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ESS - ESSENTIAL METALS LIMITED


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  • 1 year later...
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Here's an interesting one for the watchlist. Market cap only $13m, so not alot of activity or interest. But is going cheap and leveraged to resources through the area of laboratory analysis.

 

Company established 1981, listed 2004. Designs and manufactures equipment for sampling and automated laboratory analysis of minerals. Revenue growing steadily but expected to grow more strongly in FY07. Predicting 8.7% growth in revenue for FY06 with slight decline in profit due to higher employee costs in first half. However, at current price of 30cps, forward P/E is 8.0 and (if dividend continues as per 2005) yield of 8.8% + franking credits. Has just gone ex-dividend.

 

Seeking potential acquisitions and aiming to improve margins through outsourcing of components. No debt. NTA of 19.5cps.

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  • 2 weeks later...

In reply to: Lizard on Friday 17/03/06 12:10pm

Sold my smallish holdings recently. I got those on their IPO, so quite happy. Got out mainly because a) the original owners have sold down their share holding and b) their expected growth was not too impressive considering the resources boom.

 

Hope it does well for you, but I just think that there maybe better investments. Their dividends have been good so far.

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In reply to: atleast16 on Saturday 18/03/06 01:11am

Thanks AL16. The IPO buyers have had some good opportunities to take a quick profit.

 

I view the vendor sell-down as positive given it was clearly driven by a need for liquidity and that other directors used the opportunity to purchase shares. Revenue growth of 38% in 2005 will be followed by growth of only 8.7% in 2006, but I would expect that to turn back into double digit growth in 2007. Also, for 2006, it seems that a higher than normal amount of tax is included in the forecast - not sure why, but would expect that to normalise in 2007.

 

So for 2006, the company forecast is eps of 3.75cps and dividend of 2.5cps. For 2007, I am forecasting NPAT of $2.1-$2.3m, or eps of 5.0cps. I conservatively value ESS at 51cps.

 

A company of this size is still risky - there are always risks that profit will be undermined by an unexpected expense or error. However, Essa appear to have been profitable for the past 4 years, so that is reassuring. They continue to operate in a growth market which also reduces the risk.

 

Anyway, as a long term investor I don't often make 13% in the first 5 hours - finished at 35cps with most of the reasonable sellers cleaned up... http://www.sharescene.com/html/emoticons/smile.gif

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QUOTE (Lizard @ Friday 17/03/06 11:10am)

In the ol` days I would of called this the ol` "SHARES" play but guess she will now have to called a "SMARTINVESTOR" play [i prefer the old name and mag http://www.sharescene.com/html/emoticons/biggrin.gif ]

 

Nothing like a bit of publicity.

 

Happy Trading

Z

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  • 8 months later...

In reply to: stockpanther on Thursday 30/11/06 01:34pm

Hi Stockpanther. I have them both too. So far, ESS has given me barely more than market returns for the year, but it looks ready to run. Still would have been happier if they'd had something to say at the agm. My tentative valuation is 75cps and it is one of the few value shares I hold that hasn't had a decent run up of late.

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Hi Lizard i was fortunate enough to get in on the IPO and sold out a while back as i could not see a lot more upside. without trying to put you on the spot could you support that 75c prediction? i do notice recent activity and they are of course in the right industry. my reseach which may be faulty and often is could not see a lot of upside. The lead brokers last report was not great also. Not putting the stock down and would like to get back in if fundamentals are ok thanks Crookers
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