around the traps ... with the ferret

  1. 4,756 Posts.
    Around the Traps ... with THE FERRET
    07:32, Tuesday, 1 March 2005

    Sydney - Tuesday - March 1: (RWE Australian Business News) -
    ***************************

    It's good to see managing directors can string a few words
    together like Carter Brown when the need arises.

    PATRICK CORP's (PRK) Chris Corrigan yesterday did a demolition
    job on Grant Samuel's expert's report into the $1.90-a-share takeover
    bid for VIRGIN BLUE HOLDINGS (VBA).

    It was a good read.
    Here's an excerpt ...

    "Grant Samuel, whilst not offering any guarantees, offer the
    following heroic prediction - 'The Virgin Blue share price would be
    unlikely to trade in the short term materially below ... $1.90.'

    This is reached on, we believe, the flimsiest of evidence,
    namely:

    1. 'the initial fall in the share price to around $1.70'
    (actually $1.68) after the second profit downgrade in six months was 'an
    overreaction'.

    Based on what evidence?

    2. 'the revenue load factor in January was 77.7%'. That's
    certainly out of left field.

    For January 04 the revenue load factor was 84.8%.

    Where's the joy in that?

    3. 'the Target's Statement gives further comfort to shareholders
    that, in the near term, Virgin Blue is considering a number of
    initiatives to secure a greater share of the higher yielding business
    traveller segment'.

    More blue sky!

    Contrary to the forecast in the Target statement, the oil price
    is through the roof and the competition is getting tougher yet somehow
    we finish up with a valuation that is off the scale."

    *****

    Now why can't we get plain speaking like that every time?

    It's in stark contrast to Patrick's annual meeting on February 3
    when the company issued the ASX a miserable six paragraphs of chairman's
    remarks.

    The first five paragraphs merely reviewed the past year and only
    the last paragraph said something new-ish ... "In terms of the current
    financial year, operating profits for the first quarter, i.e. the quarter
    to December 2004, with the exception of the equity accounted results for
    Virgin Blue, which has made a separate announcement, are in line with the
    company's expectations and budgets."

    As Ferret wrote at the time, what WERE the expectations and
    budgets Patrick was in line with?

    Patrick rose 4c to $6.12 yesterday while Virgin fell 2c to
    $2.02.

    *****

    Seems some in the market agreed with the column on the contrary
    moves (contrary to good sense, that is) in SIMS GROUP (SMS) and SEVEN
    NETWORK (SEV).

    Sims slumped as much as $1.02 on Friday despite trebled
    first-half profit, a rise in interim dividend from 26c to 70c and a
    forecast of continued growth.

    The shares bounced back 85c to $18.07 yesterday.

    Seven, meanwhile, which had already climbed from $6.41 since the
    beginning of the year, rose 4c more to $7.71 on Friday despite profit
    falling 35 per cent in the first half and a warning that full-year
    earnings were expected to be lower and cost growth in television higher.

    Yesterday the shares fell 31c to $7.40 before closing at $7.55.

    *****

    Was STRAITS RESOURCES (SRL) being cute yesterday when it said it
    was "pleased to announce a strong profit performance for the year"?

    Gross profit from operations was $37.7 million, up nearly sixfold
    on the 2003 result, it said, while profit before tax was $27
    million, a significant turnaround on the loss before tax (after taking
    out Nifty sale) of $3.6m incurred in 2003.

    It then said, "Consolidated profit after tax attributable to
    members was $16.5 million, after an income tax expense of $8.0 million
    and outside equity interests of $2.5 million."

    This is the bottom line, the one the ASX wants reported to the
    market by every listed company.

    The trouble with Straits Resources was that while the company
    was only too happy to tell us how wonderful gross profit and pre-tax
    profit were in its media release, it did not give any comparison for the
    after-tax result.

    It was down 57.2 per cent.

    The company need not have been so shy of the fall because the
    shares rose 2c to $1.99 anyway.

    *****

    MARINER FINANCIAL (MFI) net profit fell from $2.39 million to
    $2.34 million in the December half-year but the company describes that
    as a "solid" result.

    It says this positions the "group to grow in the coming year".

    EPS fell from 7c to 4c.

    The shares fell 3c to $1.05.

    *****

    VILLA WORLD (VWD) rose 8c to $1.61 after it reported December
    half net profit up 17 per cent and EPS up from 10c to 10.9c.

    That's a handy forward p/e of less than 8 times which reflects
    investor caution over property.

    The southeast Queensland operator had some tips.
    Margins remained generally strong, it said, although not as high
    as when the property market peaked during the 2004 year.

    Villa World says it's performing well in a cooling property
    market and while it remains confident of continuing satisfactory rates
    of sales across the portfolio of projects, recent talk of imminent
    interest rate rises is creating some uncertainty (rises? ... Wizard has
    cut mortgage rates twice in recent days).

    "However, with long-term fixed rates still at attractive levels,
    we believe that the fundamentals are still there for continuing good
    results," it said.

    Villa World is budgeting for a net profit of 5 per cent for the
    full year, "dependent on the continuation of current rates of sale and
    no further worsening in property market conditions."

    (Comments and complaints to [email protected] - no requests
    for advice please.)

    ENDS

    Copyright © 2005 RWE Australian Business News. All rights reserved.
 
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