HOW THE H*** DO YOU POST A PICTURE OR A SPREADSHEET ON HC?
Please go to share sce ne. com and look at the TOX posting for my spreadsheet of earnings forecasts.
COMMENTARY The basic valuation premise is this: (12c shares minus 1.5cps discounted cash flow value of the tax losses) = 10.5cps 0.8 cents per share earnings, normalized after tax for 2006fy (note no actual tax payable this year) = 12.9x PE current.
On the same basis I have them earning 2.2cps, normalized for FULL TAX (they’ll only pay 6% tax in 2008) so on 10.5c (12-1.5) they are on 4.5x NORMALISED 2008.
My investment thesis is thus: In two year’s time they will have earned a valuation (through 2-3 years of good business improvements and rising earnings results) that sees them worth 15x full year 2008 expected profits.
So…from Feb ’06 to Feb ’06 I believe that they will be re-rated from my forecast of 4.5x ’08 to a market forecast of say 14x ‘08’s results. I.e. 14/4.5 = a tripling in the share price over two years.
This is a low risk business. A typical Warren Buffet thing; real assets, generating lots of cash with high barriers to entry and government protection with no nebt too. Management have a Goldilocks number of shares; not too many, not too few, but just right. They have a pretty good board, what appears to be a wise chairman, and a hungry young management team. They have a diverse range of customers and revenue streams and a good exposure to the continuing growth in the resources industry...but are also not likely to be exposed to much downside in a recessionary environment.
Buy ‘em with your ears pinned back at the current prices.
TOX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
