Thursday, April 29, 2010

Long Term View: Ryman Healthcare Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO.

The calculation of returns includes dividends and tax credits.

Ryman Healthcare Ltd [RYM.NZ] has been exceptional to its shareholders in terms of returns since its IPO in July at $1.00 and its subsequent listing on 29 July of that year and even better for its owners who founded the company in 1984. 71.9c in net dividends - there are no tax credits - (see chart above) and a 5:1 share split in January 2007 gives RYM a slightly more than 680% return (see chart below for the share price percentage gain against the average of all NZX indexes) over the nearly 11 year listing, an approximate annual net return just over 60%.

This is approximately a 600% better return when compared to the average of all NZX indexes.

Disc : I own RYM shares in the Share Investor Portfolio

Long Term View Series

Auckland International Airport

Air New Zealand
Briscoe Group Ltd
Contact Energy Ltd
Delegats Group Ltd
EBOS Group Ltd
Fletcher Building Ltd
Fisher & Paykel Appliances
Fisher & Paykel Healthcare
Freightways Ltd
Goodman Fielder Ltd
Hellaby Holdings Ltd
Mainfreight Ltd
Metlifecare Ltd
New Zealand Refining Ltd
Port Of Tauranga Ltd
Pumpkin Patch Ltd
Restaurant Brands Ltd
Ryman Healthcare Ltd
Sanford Ltd
Sky City Entertainment Group Ltd
Sky Network Television Ltd
Telecom NZ Ltd
Telstra Corp Ltd
The Warehouse Group Ltd

Ryman Healthcare @ Share Investor

Ryman Healthcare Ltd: Australian Expansion Needs Care
Stock of the Week: Ryman Healthcare Ltd
Why did you buy that stock? [Ryman Healthcare]
Long VS Short: Ryman Healthcare Ltd
Time for retirement?

Discuss RYM @ Share Investor Forum

c Share Investor 2010

Wednesday, April 28, 2010

Fisher & Paykel Healthcare: 2010 Full Year Profit Result rests on Foreign Exchange Movement

The 2010 full year profit for Fisher & Paykel Healthcare [FPH.NZ] out late May (provisionally 26 May) is a hard one to calculate but it probably wont be a vast improvement on the 2009 FY result.

Indications are that last years $NZ62 million profit is going to be flatish to slightly up on a good revenue rise spurred on by additional innovations in sleep apnea products and the continuation of purchasing of health related products by US health providers.

This figure will vary depending on how much forward foreign exchange cover the company realises as every cent in movement up in the Kiwi/US dollar cross means $2 million less on the bottom line.

From the 2010 Interim Profit Report from last year (see excerpt below) you can see that FPH's profit calculations were based on an average of 64c to the US dollar and over the last 6 months that average would be closer to 70-72c. The forward exchange cover makes the profit calculation hard to calculate.

"Currency exchange rates continued to be very volatile. During the six months, the NZD:USD spot exchange rate ranged from 0.55 to 0.73 with an average spot rate of 0.64. Our hedging policy again served us well. We had in place at 30 September 2009 a mix of foreign exchange contracts and collar options, up to five years forward, with a face value of approximately NZ$600 million. The US dollar and Euro instruments were at weighted average rates of approximately 0.52 US dollars and 0.44 Euros to the New Zealand dollar and are to protect the company from exchange rate volatility." FPH 2010 Interim Report

Having outlined the above though, underlying revenue and profit in US dollars (most FPH business is done in US dollars and translated back to the NZ dollar where their head office is) will be well up and this is the most important indication of company progress.

The exchange rate factor, while important to shareholders in terms of returns in dividends and realised New Zealand dollar profit, should be secondary to real profit in constant US dollar terms.

FPH shares have been steadily rising over the last couple of weeks and closed flat at $3.49 yesterday.

Disclosure I own FPH shares in the Share Investor Portfolio

Fisher & Paykel Healthcare @ Share Investor

Long Term View: Fisher & Paykel Healthcare
Stock of the Week: Fisher & Paykel Healthcare
Analysis - Fisher & Paykel Healthcare: FY Profit to 31/03/09
Schroder Investment Management takes big Fisher & Paykel Healthcare stake
Long VS Short: Fisher & Paykel Healthcare
Big Fisher & Paykel Healthcare trades a curious tale
Why did you buy that stock? [Fisher & Paykel Healthcare]
Drinking and Trading
Share Investor's 2008 stock picks
Fisher & Paykel: A tale of two companies
FPH downgrade masks good performance

Discuss FPH @ Share Investor Forum

Download FPH Company Reports


Bird on a Wire: The Inside Story from a Straight Talking CEO

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Tuesday, April 27, 2010

Pumpkin Patch Ltd move downmarket

The announcement yesterday that Pumpkin Patch Ltd [PPL.NZ] are introducing another brand with stand alone stores in Australasia has the market excited but as PPL shareholders we shouldn't count the dollars before the product goes out the door, or before the cash is received, the cheques are cashed and credit cards debited.

The stores are going to operate in what PPL call the "playwear" market, that makes up around 70% of the $NZ 3 billion Australasian childwear industry.

"The introduction of a dual brand aimed at a different segment of the market is a model that has been successfully followed by numerous international clothing companies. This move will allow us to leverage our existing infrastructure and retail expertise for the benefit of both brands". PPL NZX release.

I suspect that the "different segment of the market" will be at the lower end of the childrenswear market where the BabyCity brand from the Postie Plus Group [PPG.NZ] T& T, The Warehouse Group Ltd [WHS.NZ] and others operate in.

The company currently sells a trendy range of children's clothing at the mid to high end of the market and does it well in all the markets it operates in except for the USA and the UK where the brand is currently a money loser for PPL shareholders.

Clearly PPL have been feeling the pinch from their lower priced rivals in this depressed retail market and moving to the lower end of the market will take away custom from those aforementioned retailers if the store roll out, buying and marketing is done well.

Separating the Pumpkin Patch Brand from a lower priced stablemate brand into a totally different operation is the wise way to go. A lower priced brand sold in Pumpkin Patch stores would have ruined the image and eventually sales of that brand. It is funny how consumers are but that is the way some of us shop - not my good self I hasten to add.

Margins will probably be lower but I would imagine volume will be higher. As a couple we buy from both the Pumpkin and those other stores and the sheer volume of stuff at the lower end is probably more than twice (I haven't taken a good look I just pay for it) that of the Pumpkin Patch clothing our girl has. Our infant spends alot of time indoors as she is 8 months old and the "Playwear" she has (who knew it was called that) is abundant.

If the roll out is done badly shareholders stand to lose millions. When PPL Chairman Greg Muir was CEO of the Warehouse he was in charge of a low cost roll out of that company in Australia and it all ended in tears and hundreds of millions in lost shareholder moola so PPL shareholders have reason to be cautious of this new venture - lets hope he isn't anywhere near it.

Pumpkin Patch was established in 1990 and was expanded in similar economic circumstances to the current day during the early 1990s but that provided good opportunities for company expansion and the same opportunities exist for expansion of PPLs new brand today.

The biggest costs, leasing and store fit-outs, will be considerably cheaper than a few years back due to economic circumstances. Empty retail outlets and gaps in malls could be easily and cheaply filled with eager landlords providing incentives for PPLs new offering to use their space.

I will reserve my judgement on the new venture until I see some concrete figures on paper and I want to see profit quite quickly (excluding the one-off establishment costs) and a year of trading should give shareholders a good idea of any future success or god forbid failure.

Pumpkin Patch shares closed up nearly 1% on the news.

I own PPL, WHS and PPG shares in the Share Investor Portfolio.

Pumpkin Patch @ Share Investor

Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?

I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum

Download PPL Company Reports

Buy Pumpkin Patch Clothing


Bird on a Wire: The Inside Story from a Straight Talking CEO

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c Share Investor 2010

Monday, April 26, 2010

NZX 50 Gross Index: Ready for a Correction?

Just looking at the NZX 50 Gross Index, since mid February it has put on nearly 10% since a market correction in early 2010 dropped the index by a similar percentage.

The index has flattened over April and seems to be taking notice of the similarly flat economic outlook. I see a poor economic "recovery" with flat to less than zero for a couple of years at least (I'm always this cheery on a Monday) and consider that the stockmarket is a little overoptimistic in terms of its overall direction.

If you look West you can see the DOW index (see 2 year chart below) as a more extreme example of ours. It is close to its September 2008 pre-crash levels and you cant tell me their economy is in a better state now, in fact things are worse - see debt levels for an answer there.

As stockmarkets are traditionally 6 months ahead of the economy (that is what the experts say but are they really?) our market seems to be expecting a good recovery but I think investors will be disappointed when reality sets in over the August reporting season and the coming 12 months of real economic facts and figures.

Watch for more opportunities to buy over the coming year as even this flat market will see some good buying opportunities when the stockmarket drops.

Hey, I could be wrong but the market looks overbought.

Recent Share Investor Reading

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Chart of the Week: Mainfreight Ltd

The aim of this series of charts is to show the divergence - up or down - of the selected individual stock price away from the NZX 50 Index. The chart is a 1 year look to give some relevant background to any recent (two to three months) share price movements.

Mainfreight Ltd [MFT.NZ] has had a poor last year share price wise and 2010 result wise.

Over the last two months though the stock has risen from around $5.75 to close at $6.61 at close of market last Friday. The NZX by comparison has been almost flat.

If you were a chartist you would say this stock has been over bought and is ready for a correction.

Just on fundamentals alone the company is a growth stock and it aint growing at present -that could all change of course.

The time for buying this stock was of course at lower prices, as I did last year at $4.20 but it looks like the market sees this company in recovery. If you dont and want to buy MFT the chart says you should wait for a pull back.

Disclosure: I own MFT shares in the Share Investor Portfolio.

Chart of the Week Series

Restaurant Brands Ltd

Mainfreight @ Share Investor

Long Term View: Mainfreight Ltd
Share Investor Interview: Mainfreight's MD Don Braid
Stock of the Week: Mainfreight Ltd
Questions to Mainfreight's MD Don Braid
I'm Buying: Mainfreight Management delivers the goods
Mainfreight Annual Report Packs a Punch
Analysis - Mainfreight Ltd: FY Profit to 31/03/09
Mainfreight VS KiwiRail: The Sequel
Long VS Short: Mainfreight Ltd
Why did you buy that stock? [Mainfreight Ltd]
Mainfreight 2008 Annual report worth reading
KiwiRail will cost Mainfreight
Mainfreight keeps on truckin
A rare breed
Share Investor's 2008 stock picks

Discuss MFT @ Share Investor Forum

Download Mainfreight Company Reports


Bird on a Wire: The Inside Story from a Straight Talking CEO

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c Share Investor 2010