Ferrets Stock to Watch: TAMAWOOD LIMITED 08:25, Monday, 18 December 2006
A HOME CONTRACTOR MEETING TOUGHER TIMES ON LOWER COSTS
Sydney - December 18: (RWE Aust Business News) **************************
OVERVIEW ********
Tamawood Ltd (TWD) is predicting a 20 per cent rise in pre-tax profit for the December half year compared with the same period last year.
As an income stock the company is looking strong, paying a 13c dividend, to yield 6.99 per cent.
Directors told the Australian Stock Exchange on Friday that the outcome is consistent with guidance given at the annual general meeting and is the result of higher gross turnover, moderated by lower, but acceptable, construction margins.
At the recent annual meeting executive chairman Lev Mizikovsky said that near term earnings outlook, based on current work-in-progress and new sales enquiries, appears to indicate further growth in earnings per share.
Tamawood's medium term performance is less predictable.
However, the business is positioned as the lowest cost producer of a wide range of contract homes in Southeast Queensland, being one of Australia's fastest growing population centres.
On this basis, shareholders can reasonably expect a year of earnings growth and a favourable short to medium term outlook, provided general economic conditions remain reasonably stable and earnings are not impacted by unusual weather conditions.
Mr Mizikovsky told shareholders that the 2006 financial year record of $5.02 million after-tax profit result reflected the growth initiatives and operational improvements embarked upon in recent years.
The profit for the year to 30 June 2006 showed an 18 per cent increase on the previous year and equates to 15.55 cents earnings per share (2005: 13.73 cents).
Directors have declared a fully franked dividend of 8 cents per share (2005: 8 cents), taking the full year 2006 dividend to 13 cents (2005: 13 cents).
The company remains debt free, with $3 million in the bank at 30 June 2006.
Referring to market conditions, Mr Mikzikovsky disclosed that gousing affordability has been impacted in recent years by the imposition of GST and higher state and local government fees and charges.
However, the positive impact of high employment levels have off-set the negative impact of the government imposts and recent interest rate rises.
The current housing market activity level appears to be at or near equilibrium, with steady customer demand and adequate building industry capacity.
SHARE PRICE MOVEMENTS *********************
Shares of Tamawood on Friday rose 14c to $1.86, a record high for the year while the the low was $1.46. Dividend is an impressive 13c to yield 6.99 per cent. Earnings per share is 15.55c and PE ratio 11.96. The company has 32.5 million shares on issue with a modest market cap of $60.5 million.
A critical element of Tamawood's focused growth strategy is to secure the supply chain for key inputs in order to protect its cost leadership position.
The merchandising importation joint venture business was established 2 years ago for this strategic purpose.
The business is now profitable in its own right.
"Our franchised operations are performing in line with our profit expectations and continue to deliver exceptional value to our franchisees," Mr Mizikovsky said.
"We are currently undertaking a review of our franchise systems to ensure that future system enhancements provide our franchisees with a superior processing capability."
He said directors believed that the following important attributes of its business were essential to sustain consistent shareholder returns, irrespective of housing market conditions:
* The ability to expand and curtail operations rapidly in line with fluctuating demand;
* The ability to attract and maintain a skilled and motivated labour force;
* The application of software-based solutions to all facets of the business;
* A focus on the work-in-progress, inventory, debtors and construction efficiencies and ability and commitment of staff allowing the company to offer 5pc saving or full preliminary fee refund guarantee.
The company has encountered encouraging sales enquiries, especially in the 12 months to October.
The number of referrals from Tamawood clients and agents has doubled, lifting the overall level of sales enquiries by 13 per cent on the same period last year.
A reinvigorated Dixon Homes brand is expected to deliver further sales growth.
This initiative is now being reflected within the group's overall marketing strategy.
New sales offices have been established in areas where potential exists to significantly grow market-share, including Gympie Road, Chermside, and Lawrence Drive, Nerang, Gold Coast.
The total capital cost of both premises is $1.7 million.
The sale of Tamawood's existing Gold Coast and Sunshine Coast offices yielded $430,000.
New leased premises have been established on the Sunshine Coast and it is likely that a Capalaba sales office will be opened in the current financial year.
BACKGROUND **********
Tamawood Homes (TWD) joined the Australian Stock Exchange list in August, 2000.
The company sells contract homes with a network of builders covering Southeast Queensland (TWD's primary segment) and Northern NSW.
Tamawood also sells individual plans on a one off basis in the areas where the Company does not offer homes.
Revenue is earned through the construction of residential dwellings, project management fees and franchise operations.
Tamawood held holds a growing share of the Queensland new homes market.
Acccording to its website, the company operates through a number of brands.
They include Tamawood Homes, Dixon Homes, Cut Price Homes, Dixon Adventure Range, Carrington Homes and Remington Steel Homes.
