GrahamMac,OK, I've had a look at AAC and - congratulations - you...

GrahamMac,

OK, I've had a look at AAC and - congratulations - you did well.

However, as a present investor, I couldn't recommend it. It's presently trading on a P/E of 78, with analysts estimating that, even by Dec 08 it will be on a 31 P/E.

It's dividend history is spotty and it's 2007 year total dividend is forecast at 8.5c/share, while earnings are seen to be 3.6c/share. Now, that's the wrong way around!

IMO, one should always continue to assess the value of their investments (income, plus prospective capital gains) against the rate of risk-free returns on offer (eg. government bonds). At present, you could take your capital out of AAC and invest it in a term deposit at 5-6%.

However, at a $2.90 share price and a dividend yield of 8.5c, AAC is presently paying you 3% (unfranked). In return for suffering this penalty, you are also assuming their risk of a share price decline. You also know that its last dividends are in excess of its present and projected earnings.

Now, with many companies, one is prepared to risk the capital decline, because there is the potential for share price growth. However, in AAC's case, it has paid out more than it is projected to earn for 2007 and, in 2008, it is still only projected to earn about 40% of its 2007 dividend. What do you think it's chances are of signficant price appreciation (absent something unusual happening)?

So, on the industry it is in (beef, not property): not bad.
As a current investment proposition, based on its metrics? Not a chance in a million years.
When would it be OK? On a P/E of 14 or less, or if there existed a prospect of future capital growth of more than 5% p.a.
When might that happen? When it either doubles in size, or halves in share price.

Summary: unless you envisage significant, future capital growth, you're better off with your money in a term deposit, at the moment.