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Re: [sharechat] one broker's view - regarding CAH

From: "James Smalley" <>
Date: Sun, 31 Dec 2000 11:28:04 +1300

Hi Hugh,
With regards to CAH (my thoughts only) only a very superficial look at their balance sheet shows that they have 60 cents per share in cash (thanks to that Sth American sale).  At the current price of around $1.64 you are then buying the rest the business for $1.04.  Add to that they earned $0.18 per share (off the top of my head, could be a bit out) for the 1st 6 months of their reporting year, you would expect them to earn at least $0.10 for the last 6 months, even with a slowdown in the NZ building market.  Taking this into effect you are effectively buying the business for around $0.76.  Sound like a bargain?
With regards to them paying out the low dividend (ie not paying a special dividend with the proceeds from the Chile Sale), this makes sense for IPP, their majority shareholder.  Since they are based in the states, do you think they would want their share of the dividends paid out when the NZ dollar is only worth 39 -40 cents?  What I think they are doing is waiting for an appreciation of the NZ dollar (currently happening) to around 50-55 cents at least in the next 6-12 months.  Then I wouldn't be suprised if CAH management got a message from IPP saying that they'd like their money now. 
Again this last bit is merely a hypothesis but it does make sense.  The fundamentals I have mentioned mean that the downside on CAH should be limited (which is what you should be looking at when buying shares)
Other thoughts anyone?
  • Subject: [sharechat] one broker's view
  • From: "hugh webber" <>
  • Date: Fri, 29 Dec 2000 13:38:58 +1300

Just received the J B Were Xmas letter.
They see the NZ market as undervalued by 15% 
(but this could be lessened by profit downgrades)
and the Oz market overvalued by 8% and the
US market overvalued by an unquantified amount
(but see my previous post from Bloomberg quoting
P/Es of Fri 22nd Dec, 'Rational, Sane investing vs the
NASDAQ) , maybe the Dow is overvalued by about 55% from
that data.
They see the NZ and Oz markets possibly benefitting
from a move out of overvalued US stocks.

The NZ stocks they prefer are (for defensive reasons)
 Auck I A, Baycorp, 
Carter Holt, FCL Bldg, INL, Lion, Montana, Lyttelton Port,
Nat Gas Corp, Sky City, Sky TV, Tourism Hldgs, 
Tranz Rail, Waste Management, the Warehouse, and
Westpac Trust.

I have a little trouble following the reasoning for Carter Holt
(none actually provided) for example in an economic slowdown.
Maybe its time to jump ship for tradeable fixed interest
securities with an interest fall coming, even though the gains
are taxable? Any recommendations in that field?


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