

IRR = 12%

Table 11.1 (100% Payout) 12% x 22.50% = 1.875
Table 11.2 (0% Payout) 12% x 22.50% = 3.100

Table 11.1: $29.95 x 1.875 = $56.16
Table 11.2: $29.95 x 3.100 = $92.85

56.16 x .15 = $8.42
92.85 x .85= $78.92

$8.42 + $78.92=

Intrinsic Value of $87.34


How did i go? Where does Margin of Safety come into this?
 
zac said:
Given mortgage lending is a competitive market, what makes MC stand out??

There also have been some interesting articles written about housing in the forseeable future.
In Sydney certain suburbs since 2004 have either remained at the same value or gone slightly backwards.

RM also has added food for thought by commenting on the baby boomers that are retiring selling their home/s to fund retirement. All the extra supply will also lower prices, assuming thats what the baby boomers will do.
Click to expand...

I'm fairly bearish on housing credit, I just don't see how you can keep stuffing the pinata; eventually something's gotta give.

I owned MOC way back in about 2002, it did pretty well, of course back then getting into debt was the flavour of the day. I just don't see where the growth in lending is going to come from. They do have a pretty good network of brokers, so maybe they'll look into utilising that asset to develop other revenue streams.

Not using a strict RM methodolgy, I get a value of $1.10 for MOC. RM got $0.99.
 
McLovin said:
I'm fairly bearish on housing credit, I just don't see how you can keep stuffing the pinata; eventually something's gotta give.

I owned MOC way back in about 2002, it did pretty well, of course back then getting into debt was the flavour of the day. I just don't see where the growth in lending is going to come from. They do have a pretty good network of brokers, so maybe they'll look into utilising that asset to develop other revenue streams.

Not using a strict RM methodolgy, I get a value of $1.10 for MOC. RM got $0.99.
Click to expand...

I think mortgage choice is appealing for a number of reasons:
Strong yield, around 15% grossed up. Quite impressive in itself.
Increasing IV. In 2008 I have it for .70, 2009 .90, 2010 1.60 and 2011 1.50
High ROE
No Debt

Definitely one to keep an eye on. Also I would like to see Kermits and Macros valuations using their cool programs.
 
My current valuation on MOC is $2.10 falling to $1.60 according to the data feeding into my spreadsheet. I haven't actually had an in depth look their revenue streams or made any estimates of future earnings myself so will just have to trust my data flow for now.

While a decent yield may be appealing, its not what i'd be looking for in a value investment. I have the IV falling from a current view to a forecasted view and it looks like you do as well notabclearning.

MOC doesn't interest me greatly. Banks are being shorted by international fund managers at the moment because its the only way they can gain exposure to a property downturn in Australia. While MOC may make money out of a fall once it hit the floor and start to make gains, its not a scenario that would occur overnight. My understanding is they don't really have a competitive moat either however i'd have to look into it further. I see other opportunities more worthy of being researched though compared to MOC at the moment.
 
Excuse my lack of Roger's current I/V method and input into this thread but I'd just like to point out that I first met Roger Montgomery in 2005 when the ASX was still conducting their face-to-face "Introduction to the Sharemarket" course. He ran a module called "Selecting and Analysing Shares" and not one person walked out of the auditorium in Sydney without a degree of excitement or belief that his long term strategy "works".

At this point in time he was the founder and director of Clime Asset Management which at the time was trading at $1.00 (currently trading at $1.015) which goes to show the "long term approach". I believe CAM was a fund specifically tailored to sophisticated investors and speculate it was a project on which Roger could trial his I/V strategy according to the risk appetite of his clients. Originally based in a small office in Balmain, CAM is now located in Macquarie Place. I specifically remember Roger stating he didn't personally live the typical "Fund Manager" lifestyle and flew economy everywhere he could. His old website supported this ideal. On the 4/5/09 Roger resigned as Chairman but still remains on the board of directors.

I've watched Roger over the past 7 years and certainly believe he's one of Australia's leading "long-term" investment educators. He's commitment to educating the public is beyond anything I've seen before.

Unfortunately I'm not in the position to be able to commit to long-term investments due to my age, impatience and focus on quick profit. When I'm approaching 40+ though I'd certainly be following Roger's advice.

Cheers

Alexander
 
tollbridge said:
Excuse my lack of Roger's current I/V method and input into this thread but I'd just like to point out that I first met Roger Montgomery in 2005 when the ASX was still conducting their face-to-face "Introduction to the Sharemarket" course. He ran a module called "Selecting and Analysing Shares" and not one person walked out of the auditorium in Sydney without a degree of excitement or belief that his long term strategy "works".

At this point in time he was the founder and director of Clime Asset Management which at the time was trading at $1.00 (currently trading at $1.015) which goes to show the "long term approach". I believe CAM was a fund specifically tailored to sophisticated investors and speculate it was a project on which Roger could trial his I/V strategy according to the risk appetite of his clients. Originally based in a small office in Balmain, CAM is now located in Macquarie Place. I specifically remember Roger stating he didn't personally live the typical "Fund Manager" lifestyle and flew economy everywhere he could. His old website supported this ideal. On the 4/5/09 Roger resigned as Chairman but still remains on the board of directors.

I've watched Roger over the past 7 years and certainly believe he's one of Australia's leading "long-term" investment educators. He's commitment to educating the public is beyond anything I've seen before.

Unfortunately I'm not in the position to be able to commit to long-term investments due to my age, impatience and focus on quick profit. When I'm approaching 40+ though I'd certainly be following Roger's advice.

Cheers

Alexander
Click to expand...

For the sake of balance it should be observed that Roger was at Clime when it was over-exposed to Credit Corp as it imploded from $12 to 50c. He lost his investors a lot of money on that one (perhaps he has made it back since...).
 

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