Stock of the Week: Methven Ltd

This edition of Stock of the Week focuses on little known company (unless of course if you are already a shareholder) Methven Ltd [MVN.NZ].

Methven is an up and coming star in the bathroom products/kitchenware area as far as delivering water to the consumer via their various faucet related products (it has been around for for 125 years) and it has recently had an overriding push to market high end to higher quality mass market products, rather than high volume lower quality mass market garbage from China or elsewhere and that is the main reason why I chose this stock.

Management are clearly on the ball too with their emphasis on the quality end of the mass market where higher margins are made, with a good niche to carve out, especially for a smaller Kiwi player that simply cannot compete on scale.

They haven't done spectacularly well over the last 12 months because of the building downturn, but with aspirations to become a global brand and the willingness to apply money to research new and innovative products, as well as pursuing growth by careful acquisitions Methven should be able to achieve their goals.

Growth will return once we start building again and in the meantime the company is focused on trimming unnecessary costs, to alleviate the temporary dip in profit.

As you can see from the chart above the share price has plumbed the depths to around 65c 4-5 months ago but that is off a 52 week high of NZ$1.74 and an all-time high of $2.80 near the end of 2008.

The dividend yield of just over 12% gross is also a very attractive feature of this stock and apparently will still look quite handsome even with the small profit drop.

Buy on weakness, there should be some stock price drops as the year plods on with the lower profit forecast.

Good luck!


Stock of the Week Series

Metlifecare Ltd
Auckland International Airport
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Methven Ltd @ Share Investor

Long Term View: Methven Ltd
Stock of the Week: Methven Ltd

Discuss MVN @ Share Investor Forum
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c Share Investor 2010


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c Share Investor 2009

Sky City debts levels now more manageable

Sky City Entertainment Group [SKC.NZ] has been named by Bruce Sheppard as one of his list of NZX companies with debt worries.

Now that time has passed since Bruce debt analysis, on June 30 2008 figures, lets take a look and see whether his criticism about high debt levels is now warranted.

Lets look at company debt levels from the last 5 years:

FIVE YEAR SUMMARY
Consolidated Balance Sheets
As at 30 June				2008	2007	2006	2005	2004
				$000	$000	$000	$000	$000

LIABILITIES
Current liabilities
Payables				121,668	119,501	100,776	97,005	93,619
Interest-bearing liabilities				-	-	-	100,758	101,000
Derivative financial instruments				-	-	25	-	-
Total current liabilities				121,668	119,501	100,801	197,763	194,619
Non-current liabilities
Interest-bearing liabilities				677,884	753,002	950,904	956,795	579,967
Subordinated debt - capital notes				123,772	123,756	123,720	121,510	149,644
Subordinated debt - SKYCITY ACES				186,538	161,410	177,956	-	-
Deferred tax liabilities				77,891	52,992	60,596	45,438	-
Derivative financial instruments				23,561	50,774	3,072	-	-
Convertible notes				-	-	-	-	8,910
Other term liabilities				-	-	-	-	27,216
Total Non-current liabilities				1,089,646	1,141,934	1,316,248	1,123,743	765,737
Total liabilities				1,211,314	1,261,435	1,417,049	1,321,506	960,356

Interest cover (EBITDA/Net Interest)				3.8x	3.3x	3.3x	3.4x	5.1x

Full 5 Year Financial Summary

We can see then that debt incurring interest or charges (of all different types) nearly doubled from 2004-2006 to over NZ $1.3 billion at its highest (due mainly to buying and financing Adelaide and Darwin casinos and cinema assets.) but since then, at balance date 30 June 2008, (Bruce's debt level comparison date) debt had been paid down to just under $1.1 billion.

In addition to that, the company has paid back $84 million with the proceeds of a capital raising and other debt reductions to take total debt to below $ 800 million, still high but more manageable and it leaves net debt to ebitda ratios that Bruce worried about down from 3.8x in June 2008 to below 2.5x as at 9 July 2009, the lowest ratio in 5 years.

This has further been alleviated by a large increase in profit and revenue for the 2009 Full Year result to be announced 26 August.

As I said above, debt levels are still very high but steps have been taken to change that and with good management the company has put itself in a position so that the business is functioning well and is an even better position now to consolidate this debt.

As interesting as Bruce Sheppard's company debt analysis has been it would be even more interesting to see how June 2008 stacks up with June 2009.

In Sky City's case I think he might assess that they have addressed his worries.

They have mine.


Disclosure: I own SKC shares in the Share Investor Portfolio

Sky City Entertainment Group @ Share Investor

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• Sky City CEO doubles down
• Sky City Entertainment 2009 Interim Profit Review
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• 2008 Sky City profit analysis
• Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
• Sky City 2008 profit preamble
• Sky City outlines a clear future plan
• As recession bites Sky City bites back
• Sky City Assets: Buy, sell and hold
• Why did you buy that stock? [Sky City Entertainment]
• Sky City Share Volumes set tongues wagging
• Sky City half year exceptional on cost cutting
• NZX Press release: Sky City profit to HY end Dec 2007
• Sky City Cinemas no Blockbuster
• Sky City Entertainment share price drop
• New Broom set to sweep
• Sky City Management: Blind, deaf and numb
• Sky City sale could be off
• Opposition to takeover
• Premium for control
• Sky City receives takeover bid
• Sky City Casino Full Year Profit to June 30 2007
• Setting the record straight
• Sky City CEO resigns
• Sky City Casino: Under performing
• Sky City Casino 2007 HY Profit(analysis)
• Sky City Casino 2007 HY Profit
  

Discuss this stock @ Share Investor Forum

Related links

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Full 5 Year Financial Summary - Where the table above comes from
Correspondence between Bruce Sheppard & Sky City over debt levels
Sky City July Debt payback

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c Share Investor 2009

Stock of the Week: Metlifecare Ltd

Metlifecare Ltd [MET.NZ] has been on my watchlist for yonks. I already own Ryman Healthcare Ltd [RYM.NZ] I love this sector and it is because of its very high historical revenue and profit growth and its similar future protects as the number of older people (especially those greedy economy sucking baby boomers) increases in very large numbers

Metlifecare has been somewhat of a poor cousin to Ryman over the last few years when it comes to its profit. It has had a couple of big asset writedowns over the last 2 years and that has lead to a punishing in its stock price.

A great opportunity.

That is why it makes my Stock of the Week this week (better late than never, I know it is the end of the week) that, and it will bounce back into profit when property prices recover.

The stock has hit a 52 week low of NZ$1.38 and a high of $4.60 but that is well off its all time high of nearly 9 bucks reached not that long ago (see chart above) so you can see the potential for a good long term and medium term gain even if today's closing share price is $2.06.

Buy on weakness, there should be some more for this stock come its profit reporting in November.

Good luck!


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c Share Investor 2009

Market announcement delay abandonment should be just the start in NZX restructure

Further to my piece on insider trading of Sky City Entertainment Group [SKC.NZ] shares last week and a convenient waiver given by the NZX for Contact Energy Ltd's [CEN.NZ] David Baldwin to get rewarded for stuffing up, it appears that the NZX is relenting to pressure from the bearded one, Bruce Sheppard from the NZ Shareholders Association, to get market announcements, previously delayed to the poor and downtrodden like you and me, now available.

Those market participants who have had NZX terminals in their offices have been using this information to trade before it is available to us, of course this is highly illegal but as Bruce has pointed out, nobody has been prosecuted by NZX, the market regulator, let alone a case of insider trading taken before.

This delay has always confused me because the advantages this gives users of this information means millions of dollars in their pockets - am I a naive idiot?

It is one of those hangovers from a regulated market that has been held onto with great gusto but other relics of a bygone age still give the advantages to the big boys.

The granting of waivers to break NZX rules, lack of clear separation of the day to day running of the New Zealand Stockmarket and its regulation and the reluctance to piss off mates by prosecuting clear breaches of insider trading rules and other market hanky panky by brokers and insiders really needs to be scrutinized closely by Government stockmarket regulators the Securities Commission because the NZX ain't going to do it.

Sadly this is unlikely to happen in any sort of expedient manner, so it is up to people like you, me and stockmarket advocates like Bruce Sheppard to keep the pressure on Mark Weldon and his mates down there in Wellington.

Of course the thing that would keep the NZX a little more honest would be a little healthy competition, and as I pointed out some ten or so years ago, why couldn't a website be set up for stockmarket investors to directly buy and sell shares without a middleman getting involved?

I'm sure others with the tech savviness that I don't have would be able to pull off such a thing.

A great little opportunity for someone to have a go.


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c Share Investor 2009