founded: 1989, ASX code: FAN, homepage: www.fantasticfurniture.com.au

Overview
Fantastic Holdings Limited is one of the leading Australian furniture retailers specializing in the import and production of non expensive furniture items. As of June 2007 Fantastic Holdings operates about 80 stores and provides employment to approximately 1000 people throughout Australia.

Analysis of June 2007 financial results:

• Market Cap: Depending on the daily stock price of this company the total market capitalization is around $400 million over 94 million shares on issue
• Shareholders Equity: $51 million making the stock’s book value approx. $0.54 per share (13.3% growth on FY 2006)
• Earnings per share: $0.17 making the average EPS growth in last 5 years about 21.8%
• Return on Equity: 31.4%, averaging around 34.7%pa in last 3 years
• Balance Sheet: Working capital of $33.2 million (ie. $0.35 per share) versus total debt of $9.1 million

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 13%
• Share price in 10 years time: about $10.11 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $12.24 (share price of $10.11 plus $2.13 of the 10 years worth of dividends if the current payout ratio of about 60% persists)
• Rate of Return in next 10 years based on the beginning of December 2007 price of $4.35 per share: 10.9%pa

Pros and cons:
+++ Great levels of ROE as well as yearly EPS growths
+++ Very strong balance sheet (ie. entire debt could be easily paid off using about 65% of one year’s net earnings)
+++ Very high levels of company stock ownership amongst the top management, where top executives hold over 55% of all outstanding shares on issue
— Operates in a cyclical, consumer income sensitive market against with very strong competition pressures from companies such as Harvey Norman, Freedom Furniture, IKEA and Domayne

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founded: 1971, ASX code: ADG, homepage: www.adtrans.com.au

Overview
Adtrans Group Limited, originally a South Australian company nowadays operates over 20 automotive retail businesses in its home state, 6 in Victoria and 1 in NSW. It employs about 920 people and proceeds with the sales of over 15,000 vehicles per year. The main brands in its franchise stable include such names as Ford, Toyota, Chrysler, Jeep, Iveco, Mercedes-Benz and more.

Analysis of June 2007 financial results:

• Market Cap: Depending on the daily stock price of this company the total market capitalization is around $110 million over 23 million shares on issue
• Shareholders Equity:: $56 million making the stock’s book value approx. $2.43 per share (7.7% growth on FY 2006)
• Earnings per share: $0.35 making the average EPS growth in last 3 years only about 3.7%
• Return on Equity: 14.3%, averaging around 15%pa in last 3 years
• Balance Sheet: Working capital of $23.6 million (ie. $1.03 per share) versus total debt of $94.4 million

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 8%
• Share price in 10 years time: about $6.70 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $9.95 (share price of $6.70 plus $3.25 of the 10 years worth of dividends if the current payout ratio of about 60% persists)
• Rate of Return in next 10 years based on the beginning of December 2007 price of $5.10 per share: 6.9%pa

Pros and cons:
+++ Not issuing new shares hence maximising the value for current shareholders
+++ High levels of top management shareholding participation (in excess of 26% of issues shares held by the company executives)
— Cyclical business where one year of good EPS growth often follows another year of EPS decline
— Rather large amounts of debt levels given by the big amounts of cash to operate in this industry

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established: 1905, ASX code: RIO, homepage: www.riotinto.com

Overview
Rio Tinto is one of the largest resource companies in the world today comprising of two companies: Rio Tinto plc based in UK and Rio Tinto Ltd based in Australia. Rio’s main operation is mining and processing vast majority of earth’s metals and minerals and turning them into thousands of highly demanded products. Its major operations engage in exploring aluminum, copper, diamonds, energy production, gold, industry minerals and iron ore.

Analysis of December 2006 financial results:

• Market Cap: Depending on the daily stock price of this company the total market capitalization is around $190 billion over 1357 million shares on issue
• Shareholders Equity: $23 billion making the stock’s book value approx. $17 per share (13% growth on FY 2005)
• Earnings per share: $6.80 making the average EPS growth in last 3 years an incredible 77%
• Return on Equity: 39.9%, averaging around 30.2%pa in last 3 years
• Balance Sheet: Working capital of $1.4 billion (ie. $1.02 per share) versus total debt of $4.4 billion

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 16%
• Share price in 10 years time: about $450 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $498.5 (share price of $450 plus $48.5 of the 10 years worth of dividends if the current payout ratio of 30% persists)
• Rate of Return in next 10 years based on the beginning of December 2007 price of $140 per share: 13.5%pa

Pros and cons:
+++ One of the World’s top resource companies with great exposure to ever growing Asian markets
+++ All the key fundamental ratios such as ROE and EPS achieving extraordinary heights
+++ Not issuing large number of new shares hence maximising the value for current shareholders
+++ Strong balance sheet – entire debt could be paid off with half year profits
— Operates in cyclical industry, where earnings correlate with commodity markets hence some long term future earnings instability should be expected
— Currently a very popular stock due to booming resources industry, very positive outlook for their products looking into the future => purchasing at reasonable margin of safety next to impossible

Note: Rio Tinto is currently a subject of merger/takeover talks with another mining giant, BHP Billiton. Depending on the outcome, potential merger could bring additional uncertainties to sustainability of future earnings.

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