CPR 0.00% 15.0¢ clivpee limited

what the hell, take a punt

  1. 3,155 Posts.
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    I have no idea how one values shares in a company that has hit a bad patch due to the vicissitudes of the economy. The simple approach of extrapolating EPS by a reasonable PER does not work if the immediate EPS forecast is low, or negative.

    In the first place, one has to decide if CPR will survive or not, and I assume that it will. This is a leap of faith supported by the fact that it is not carrying horrendous debt, and it is not being hounded for cash. The Total Liabilities divided by Total Assets less Intangibles gives a ratio of .79, which is fairly normal. Also, their are many positives that I list below.

    Total assets, less intangibles, is about 35 cents a share. Intangibles include brand names, and they are worth something, because the name “Cleve Peeters” is well known in Victoria, and “Rick Hart” is well known in WA. Anyhow, if you invented a factor like 1, then the shares could be valued at 35 cents, and if you used .75, they would be worth 26 cents. Take your pick.

    If you think the current financial fiasco will pass, and CPR returns to its 2007 profitability of 10.6 cents a share in 2010, and you decide to use a low PER like 5 to account for the 1-year hiatus, then you could get a target share price of 53 cents.

    One does not know what dividend CPR will pay. I think they will in trying times pay 1.5 cents x 2 = 3 cents.

    I am inclined to value CPR at a target SP of 53 cents. However, I could not defend this contention.

    Let us look at the positives – namely:

    1) Part of the reason for slowing sales was the long series of interest rate hikes leading up to a few months ago. Interest rates are now retreating, so that is a plus.
    2) Similarly, petrol price increases reduced disposable income, and petrol prices are retreating now.
    3) The decline in new homes negatively impacted CPR, but the New Home subsidy of $21,000 should, with lower interest rates, stimulate new home building, which is good for CPR.
    4) Australia is not expected to have high unemployment, and when the fear of unemployment abates, and the media gets tired of carping doom, doom, doom, some people will unzip their purses a bit.
    5) The recent zipped-purse phase will have created pent up demand, so things might for a while return to even better than normal.
    6) CPR’s mistimed entry into NSW was unfortunate, because it hit a whammy – the cocked-up NSW economy and housing market, followed by the international credit crises. However, CPR’s NSW business is trending better each month, thus diminishing the drag on CPR.
    7) The new stores are maturing, and their conversion-to-sales ratios of floor traffic are moving closer to the norm for CPR. This is part of the improvement in NSW mentioned above.
    8) New business lines should help.
    9) October 2008 sales volumes and margins better than September, with better results expected in December.
    10) Two directors hold over 42 million shares each, and they are going to bust their sphincters to improve their net worth.

    I would not bet the farm on CPR, but if you have a lazy few grand, and want to punt on the basis that you are more likely to make 16 cents on CPR than lose it, and you may make a great deal more than 16 cents, then you could consider buying CPR at the current price. I do not like to opine on a share that I do not hold. I bought 44,000 this afternoon at 16 cents each.
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