Hi I have been doing some research and found what i think is a great investment chance, whats peoples opinion on this company? thing going for it - It has been profitable for last 6 years - they have 3.6 million cash in bank, - no long tern debt - predicting a 1.7 million gain next year - it has cut cost by a further 12% by moving operations back to Australia and cutting staff - now offers a dividend of 25% of earnings everything seems pretty good in my opinion,but what do i no i invested in ccu share price is at 0.07 atm.
imo this is primarily a trader's stock and therefore you would have to out-trade more experienced traders if you are to profit. There would be traders out there who have already taken their profits in this. As an investment I dismissed it pretty quick because of a few simple 'tests'. 1/ Over the decade this company has made shareholders only 800,000 dollars of net profit after tax. Going back further would show even worse. 2/ The decade record for Return On Equity (ROE). This single concept when grasped can turn you around from being a pure gambler. My understanding. A company starts off with some seed capital (I think this is what is meant by 'reserve') plus a big chunk of share capital that is subscribed by the first shareholders via an IPO. As the company proceeds it issues more shares down the track for more capital. If the company makes profits and retains some or all of the profit that is added to the pool of capital. Annual losses are subtracted from the pool of capital. Forget the reserve - its like a 'float' and always small. So the share issuance money + the retained profits minus the yearly losses add up to what's called the shareholder Equity. It's what the shareholders have put in over the years through new share subscription or left in as retained profit after annual losses are also accounted Now you need an opinion as to what Return you think is worth the risk to buy that Equity. The Equity that's been put in (share issuance) or left in (retained profits) minus what's been lost is either yours as a shareholder, or conceptually yours as a prospective shareholder. The Return on the Equity is the only reason you are buying a share of the Equity rather than leaving your money in a bank account. So what are you being paid in profits relative to the size of that Equity? Expressed as a percent that is: Profit / Equity X 100 = Return On Equity = ROE for short What has been the ROE over a decade for Techniche Ltd (TCN)? Financial Years 2004 - 2013: Return on Equity (%) -63.4 -33.0 -36.3 -4.8 3.1 12.4 1.9 2.7 5.4 8.4 That's an average 5.7% over the last 6 years. Admittedly the ROE has been rising over the last 3 years but it is still an unexciting ROE given you could have expected around 5% or so average over that time in a riskless term deposit. Also that 5.7% is not available to you. It is retained in the company's capital as dividend has been negligible. So will the ROE continue to increase? I have nothing to base a guess on other than mgt guidance for FY14. Margin has been going up however revenue has been going down. Price to earnings (P/E) at ~14 is arguably not terribly high given that the company has given guidance of $1.5m - 1.7m for FY14 which would be at least 36% earnings growth over $1.1m in FY13 if management is true I did see that the directors and management pay doesn't look too excessive for this class, that the company has no debt and a bit of cash in the bank. Also it has shown that it will pay a dividend when it can. Chartwise, correcting the rally, it has overbalanced the newest uptrend, is overlapping (i.e. price has gone below previous peak), and has not thrown a bullish candle yet. So if I were buying, which I'm not, I would still be watching for some sort of signal unless excited by notions of the 'fundamentals'. Easier out there? Just an opinion. [imgz=http://forums.silverstackers.com/uploads/1893_tcn.gif][/imgz]
