Morning Star does have five years of history for TGA, because it supplies metrics for YE 30/03/2007. However to calculate 5 years growth, one needs six years' history. Also, the per-share metrics for 2007 are misleading, because of the December 1997 float. Consider the Morning Star figures for EPS.
This suggests a compound annual growth of about 12%, but as I explain below, the reality is better than that.
The 1997 annual report states that diluted earnings per share from continuing operations was 11.64 cents on an average-share-number basis. However, to accommodate the float, the annual report proffers an alternative earnings per share – namely, a 5.05 cents diluted earnings per share from continuing operations, based on total shares (including the effect of performance rights) at balance date of 129,460,000. If you start with 5.05 cents for 2007, and end up just over 20 cents for 2012, this suggests 32% annual growth – a superior performance to what one would conclude from the Morning Star metrics, and there was no deterioration in 2008.
The 32% growth could be said to come off a low base, so pick any number you like for future growth. Here are some numbers to help you (the 2012 EPS is an estimate).
Misunderstanding the debt/equity ratio and the stellar performance history of TGA would have influenced the fair-value SP calculations of some investors, by increasing their required rate of return and by decreasing their prognoses for future years' EPS. This is a good thing, because I have accumulated 420,000 of the beauties, or roughly 50% of my total portfolio. If the dividend increases by CPI only, I can live off it with shekels to spare. I'll sell some one day to rebalance my portfolios (I have two – one being for my SMSF), but the SP would have to increase significantly before I would seriously consider selling any.
If you look for ASX-listed companies that have an ROE >20%, a 5-year EPS growth of > 10%, the absence of a reversal in any year, a debt/equity ratio of < 20%, virtual immunity from trade union or government interference, does well in bad times, is not negatively impacted by the high Australian dollar, has contracted streams of income, has been around for many years (since 1937 in TGA's case), I would be astounded if you found more stocks than you could count on one hand, and if you looked at their PERs, you would be compelled to wonder why TGA is trading at below a PER of 10. Based on the relative merits of other listed stock, and their PERs, I am stuffed if I know why TGA's PER is not north of 15.
On the matter that Klogg mentioned about welfare recipients, Centrelink's commitment-paying facility is called Centrepay, and it can be used for household appliances. TGA has, I believe, a good Centrepay-related modus vivendi with Centrelink, and with luck it might pick up some debt management work one day.
TGA Price at posting:
$1.64 Sentiment: Buy Disclosure: Held
