Also referred to as NET WORTH, BOOK VALUE or NET ASSETS. It is the amount which would remain in shareholders’ pockets after repaying all the company borrowings. It is calculated by subtracting the total of all liabilities (total debt) from the total of all company assets.

It is the amount of money contributed by the shareholders to the company’s bottom line. On a typical financial statement, the shareholders’ equity amount will increase every year by that part of profits, which is retained by the company (i.e. not paid out as dividends).

Shareholders’ equity can also be thought of as the funds remaining for shareholders should their company liquidate at given date. From this reason, some investors consider it the only true fair valuation of a company.

Founded: 1895, ASX code: ANC, homepage: www.anguscoote.com.au

Overview:
Angus & Coote is dominant Australian jewellery retailer with approximately 15% market share in its industry. It consists of over 280 stores operating in three divisions: A&C division (Angus&Coote, Amies, Dunklings and Edments stores), Goldmark division and J’s Room Division.
At the time of writing, Angus & Coote is in process of being taken over by another major jewellery retailer, Prouds.

Analysis of latest annual report (July 2006):

• Market Cap: Depending on the daily stock price the market cap of this company is about $72mil in about 12mil of outstanding shares.
• Shareholders Equity: $46.4mil making the stock’s book value approx. $3.87 per share (-23% growth on year ending July 2005). From that about $16.9mil. ($1.40 per share) is available working capital.
• Earnings per share: $-0.32 making the average EPS growth in last 3 years about -41%
• Return on Equity: -8.1%, averaging around 5.7% in last 3 years
• Balance Sheet: Working capital of $16.9mil versus total debt of $33.4mil

Sharemarket’s view:
Average ANC Price to Earnings ratio of 11 suggests the share price around $5.94 ($0.54 EPS x 11 P/E). This calculations is based on 2005 EPS as company had negative EPS in 2006!

VALUE STOCK:
Return: The January 2007 share price of $6.3 indicates that this company is trading at about 38% premium to its 2006 book value and at about 77% premium to its current working capital.

PROS AND CONS:
+++ Long established business with high levels of management ownership
— Deteriorating in value over the last two years
— Increasing levels of debt
— Uncertainties coming from recent takeover

Further information about Australian Stock Exchange www.asx.com.au

Founded: 1924, ASX code: WOW, homepage: www.woolworthslimited.com.au

Overview:
Woolworths Limited is a retail giant accounting for approximately 10% of the total retail market and about 30% of the total grocery sales in Australia. The businesses operates four major divisions: Supermarkets making 86% of the sales (incl. Australian Food and Liquor, New Zealand supermarkets and Petrol), general merchandise division making 11% of the sales (incl. BIG W, Dick Smith), hotels division making about 2% of the sales and the wholesale division contributing by the remaining 1% of all sales.

Analysis of latest annual report (June 2006):

• Market Cap: Depending on the daily stock price the market cap of this company is about $25,500mil in about 1,123mil of outstanding shares.

• Shareholders Equity: $4,027mil making the stock’s book value approx. $3.59 per share (76% growth on year ending June 2005). From that about $-753.5mil. ($-0.67 per share) is available working capital.

• Earnings per share: $0.9 making the average EPS growth in last 3 years about 14.9%

• Return on Equity: 25.2%, averaging around 31.8% in last 3 years

• Balance Sheet: Negative working capital of $-753.5mil and total debt of $4,387mil

Sharemarket’s view:
Average WOW Price to Earnings ratio of 19.5 suggests the share price around $17.6 ($0.9 EPS x 19.5 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 11%

• Share price in 10 years time: about $50 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)

• Total shareholders return in 10 years times: $61 (share price of $50 plus $11 of all the dividends if current payout ratio of 65% persists)

• Rate of Return in next 10 years based on the beginning of January 2007 price of $22.80 per share: 10.3%pa

PROS AND CONS:
+++ Extraordinary Returns On Equity
+++ VERY strong position in the market
— Balance sheet with current account deficit and large debt
— Low potential for growing at same levels in the long term
— Too high dividend payouts; funds could be better used repaying own debt and/or reinvest in own business

Further information about Australian Stock Exchange www.asx.com.au