ABB - AUSSIE BROADBAND LIMITED

[ShareCafe]

ABB

[herger]

Anyone have any views on this one?

 

I was alerted to this by Intelligent Investor, which has a buy recommendation on it currently. It says basically that current drought conditions are contributing to negative market sentiment which shouldn't have any bearing on the long term value.

 

I had a brief look at the financials. Market cap at $5.80 is around $810m. Forecast result is for a $35m or so profit this year. However MD says under normal weather conditions this figure should be double what it is. So for a steady, reliable business such as this one, earnings of $70m against a price of $810m seems quite attractive.

 

But then, there seems to be one problem that Intelligent Investor fails to mention- global warming. I think it represents a very real threat to the agricultural yields we've been enjoying in the past. This article gives a bit of info on agriculture and global warming:

 

http://en.wikipedia.org/wiki/Global_warming_and_agriculture

 

For me, after taking into account this potential threat, ABB doesn't look like the bargain that it appears to be.

[King Baz]

ABB has potential and l do not think that global-warming is an immediate threat, more a 20yr+ issue.

 

However, current poor cropping conditions suggest that NPAT will be reduced, this is not necessarily a one-off, we could have prolonged drought. There is an ongoing risk to earnings, even AWB with its diversified earnings base will struggle in the short term.

 

Over the longterm ABB may offer a good entry at this price but little urgency to enter in the short term

[herger]

In reply to: King Baz on Sunday 22/05/05 05:06pm

I reckon we're seeing the effects of global warming already. It's very much a current issue. 3 of the hottest years the globe has ever experienced were recorded in the last 5 years - I don't like the chances of that being a fluke. Still, I admit I've only done some quick reading on this subject and can't say anything with certainty. But apparently most scientists agree that there'll likely be agricultural shifts coming in future years. Worth considering for companies like ABB at least.

[remlif]

In reply to: herger on Thursday 26/05/05 02:02pm

I'm having a look at our agricultural stocks too, to see if there are any bargains.

 

I'm not convinced that general global warming is such an issue for our Australian exporters of Agricultural products. Globlal warming will mess up agricultural productivity every where round the world. This will influence prices. As quantity goes down, prices go up.

 

 

I believe the major issues for Australia are:

 

the el nino effect which is Australia specific and on a seasonal basis.

 

the demand for food from an increasingly affluent China and India

[herger]

QUOTE (remlif @ Thursday 26/05/05 02:50pm)

Hi Remlif

 

Yes, I think higher prices for exports, such as grain, is inevitable.

 

The past few years have seen reduced grain harvests in major grain producing countries which has lead to grain shortages and upward pressure on prices. However, I'm not sure that translates to higher profits for ABB. From what I can make, part of ABB's services include grain storage - they own over 100 grain silos and charge by the volume. They may be able to partake in a slice of any price increase as they're responsible for grain marketing as well but I've read some comments from the CEO saying their business is largely volume dependent.

 

Good point re: China and India as well, I've read that their rural sector is on the whole fairly inefficient when compared to the US or Australia, for example. A gradual trend for farm workers to migrate to the city in China only serves to make things worse.

[remlif]

In reply to: herger on Thursday 26/05/05 03:25pm

Yes, I'm sure that you're right about ABB's lack of sensitivity to price.

 

My interest is not in ABB specifically, but in what all this current hoo hah about giving the farmers money in lieu of rain, is doing to the share price of stocks that are impacted down stream.

 

The ones of interest seem to be AAC, ABB, AWB, FCL, GNC, NUF, ORI, PRK, RIC and even TOL and PRK. Perhaps also WES.

 

They all dropped during the 2002 drought, then bounced back strongly when the rains came. My concern is that this is still in everyones mind and all these stocks seem to have already bottommed and are now rising.

 

Perhaps I spend too much time sitting and thinking. Or perhaps I dont think quickly enough.

 

 

 

 

[herger]

As a short term play I agree, ABB and others could represent a buying opportunity. Buy it now and flog it when the drought ends. However I myself prefer a "buy and hold forever" approach when it comes to monopolies like ABB, which would have been a wonderful strategy - if only there weren't such a thing called the greenhouse effect http://www.sharescene.com/html/emoticons/grrr.gif

[john constantine]

remembering that there is still the last few steps in the rationalisation of aus. agribusiness to go---and abb hasn't really made it out of s.a. yet.-----the merger with the s.a. bulk handler seems to be unlocking value that was squandered for years by inbred bickering.----------also remember that abb is a world class operator in the small niche of barley exports. the downstream investment in malt production seems to provide a dry-proof cash flow.check out their annual report and see what they really drive income from------and my tip is that sooner or later either the west australians,gnc/glencore/cargill/toll,but most likely the sandgropers will have a go.-------[holding abb since float,free carried now,got heaps,and regretting each time i took profits]

[King Baz]

outlook for ABB is very good. We had a poster concerned about global warming. Insignificant l think. Because if production is reduced price will go up accordingly