Recently Danks Holding, a long established Australian hardware distributor and retailer has announced its results for financial year ending 30 June 2007. Because I did cover Danks’ results form last financial year I will now jump right into the deep end here. If you need some background on this company you may find it helpful to read my previous article first.
Analysis of the latest financial results (to 30 June 2007):
- Market Cap: Depending on the daily stock price the market cap of this company, the market capitalization is now at around $55mil. over the same amount of issued shares as last year ie. 6.5mil
- Shareholders Equity: $59.7mil making the stock’s book value approx. $9.18 per share (9.6% growth on FY2006). From that about $45.8mil. ($7.04 per share) is available working capital. That is about $6.4 mil decrease in total working capital (in other words about $1 per share).
- Earnings per share: $0.60 making the average EPS growth in last 3 years about -6%
- Return on Equity: 6.5%, averaging about 6.9%pa in last 3 years
- Balance Sheet: Working capital of $45.8mil versus total debt of $13mil
Sharemaket’s valuation:
Average DKS’s Price to Earnings ratio of 13 suggests the share price around $7.8 ($0.60 EPS x 13 P/E)
VALUE STOCK:
Return: At the end of August 2007 at share price of sub $9 levels this company is now already trading at about 22% premium to its working capital and at about par with its newly reported 2007 book value.
Pros and cons:
+++ Strong balance sheet
+++ Long established company with about 49% management ownership
+++ Not issuing new shares
— Products for cyclical markets
— Low ROE => don’t hold for growth
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