they just made 44cps , and they always outperform forecastsThyre...

they just made 44cps , and they always outperform forecasts

Thyre continuing to takeover businesses at a healthy cas-flow

With this biz cash flow from core opps is most important

I reckon with a global recovery and all the infrastructure programmes in place here and in the USA, you gotta think that in 2010 theyll OUTPERFORM again

Assign 10% EPS growth and you get 48cps EPS; Some forecasters are saying 51cps at the high end

I think you can given this company a PE of say 12-13 historic given the recent performance and strong cash-flow generated from core opps

so 44cps EPS * 13 = $5.72

its a no-brainer

They made 34.15 NPAT

Lets say 15% growth for 2010 = 34.15(1.15)=39.27mill NPAT

39.27mill NPAT/78mill shares = 50.3cents per share

give forward PE 10= 5.03
give forward PE 11= 5.53
Give forward PE 12 = $6.04 valuation

cash-flow from opps is 38.6mill which is great!

Obviuosly their CAPEX is high due to making many EPS accretive acquisitions that meet their ROE standards

Once they stop acquiring or settle down a little ala say UGL (which has matured somewhat and gone into some defensive sectors like property management in the USA which is doing very very well for them), theyll be a CASH-COW given the huge cash-flows from core operations

Their debt also is manageable and a third of equity

If they can do a UGL and mature at some point re acquisitions , theyll be a CASH-COW business. I.e FREE_CASH-FLOWS will be huge! Thats is, cash flows from opps minus CAPEX minus divvies will be huge and theyll retain alot of cash for divvys cap returns etc

So far RETURN ON ASSETS or RETURN ON CAPITAL shows that theyve grown the business nicely with a mix of equity and debt. The integrations have been solid as demonstrated by good return on assets or RETURN ON CAPITAL! Return on equity is also very good.

U cant compare this coy to ABC LEARNING. YES, it takes over a lot of businesses, BUT......... its debt/equity has been a measley 30% till now. If the debt to equity climbs to over 100% ala ABC LEARNING ill be worried. But at circa 30% its very manageable and the return on capital shows a good figure (i.e theyre using their debt well and making good returns on the debt+equity). With ABC, their return on equity was TERRIBLE; Their RETURN ON ASSETS or RETURN ON CAPITAL was HORRIBLE. They simply took on waaaaaaay too much debt and issued too much capital and DESTROYED theur core biz which was doing well.

Cardno may well keep taking over, but its debt is nowhere near the equity level. Furthermore the Return on Capital (i.e return on debt+equity) is good and getting better unlike ABC where it was terrible and getting worse)

If debt/equity got to a high level e.g 60%+ id think about abandoning ship, but at these levels and VERY STRONG CASH-FLOWS from CORE OPPS (and good ROE and ROC), ive got no probs!

Its a cash-cow but-for the CAPEX due to take-overs and debt is lowish now

So im happy and no doubt itll be a cash-cow retaining ALOT of free cash d flows as retained earnings in a few years when it matures and then youll get very high divvys and or cap retruns etc.