established: 1930, ASX code: BKL, homepage: www.blackmores.com.au
Overview:
Blackmores is the number one Australian producer and distributor of vitamins and mineral supplements. It operates in Australia, New Zealand, Thailand, Malaysia and Singapore. In 2006 the company’s international operations delivered about 15% of the total sales.
Analysis of 2006 financial results:
- Market Cap: Depending on the daily stock prices volatility the market cap of this company is about $290mil in 15.9mil of outstanding shares.
- Shareholders Equity: $36.8mil making the stock’s book value approx. $2.31 per share (20.3% growth on FY2005). From all that $28.3mil. ($1.78 per share) is the available working capital.
- Earnings per share: $0.86 making the average EPS growth in last 3 years about 28%
- Return on Equity: 37%, averaging about 35.9%pa in last 3 years
- Balance Sheet: Working capital of $28.3mil versus total debt of $10mil
Sharemaket’s view:
Average BKL’s Price to Earnings ratio of 16.4 values the stock at around $14.1 ($0.86 EPS x 16.4 P/E)
GROWTH STOCK:
- Conservative forecast of average EPS growth in next 10 years: 15%
- Share price in 10 years time: about $57 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
- Total shareholders return in 10 years times: $77 (share price of $57 plus $15 of the 10 years worth of dividends if the current payout ratio of 75% persists)
- Rate of Return in next 10 years based on beginning of January 2007 price of $19.5 per share: 13.9%pa
Pros and cons:
+++ Long established market leader in its industry
+++ Establishing family still owns over 31% of shares
+++ Exceptional ROE year in year out, very reasonable levels of debt
— Low book per share values
— Trades on high P/E ratios => little margin of safety
Further information about Australian Stock Exchange www.asx.com.au
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