run starts now?, page-16

FB

TGA was probably overvalued at $2.60, when I sold some, but should have sold more. At $2.11 it is undervalued in my opinion. I'll not buy more because I do not have the funds, and because I hold 500,000 already.

TGA is not like mining services and similar companies that rely on a few customers, and where the dragging out of a tender can have a large repercussion. Apart from its myriad of small clients (some 100,000 of them) the payment-schedule nature of its income stream insulates TGA from any short-term blips in the rate of deals being made. This, and the good cashflow, means that dividends can be assumed to be steady, and so one can get a good yield on any money invested at the current SP, while one waits for the SP to rise. Of course, the SP may not rise, but that probability is what each investor must consider. Some four years hence the SP could easily be $5.00, and if one has in the interim been paid a dividend yield in excess of 5%, which with franking credits is about 7%, then TGA is a good place to park large sums.

I have reason to think reality would be worse than the Thomson Consensus Estimates, which are:

- - - - 2013 - - 2014 - - 2015 - - 2016
EPS - - 19.1 - - 19.5 - - 21.4 - - 23.4
DPS - - 10.5 - - 10.5 - - 11.4 - - 12.2

If one bought at today's SP of circa $2.12, one would get a good fully franked dividend while one waited to double one's money on the capital-gain front. This value-investing style is, however, not to the taste of everybody. Those born since instant coffee hit the market, probably do not have the patience to wait a few years to double their money, and if they have other investing styles that do better, then they should not buy TGA, the tortoise in the old hare and tortoise fable.