Founded: 1868, ASX code: GOW, homepage: www.gowings.com.au
Overview:
Gowings Brothers Limited started as a prime family owned retail business and over the years evolved into a quality value focused wealth management fund. As of July 2006 the total company net assets were 170 million, majority of which (66%) was allocated to investment portfolio of listed and private equities. The rest the assets were kept in cash (32%) and property (2%).
Analysis of latest annual report (July 2006):
- Market Cap: Depending on the daily stock price the market cap of this company is about $145mil in about 43mil of outstanding shares.
- Shareholders Equity: $158mil making the stock’s book value approx. $3.67 per share (63.7% growth on year ending July 2005). From that about $57.8mil. ($1.34 per share) is available http://www.soundofgold.com/2007/01/11/working-capital/.
- Earnings per share: $0.58 making the average EPS growth in last 3 years about 91%
- Return on Equity: 15.8%, averaging around 9.6% in last 3 years
- Balance Sheet: Working capital of $57.8mil versus total debt of $12.9mil
Sharemarket’s view:
Average GOW Price to Earnings ratio of 16 suggests the share price around $9.3 ($0.58 EPS x 16 P/E).
VALUE STOCK:
Return: End of January 2007 at share price of $3.5 this company is trading at about 5% discount to its 2006 book value and about 60% premium to its current working capital.
PROS AND CONS:
+++ Long established business with high levels of management ownership (e.g. the first page of Gowing’s annual report reads: “It’s our money too�? a statement from MD J.E. Gowing)
+++ Very strong balance sheet
+++ Good use of generated capital (i.e. paying low dividends and using funds to generate more profits in promising markets; repurchasing own stock when priced favourably)
— Low Returns on Equity tied up closely to the overall sharemarket performance
Further information about Australian Stock Exchange www.asx.com.au.
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