Hi afd, Thanks for your help! IMO focusing on underlying results...

Hi afd,

Thanks for your help!

IMO focusing on underlying results is important so as to identify investments of value or vice versa. It's not a bad thing but, of course, one has to be careful for the repeated one-timers (some companies have a lot of those!).

I don't agree with you that FY16 will be a "a considerable improvement". I think it's you who is not comparing apples-with-apples.

Firstly, management have always talked in terms of the underlying business (most CEOs do!). Whilst they haven't clarified that this guidance is total-v-underlying profit this time, both these 2 items you refer to (i.e. SBP & DTA) are accounting items. Maybe you do but, I don't think management have deducted accounting expenses to get to the $2m guidance.

More importantly, If you insisted on adjusting the $4.2m FY15 underlying profit for those 2 items (totaling $1.2m) then that still produces a result of $3.0m profit. The main difference between this profit and $750k actual loss is due to the one-time Nanjing write-off.

To put FY15 NPAT in a table:
Underlying per FS $4.2m
Accounting adjustments -$1.2m
Underlying inc accounting adj $3.0m
One-time Nanjing write-off -$3.7m
Total per FS -$0.7m

What ever way you cut it, the current $2m guidance is a significant drop on last year - i.e. drop of ~33-50%. I hope the upcoming presentation provides more of an explanation.

Maybe I missed it but, I haven't seen any information to suggest this is conservative. Maybe it is, maybe it isn't. Management have unfortunately disappointed against their profit guidances thus far. What we do know is that Q1 is down on last year. And management would have the order book to give a feel for what summer looks like.

One other thing on their announcement, it said the MD share purchase was a sign of "confidence in future prospects". If so then, I wonder if we can get the latest Top20 so we can see who sold. If it was our Nanjing fellow then IMO it wasn't as voluntary as they are letting on. If that guy was intent on selling then Charles only bought to avoid the market being flooded with supply and the impact that would have to the SP and ultimately the value of his investment. Only saying because they talk it up whereas I am less certain it's so positive (not suggesting it's negative either, just not a positive).

I have always been on VMT side but my stop-loss and more importantly the key FA metrics indicated the slide was more than just temporary sentiment. If it turns around then so be it. I trust in my investment strategy.

All the best.