what's happening here?, page-11

While we are on the not-so-trivial subject of P/E ratios, these are some of the numbers my analysis has thrown up.

This is an excerpt from the market update provided by the company on 30 July 2010:

As a result of the above, we currently project our FY11 EBITA to be approximately the same as last year ($58.9m). Our NPAT for FY11 is projected to be approximately 10% higher than last year ($26.2m) due to lower interest expense, before adjustment of the net expense to close our UK operations ($7.6m after tax, as previously announced).

Based on this NPAT before UK closing down expenses is expected to be $26.2m x 110% = $ 28.82 m.

After the one-off, it is 28.82m - 7.6m = $21.22 m.

They have 118,169,908 shares on issue. This gives EPS as follows:

EPS before UK closing down expenses = 24.39 cents

EPS after UK closing down expenses = 17.96 cents.

Based on earnings after the UK closing down expenses, the P/E ratio is 9.9. If we exclude the UK closing down costs as a one-off, it is trading at a low P/E ratio of 7.29 which is fairly low.

Management have foreshadowed dividends of between 12-13 cents a year fully franked, so dividend yield is between 6.74% to 7.3%. Taking into account franking credits, it would be between 9.63% and 10.43%.

So unless the market update on 30 July was porkies, and I have no reason to believe it is, I think the numbers look quite favourable for PRG as an investment. I think there will be a re-rating on 24 November when half yearly is released. VBA languished at 28-33c for a long time before it reported its financials and met its forecasts. It has jumped 50% since then to 45c+. I am expecting similar treatment for PRG.