Around the Traps ... with THE FERRET 07:59, Friday, 3 February 2006
Sydney - Friday - February 3: (RWE Australian Business News) - *****************************
ADELAIDE BANK (ADB) yesterday reported an "announcement to market" net profit for the first half of $41.4 million, up 12 per cent.
It also announced:
* Profit before tax of $62.5 million, up 25 per cent * Profit after tax of $41.4 million, up 24 per cent * Underlying profit of $71.15 million, up 21 per cent.
It did not stop there because the two versions of Earnings Per Share were:
* EPS 36.88c up 8 per cent * EPS 40.24c up 13 per cent.
Not bad, eh, six different percentage figures to describe the level of prosperity.
Hang on, there's more.
Chairman Adele Lloyd said, "Importantly, the bank has continued to deliver on its key shareholder promise with cash earnings per share growth of more than 10 per cent."
Group managing director and CEO Barry Fitzpatrick said the board was confident the bank would "meet its strategic commitment by delivering cash earnings per share growth in excess of 10 per cent for the full 2005-06 financial year".
Ah, some consistency at last.
Shareholders failed to appreciate the 2c rise in interim dividend to 26c and hoed into the shares.
Adelaide Bank started the day at $13.45 and finished at $12.80, down 62c for the day.
That's a fall of 4.6 per cent.
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If they got stuck into Adelaide bank even though it lifted profit and dividend, SIMS GROUP (SGM) with a big profit fall stood no chance.
But someone had obviously expected a surprise from the group.
The shares climbed from $15.47 last Friday to as high as $17.27 on Wednesday ahead of yesterday's dull thud of a profit announcement.
After opening sales at up to $17.10 (now there's a lucky seller for you!) the shares fell off a cliff.
The price fell $2.97 to $14.03 before closing at $14.80.
Investors have burnt their fingers because the company's 37 per cent fall in net profit in the first half was in exactly line with guidance.
EPS is down 44 per cent from 119.2c to 66.5c and interim dividend is cut from 70c to 45c.
Group chief executive Jeremy Sutcliffe says the impact of softening ferrous prices will be reflected in the early part of the third quarter, which is not expected to match the second quarter.
"Looking beyond the 3rd quarter, ferrous prices have partially rebounded, but largely as a result of supply constraints, rather than as a result of strengthening finished steel prices," Mr Sutcliffe says.
"Accordingly, this rebound in ferrous prices, if sustained, should assist 4th quarter earnings."
Despite the plunge in EPS Sims seems to be on a forward p/e of less than 11 at yesterday's heavily discounted price for the shares.
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Merely being in line with forecasts does not cut it in the sharemarket, particularly if a stock has already been climbing.
But that does not seem to apply to LEIGHTON HOLDINGS (LEI).
Following a page one article in the The Australian Financial Review that day, Leighton yesterday confirmed that significant claims had been lodged with the WA Public Transport Authority, which the company believed were legitimate.
"These claims have been progressively submitted since the commencement of the project and represent the expected value of the company's entitlements on the project," it said.
"They include a mix of claims for work done, changes to scope and variations, and compensation for rise and fall and time lost due to industrial disputes."
It seems Leighton grabbed the Fin Review article as a handy way to update the market generally.
"The company will meet its financial forecasts for the 2005/06 half and full year results and has provided for a loss on this project, which is included in the company's forecast financial results," it said.
Leighton rose sharply ahead of yesterday's brief report, climbing from $17.69 on January 23 to as high as $20.40 on Tuesday.
Yesterday, despite the "will meet" forecast revelation, Leighton fell only 31c to $19.72.
Leighton is on a p/e of more than 26.
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Cas on the email liked Ferret's piece on cheap gold stocks that turned out to be big winners the last time gold was soaring to record levels in the late seventies so much he's mentioned a couple of candidates for the noughties.
He suggests a look at RED 5 (RED) and this week's "quarterly report that seems to indicate something fairly good is about to happen".
Red 5 announced that the Siana gold project in the Philippines was "proceeding to bankable feasibility".
"Also keep your eye on AUTHORISED INVESTMENT FUND (AIY) (a pooled development fund) that has a stake in a couple of small but very interesting and rapidly growing enterprises," he says.
"This PDF will kick some big goals this year."
Maybe, but earlier this week the company revealed the 1-for-3 rights issue at 12c attracted applications for only 33.5 per cent of the total.
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What companies deem to be market sensitive or not is a moving feast.
John points out that the latest announcement by AMBRI (ABI) on Wednesday afternoon may not have been listed as sensitive by the company, but the market certainly thought it was, and the shares plunged from 7.8c to as low as 5c, and closed at 5.3c.
A near 40 per cent fall in a share price seems a pretty sensitive reaction to most of us.
The stock firmed 0.6c to 5.9c yesterday.
Ambri's announcement advised that its licensee would be terminating research work on the ICS technology and would be focusing on technology outlicensing efforts.
(Comments and complaints to [email protected] - no requests for advice please.)
