I calculated the per share NTA had finally passed $1.00 when the report came out, but had failed to update my share count for the latest DRP issuance. Thinking they had finally cracked the $1 caused me to look back at my 'UOS since inception' spreadsheet as I thought the per share NTA 50-bagger had finally been cracked.
I extracted the following:
Investors in the IPO at the end of 1987, who paid 20 cent per share (the split adjusted equivalent of 2 cps using the current share price) assuming they foolishly opted out of the DRP over the years have earned $3.16 per share in dividends (15.8x their original capital).
They have also received $0.95c in capital returns (4.8x their original capital).
Furthermore, their original 20c of NTA is now worth $9.6612 per share (48.3x their original capital).
They have made 69x their money. Meaningfully more than that on a time value basis as the dividends commenced in 1993 and are now in fire-hose proportions relative to original investment. The 3 cent annual dividend is the split adjusted equivalent of earning a 30c dividend on the IPO cost base, or 1.5x your original investment every year...
If an IPO investor chose to DRP their stock, they have earned just a shade over 20% annually for just over 30 years for a "260-bagger". A $10k IPO investment (50,000 x 20c shares) is now roughly 2.69m shares worth $1.722m (at 64c), but with an NTA of $2.6m.
Everyone raves about what an outstanding business CSL is, UOS is its closest ASX competitor in terms of value creation history, but goes almost completely un-noticed.
Yet CSL trades on 43x last years earnings (and could very well justify this lofty valuation), if one adds in the net debt, it's over 45x. Whilst UOS trades on 8x last years earnings and when one backs out the attributable cash, nearer to 6x, or alternatively, leave the cash in and you've got 1.5x your purchase price in conservatively valued tangible assets on top of a business earning 1/8th of your cost base and growing.
I'll grant you property development is a lumpier business than making blood products, but perhaps think about the valuation in a different way.
One alternative is to consider that over the past 10 years, CSL has earned a cumulative $14.37B in profit and has equity valued today at a little over 7x the cumulative earnings of the past 10 years. Over the past 10 years, UOS has earned a cumulative $1.003B in profit and has equity valued at about 0.9x the cumulative earnings of the past 10 years.
If CSL is not an "apples with apples" comparison, the same argument could be made with GMG who are a very similar business to UOS. GMG earned $6b cumulatively over the past 10 years and is valued about 3.2x that figure... GMG trades at 2.3x tangible equity, UOS trades at 0.63x tangible equity.
The key thing I think UOS is punished for is the dilutive DRP. For example, CSL earned 204% of its 2008 profits in 2018, but it shrank its share base by 24.5% over the period, meaning the equivalent of a 270% rise on a per-share basis or 10.5% annual EPS growth. UOS earned 224% of 2008 profits in 2018, but share count rose by 61.1% meaning the equivalent of only a 39% rise per share, or 3.4% annually.
I routinely tell people when asked that the "efficient market hypothesis", whilst a fiction is becoming ever closer to being a reality with each passing year as the efficiency of the market improves, massive anomalies such as this one leave me confident that there's plenty of runway yet left for investors focused on seeking mispriced securities.
As previously indicated, this mispricing mystifies me, but as someone who has now been accumulating UOS stock for more than 10 years, and is hopeful of continuing to do so for the next 10, I am grateful... - Eternalgrowth
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