dividend, page-5

UTS

I am having a really good look at Billabong

here's some stuff that I have dug out of the annual report.

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PROS

predicts strong earnings growth

direct to consumer operations = 38% of revenue vs 21% pcp (as a result of vertical integration)

total company owned stores 639 vs 380

better sell through in the first four weeks of FY12 with +ve comparable store sales July 2012

CONS

FY11 NPAT would have been worse if not for tax benefit that will not apply to FY12 result where the effective tax rate will be similar to FY10 ie approx 27%

Massive inventory overhang from acquisitions

Doubtful debts = $19.9M (conservative)

Online sales only $50M in consolidated result (that?s only 2.9%of revenue)

Borrowings now $468M vs $216M

Gearing now 28% vs 15%

Interest Cover now 6 times vs 12.1 times

Costs out of china are increasing

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I agree with you that the dividend is now well into the target range of many investors regardless of franking

IMHO there is a good case for a turnaround investment over the long term while there is also a good argument for keeping it on the radar for a little bit longer..

IMHO they will not need capital raising but if the global economy doesn't pick in next six months then I would expect the dividend to come under serious pressure as they will struggle to convert massive amount of working capital (in the form of inventory) into cash..

On the other hand, if global economy picks up and consumers start spending, BBG are well placed to make money hand over fist..

DYOR