Attended the AGM on Tuesday (15 Nov), having held the stock for...

Attended the AGM on Tuesday (15 Nov), having held the stock for about 18 months, wondering about adding more given the price is off a bit since the FY6/16 results announcement. It was a short meeting, somewhat heavy on formal business, with the review of ops rather brief, so really not much to report here. Spoke afterwards, separately, with two individuals – one on the board, one not (but with connections to the board) in regard to debt paydown vs. M&A. The message from both was the same – owner-CEO Danny Wallis likes the dividend and dislikes debt. The board are not disinterested in M&A (having just successfully completed Phoenix and Simplicit acquisitions), but would not pursue any opportunities that they don’t think are clearly earnings accretive, and they would need to be able to quickly pay down any new debt. Of course, most boards would say much the same, but with Wallis unlikely to want to see his ownership diluted or the dividend reduced, you feel reasonably assured that they’re not going to do anything dumb with free cash.

If you believe the forecasts of the sole covering analyst, the stock looks quite attractive on FY6/17E and FY6/18E PERs of 10.0x and 9.9x and grossed-up dividend yields of 11.7% and 12.2%.