Here is my first value analysis of a company. I plan to build on...

  1. 17 Posts.
    Here is my first value analysis of a company. I plan to build on this, so what you see is the bare bones, or the base of the structure if you like. A huge thanks to Roger Montgomery (An Australian fund manager who has consistently outperformed the market) for making his knowledge and expertise freely available.

    A Value analysis of Trade Me Group Limited

    Debt: $29m compared to $66m currently held in cash | 8/10
    Return on Equity: 12.9% and increasing | 4/10
    Dividend payout ratio: 81% | 2/10
    Intrinsic Value: $2.26 compared to share price $6.07 | 0/10
    Reputation: Good. As far as I know, it is still the go-to trading website in NZ. | 9/10
    Prospects: The NZ market seems to be fully saturated. The closest overseas market is Austalia, which is already occupied by Gumtree and Ebay. | 2/10
    Competitive advantage: Yes. Brand awareness, market monopoly, good reputation, operated in NZ. 7/10
    Management: Backing the takeover from Apax is a fantastic move for their shareholders as it pushes up the share price. However, the 81% dividend payout ratio may not be in the best interest of the shareholders, as more value would be added if they found a way to reinvest in growing the company. 5/10
    Other notes: $687m of 'accounting goodwill' on the books represents 81% of total assets. This is a huge warning sign | 1/10

    Conclusion: I would sell. In the coming years, if the take over goes ahead, I predict writedowns from Apax (say 2 - 4 years from now).

    This is not financial advice, just the opinion of an amateur analyst. Ideas for improvement are welcome.
 
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