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ANN - ANSELL LIMITED


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Howdy ....

 

Two or three fairly impotant announcements of the last 3 days.

 

Firstly we have a substantial shareholder increasing his holdings on the 29/4.

 

Then yesterday the company announced yet another share buy back but for a substantial amount of the outstanding shares. It represents at 12 million shares and out of a total of 177 mio shares outstanding around 6.7% buyback. This coupled with previous buybacks brings the total to around 12 % of the company they have or are trying to buy back.

 

Lastly we have the announcement from AXA that it has increased its holdings and now has become a substantial shareholder.

 

Now one on its own is good, but all three together suggest to me at worst the market will be supported in ANN. ANN has had a few bad years going from making nearly 200 mio to loosing money as it wrote off some bad assets in 2003. Books look to me to have very much turned the tide and the company is a much different animal to what we had back in 2000. Earnings look to improve and the 2005 estimates if correct have the company at present values being around a P/E of 10 whicj when compared to other in this sector is very low.

 

Given the latest three announcements I have re- estblished myself at $7.42 and shall watch and see how the share behaves around the $7.60 level intially. Regardless of that with buying coming from 3 sources alone should sent the price higher over time.

 

Good Luck

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Kauhana1

 

Well done!

I am not trading this stock but have (for me) a substantial investment in it.

I have not done a fundamental analysis of this stock for a while and admire the work you have done. i am not as bullish about the stock as you are. I dislike on market buybacks.

To me it shows lack of imagination by managers and the only winners are the short term traders rather than long term investors. I just cannot see the benefit, as its only asset stripping.

I also thought that the December figures were pathetic and the dividend of $0.06 compared to the June half of $0.11 shows that the Directors have no intention of giving anything back to shareholders.

There are always tell tale signals with incompetent managers (in my opinion)-

1) Always talk about future.

2) Always talk of EBITA - a term which is used to judge line management. Completely useless to shareholders. We want to know Net profit per share and franked dividends.

3) Accident prone - eg Currency always works against them, irrespective if our currency goes up or down.

4) Consistent abnormal items.

5) Need to "Concetrate" on single iteks.

6) Make presentations in foreign currencies and skip over the fact that they are reporting in Aaustralia.

 

The above is my experience in investing over a period of 30 years. Look at Ansell, they are guilty with all of them.

 

I hope I am wrong.

 

 

Regards

 

 

Avenger

 

 

 

 

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Howdy,

 

Yes totally agree with your views.

 

EBIT is as you put it correctly a waste of time !!

 

Management of ANN has hidden behind this sort of stuff for a long time.

Also very much agree the hiding behind the abnormals number has been an excuse used for too long with this company.

 

Now where I may be being a bit hopeful is believing this sort of behaviour is behind them.

 

Personally can't see any abnormals left that can jump out and bite us. Of course this may be famous last words, however ANN has divested itself of most of its non core assets and also most of those not returning a decent amount.

 

Having said that of course they can turn around and bite me with a surprise.

 

Now how I see it, and yep maybe thru rose coloured glasses the company is about to achieve substantial increases in both bottom line profits and EPS as well as real profits and maybe even increase their dividend.

 

With the share buyback I look at this differently as well. Money freed up and realised by getting rid of some dogs they are usuing to buy back the shares and if anything else increase returns for individual shareholders. On the other hand I agree piecemeal buybacks as ANN has been doing are a bit of a joke. Why when they first announced the intial buyback they didn't just go and buy 20 million is beyond me.

 

Now the last set of accounts came out and the AUD/USD exchange rate was 79 cents. Currently we have the Ozzie looking to go through 70 cents. That is the currency has fallen by 11%. Most of its sales and income are in USD as well as most of its cost are incurred in USD and the surplus being profits are also reported in USD. Now from that perspective I would look at an increase in the bottom line results rather than any watering down of expectations.

The US economy is coming off its lows and well and truely has turned the corner with strong economic numbers for the last few months.

 

Bottom line I would agree with you if in the face of a better base currency Aud/USd if they were to try and use some exchange related excuse it would not wash with me.

If the sales numbers out of the US were not at least good again this would not wash with me. In fact any excuse in the next set of accounts would not really be acceptable for my rosy scenario to be correct.

 

So in the end, for me a lot is riding on the next accounts, but I firmly believe at least at this stage that yes the company has turned the corner. If the accounts come out as I expect the shares will jump and as I said before I believe the higher they go the more buying interest that will come in. This is of course my preferred scenario.

 

On the other hand if my misplaced faith in the new ANN becomes true I would expect unless the numbers are complete dogs the stock will still be supported. With the share buyback scheme alone for 12 million shares there should be no need to rush out and sell on any sudden drop.

 

Having caution to past surprises, I still strongly believe ANN feels and looks like a company that has turned the corner and await the next set of accounts to confirm/ disprove this.

Accordingly I shall be long and buying on dips and flicking them out to try and build a position that regardless of the numbers even if the stock was to fall the overall cost would be minimal if at all. If the numbers come out as I expect or even better I feel $9.00 target is realistic for sometime in the month after the results. With funds looking at the company as a recovery/growth prospect maybe a lot higher into 2005.

 

Many thanks for your comments. I shall be very cautious.

 

I must admit the share I purchased last week I flicked out for a tiny profit along with nearly every other share I owned late last week. Overall market at the time despite being off recent highs felt mushy to me. At present nearly 100% cash ... and looking to buy on some dips this week with the S+P ASX 200 down to say 3330 ish. For ANN I shall wait and see but suspect maybe we see the $7.21/22 level as a better level to get back in. Not much from where I flicked them out but 2.5/3 % adds up over time.

 

Good luck

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Howdy ...

 

Lowering the buying levels yet again. Lots of sellers happy to sell around $7.22 so suspect even lower so shall have a look around $7.12 and buy half and set the other half lower around the $7.00 level.

 

Not looking as though we have any letup in the sellers and the buyers for the share buyback seem to be sitting on thier hands so I shall do the same.

 

Good luck

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Shows how quickly things change.

 

Started typing last post at 11.12 am with ANN looking sick and no sign of the buyers we have seen and then boom. Price was trading at $7,22 with few bids then 10 mins later trades at $7.35 and a serious bid for this stock at $7.30. Too greedy.

 

Buyers still there just not showing their hands !!!!

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Hello Kahuna1

 

Good research.

 

I have a question for you. If most of Ansell sales and costs are in US$ then, the raise in the US$ and the fall in the Aus$, should only mean a bigger profit in Aus$ correct? If this is the case, then we should have expected an increase in the share price and not a fall.

 

I spoke to their finance guy a couple of years ago, and he told me that in fact they sell in Europe in Euro$ and not US$. And Europe is big for them. If nothing has changed, then the strong US$ may be hurting them.

 

Just a couple of interisting notes with my chat with this executive.

 

1) PDP got in trouble in the USA with that heart device. Over a billion dollar loss. Did you know that they had NO insurance because it was TOO EXPENSIVE?

 

2) They gamble with the exchange rates. When ther Aus$ was at 0.60 a couple of years back, they believed that it would increase to $0.72 (Pasminco had the same thought.)

The dollar dropped tp $0.52. Result, over $200m exchange loss. Had to sell other divisions to get cash for this.

 

3). When they sold off Repco and Pacific Brands, they had a lot of choises with the cash. One was a special dividend to shareholders. They chose to reduce US$ dominated debt at $0.52. Less than three months after this, the Aus $ was over $0.60. At least $200m gain in E/R was missed. At same time, the translation of US$ sales into Aus$ dropped. Result - no dividend. These decision were taken by the current Directors. Do you see what I mean by "bad luck" following a company? And who was the Chairman of PDP? Ralph! And he is on Telstra's Board. See the "bad luck" affecting Telstra?

Unfortunately, Direcorships in this Country are "boys club" and a lot of fools go from company to company and "bad luck" just follows them. No accountability. No responsibility.

Look at Ziggy's prior record. Look at Telstra's price. Billions lost in investments and no one is accountable. No worries, we'll just increase line rentals.

 

I agree with you about this being a reasonable company, but I need to be convinced that these managers have the capacity. The share price has done nothing since they have been in power.

 

 

Regards

 

 

 

Avenger

 

 

 

 

 

 

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Thanks Avenger ...

 

Got set yesterday early on below $7.30 wasn't going to fall for the trick second time around. I got set price suddenly went bid yet again.

 

Many thanks for the great info and history excellent.

 

Agree about company directors. What a load. Some ex politicians on boards are a joke.

Ex Premiers ... hmmm one in particular.

 

Thanks for the info about ANN and the European sales. Yep already knew that. If it was really going to effect their bottom line would have expected some warning by now so I expect the bottom line, the very rosy bottom line presented a few months ago is still valid.

Yes it is my contention that ANN should benifit from a lower AUD/USD exchange rate.

ANN has its accounts in USD and it is their base currency. If the bottom line profit estimate in USD they made a few months ago is still the same the bottom line profit in AUD should be up by well over 10% representing the fall from 79 cents to the current just below 70 cents. This may be a one off move but I look at it as a very much short term positive that has been ignored by the market.

 

ANN and hedging currency risk. Yes they certainly have had some very big bets on the direction of the currency by going un hedged. Maybe that is why they have their base currency as USD as opposed to AUD. Shares are Australian and bottom line valuation is Australian. Hence if assets held in USD and income in USD and the exchange rate falls I would expect a benifit from a falling exchange rate from now on. This obviously wasn't the case 2001/2003 but the company did go from making 120/140 mio a year to making a loss.

Now I believe they have got rid of 85% of the dead wood. maybe I am wrong. Certainly I am taking all you have said on board. Taking a big loss on the currency when it went loopy and having to sell assets hurt the company. Looking seriously at the exhange rate moves of recent years they defy rational prediction. Not an excuse, it was too big a bet.

 

Australia as a country has enjoyed one of the highest growth rates of and developed country for the last 5 years. Our goverment debt has been going down, unemployment improving and a very good report card on virtually every front. However with the Asian financial crisis we took a small hit but perplexingly it was the USD that did the damage in the end. US economy and debt in comparison has been very very poor when compared toi AUstralia but that didn't stop the currency being sold down over 40% to below 50 cents.

Conversly the move back over 80 cents quickly was over done. Now yet again in a 4 month period we have shed 10 cents .... again I think this is overdone. US economy is just starting to turn the corner, having their currency go up quickly by 10% will not help them at all. If they raise US rates this will just make things worse. The recovery in the US is not robust and is a lot more fragile than they would like to think.

 

Anyhow back to ANN. I am in yet again and we shall see what the numbers bring. I will be activly trading the position within the current range but with the hopes of building a position

to hold on any break higher. I have been long for several months and have been in and out five times when the market looked like peaking and feel back a few percent.

 

Insurance, one has to love then. Wonder what the quote was for cover but I am sure it would have made our eyes water. Rates for medical devices and in fact for anything medical in the US are ridiculous. Unfortuantly we in Australia are following. Of course if a doctor does something stupid he should be fined and loose his licience. On the other hand if you have something very risky or cosmetic done you have to accept some responsability if anything goes wrong. Seems we all need something or someone to blame if it goes wrong but the fact is if you are seeing a doctor something already has gone wrong and if he chooses course A as opposed to course B to fix the problem and the course he chooses in good faith is not the right one we now have to blame some one. Funny world we live in.

We all die, sad but true.

 

Many thnaks again for your thoughts .... we shall see

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Hello Kahuna1

 

When it reaches $11 Iwill also start trading it. LOL

 

Whats your view of the new CEO?

 

I don't know anything about him, but one of the things I read yesterday I wasn't happy with. One of his allocated priority is "to grow the top line exponentially....".

 

I have been associated with a couple of companies that have taken this top line approach. Good short term. Disastrous long term. I am not suggesting that this will happen to Ansell, but I just don't see how this objective lines up with shareholders wealth.

 

Still, i hope this guy is a winner for all of us.

 

 

Regards

 

 

Avenger

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Howdy Avenger ..

 

Didn't hear that about top line approach. Would agree not a fan of the process. makes the gulf between the Indians and the chiefs huge. Market has ignored the announcement and I suspect is doing a wait and see approach.

 

His experience with Cadbury looks ok on paper with a background very strong in the marketing side. Don't like Dr Pepper and think it tastes like #$@&. Think he may have a hard job stopping the company at present no matter what he does. I think it has turned but if he starts meddling and chnaging a lot of things for the worse things may come apart.

 

Share just keeps being bid by institiutions and it has a pattern opens with little or no bids then wham in they come. The ones I got at $7.26/27 yesterday I am starting to flick out round here. Only 2.5% but it just keeps on doing the same thing day in day out. If we have another down day in the US we will be $7.25/$7.30 and can start all over again. My aim is to do this a few times and then if the unexpected happens and we fall 10% quickly I will just be paying back some retained profits. Have been in since $6.40 and in and out for a 2-5% payoff five times since then so the average is some where sub $5.50. Failed a few times around the $7.20 and then twice at $7.50/60.

 

Hope the new guy is a winner as well .... announcements made on the first few weeks into a new job rarely ever turn out to be what actually happens to a company unless it is a rescue package job. Don't think ANN is there.

 

Good luck

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