apollotails I'm no expert but here are my comments...
there is a bit in the Southern Cross brokerage report on the risk of adverse currency movements. The company also puts out regular quarterly reports on performance, and recently they have been quantifying the negative currency effect (as it has cut into expected results) which amounts to foregone profits of something like $A150k every one cent rise in the $A. It is worth looking at both of those sources.
The company position is unhedged, but the defence is that much of the expenses are in $US as is the revenue, so currency exposure is a net profit issue rather than a gross profit margin issue. Either way, the overall bottom line effect of unhedged strategy sofar has been quite big as the $A currency has risen alot in the last couple of years, maybe as much as 1.5-2c eps, which is alot in a EBIT of 6 cents (ie EBIT could have been 2 c higher if $A hadn't appreciated).
The question on currency is what will it do in the next 2-3 years as DBS's business reaches its potential. The Southern Cross model predicts an appreciating then a declining $A over a 3 year timeline, to settle at a bit less than present. I read somewhere at the end of 07 the financial pundits are predicting a $A by the end of 08 in a wide range - as low as 80c and as high as maybe $1.10, so who the hell knows anything. I would have thought most of the $A currency appreciation has already happened, and the long term trend will be back down, but thats just a guess. The currency hasn't moved much either way in recent months.
I think the current negative share price sentiment is a market wide thing with focus on stocks with US exposure - not so much currency, but is advertising going to crash?, is the online market immune as it is growing so fast? These are the main short term questions along with the big question: will their business model come up trumps?
Southern Cross are predicting EPS growth to maybe 12 cents in 3 years - even if the $A goes up a huge amount, unhedged losses won't get anywhere near that sort of EPS growth.
As price has dropped alot in recent weeks, probably won't be a better time to get in.
DBS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
