re: top value picks for 2003/ re cli for nickoo
Hi Nickoo,
you stated that you're concerned about the accounting method applied by Challenger. As you may be aware, CLI re-stated their profit from $195 mil to $158 mil, this figure of $158 mil leaves them with the statistics as I have given in my last post (homework done?). The financial reporting is all above board and fully ASX approved. It is therefore that this stock does represent an excellent opportunity, it has been beaten up because of their previouse Accounting method- which whilst not illegal- did paint a rather ambitiouse picture. None of this however changes the fact that CLI is making the money and holding the Assets.
I have pasted part of the AGM speach below, this will explain the actual situation and clear CLI of any wrong doing.
>>Up to this point we had used a methodology developed by Challenger and applied consistently year by year. That basis was always agreed by our auditors and reviewed and accepted by the Board. This year our auditors concluded that, given the increasing size of our business, we should confirm our approach. This year for the first time we commissioned two international investment banks to review the methodology under which we value our business for the calculation of our profit.
The investment banks concluded that our approach was sound but that it would be prudent and more conservative in the current environment to increase the interest rates used to calculate these values. We explain this more on page 9 of our report.
The effect of this was to lower the profit level for the year but it is not profit lost, it is profit deferred. We will use the same approach for June 2003 and beyond so that independent experts will confirm our profit statement each year as we go forward.
While the market did not treat us kindly for restating our profit we believe the quality of our results is now materially better given that our approach has been confirmed by outside experts.<<
PS: I do hold CLI since a few weeks, and pressed"ADD" before realising that my previouse post would show me as having no position,- by default.
