Actually I think that a lot of shares have dipped after the AGM.
I did not listen to question time here, so maybe something spooked the audience.
My take is that investors have lost sight of profits and we now have a new investment model Revenue Growth or multiples of revenue. Take STP (Step One) a product I like but next year will made $2 million and valued over $500 Million. Sorry but if you think that other competitors cannot challenge that position I must be dreaming. The moat must consist of the cost of a ticket and some travel money plus the cost of advertising and Step One spent $30 Million so a budget of $70 million and you can probably get the same airspace all to make $2 million.
Nothing to suggest this is a growth industry. Nothing to suggest we are all going to eat more chicken. So this is a slow gradual change in fortunes driven by cash flow.
This is a geared investment and you hope the interest rates stay low for another 3 to 4 years and that the company keeps improving. The fear will be interest rates. The plus side is that if you hit the sweet spot it generates $1.20 cash flow per shares earns around 45c has around 70c in depreciation ( around $265 million in total). So what you have to repay debt is dependant upon how much capex you put back in. If they can pay off $200 to $250 million each year that will change this investment over time. That is why I invest here. I buy in when the fanfare of dividends has gone and the slow bleed keeps happening , sell out when it gets a bit pricey - rinse and repeat.
At some point it will become a core holding if the rerating starts happening. That will only occur in my opinion when the debt has been reduced a lot more and all the efficiency programs have made the difference.
ING Price at posting:
$3.52 Sentiment: None Disclosure: Held
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