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NEW - NEW ENERGY SOLAR LIMITED


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One problem with giving a stock the ticker "NEW" is that it flusters the search engines which mostly ignore common words (try typing NEW into the search function of this or other NZ share forums).

 

Thought it might be a good time to examine the micro-caps for any signs of value. According to the database I consulted, the number of companies with a market cap under $50m was 66 out of 150 - a massive 44%! Furthermore only 29 of these companies appear to have recorded any sort of profits in the past year.

 

New Image has certainly made its fair share of mistakes since back-door listing via SEL (Selector Group) in 2004. The purchase of Australian company, Omegatrend, out of administration in 2006 appears to have been one of them - claiming "misrepresentation", New Image soon put Omegatrend back into liquidation, though managed to retain some of the relationships with distributors. It's also been associated with the Australian "weird company of the year debacle", Firepower - apparently manufacturing the very pills Firepower claimed to be selling.

 

Unfortunately, like many smaller NZ companies, finding a set of recent accounts comes down to calling the company - something I've yet to do. The June 2007 accounts can be retrieved from the companies office web-site, but that is the most recent. Chairman, Graham Clegg, appears to exude some of that new age, dietary quackery that makes me uncomfortable. However, the recent appointment of a former Fonterra senior manager, Max Parkin, on the current board provides a little reassurance.

 

While New Image results have been weak since listing, the full year 2008 should be a good result. The half year reported a profit of $1.48m and revenues are expected to rise from $25.5m to over $40m. Without access to the half year report, it is difficult to determine whether the improvement has been achieved through improved sales margins, reduced % commissions or reduced corporate costs. The latter may be feasible given the lower cost associated with closure of the Omegatrend head office. If so, a $3-$4m profit (nil tax payable) seems feasible and the market cap of $34m looks good value if historical growth rates can be achieved.

 

For now, I'm happy to watch this one. Spreads are big, liquidity is low and the Asian market that dominates sales has proved flukey in the past.

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NEW share price took another step up last week to close at 19cps (from 15cps last week). This is a one year high and up from a low of 9cps one year ago.

 

Not very liquid, though, as NZX micro-caps go, it could still be called "tradeable". I'm estimating FY profit at $3.5m for a P/E of 12 at current price of 19cps.

 

(I'm not holding)

 

 

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  • 2 months later...

AGM speech mentions that first quarter revenue was $17.1m (up 73% - but at least partially due to intervening acquisition) and NPAT was over $2m, with FY revenue forecast to be at least $50m (against $39m for FY08 and $2.2m profit). Profit margins have improved due to changes in exchange rates and a decrease in raw material costs. This looks like an excellent year for NEW, though they may not be a full 30% tax payer yet?

 

Market cap $39m and about $1m of net debt.

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  • 3 months later...
  • 1 month later...
Another significant announcement out for NEW this morning, with trading on track for $100m sales in FY09 c.f. $40m in FY08. Share price has bucked the trend since results overcame scepticism in regard to their results forecast. Illiquidity is the nuisance though.
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  • 3 months later...
  • 1 month later...
excellent report today: huge growth in revenue and profit, and still significant growth in the next few years foreshadowed. Huge double bottom pattern on long term chart indicate target to $1.60 share price (in 12 month's?). Market cap now qualifies NEW as NZ50 index stock, making it compulsory BUY for fund managers in the next few months.
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Yes, they are one of the few small caps I have seen to achieve what they said they would over the last couple of years. I must admit, looked a bit wacky at the outset - and in some regards, I'm still not "sold" on them. But they're delivering for shareholders, which is what counts for now.
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Lizard, Jane

I am blown away by results and stayed up late to research last night & had to buy in at 82c today. I can only see great things ahead; powering sales growth, o/seas markets proven to have high potential and still more, great margins, huge cash in bank, no debt, 25yr hisory not all as listed co, very good board, they own the whole chain. I am kicking I hadn't noticed sooner. With a PE of 11 this should be in mid 20s given there's high growth into future, based on average of last 2 yrs then Jane's S/T target $1.60 has to be assured. Not to mention the fillip that is bound to come with partial listing into Malaysia.

 

I am new to the stock so what am I missing?

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Hi Morton,

"...had to buy in at 82c...". You should be able to buy more at lower prices in the coming weeks. Technically a bit stretched, very overbought so a correction on profit taking is likely. I plan to slowly accumulate on quiet trading days. If we get a big (maybe very big) down day led by Wall Street, then we might be lucky enough to buy more at bargain basement prices.

 

"With a PE of 11 this should be in mid 20s "

definitely, it just needs a bit of time for the market to get familiar with NEW. At this stage NEW is a new kid on the block.

 

"...partial listing into Malaysia. ..."

What's the average PE, or average PE for growth stocks, on Malaysia market???

 

One more point: I reckon NEW's business is somewhat recession proof, or at the very least is not affected too much by the current difficult economic conditions. Chairman Graeme Clegg joked that "it's good to know that in the US many newly unemployed former bank managers are joining direct selling companies like Tupperware......".

 

 

 

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