established: 1976, ASX code: CAB, homepage: www.cabcharge.com.au

Overview
Cabcharge Australia is an unchallenged operator of the national taxi fares and public transport charging facility. It also owns three major Australian taxi operating businesses Communication Network, ABC Cabs and Black Cabs. More recently it has also obtained about 49% stake in one of the biggest private bus service operators, Westbus.

Analysis of 2007 financial results:

• Market Cap: Depending on the daily stock price of this company the total market capitalization is around $1.5 billion over 117 million shares on issue
• Shareholders Equity: $217 million making the stock’s book value approx. $1.85 per share (33% growth on FY 2006)
• Earnings per share: $0.44 making the average EPS growth in last 3 years about 28.9%
• Return on Equity: 23.5%, averaging around 22.5%pa in last 3 years
• Balance Sheet: Working capital of $28.6 million (ie. $0.24 per share) versus total debt of $62.4 million

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 13%
• Share price in 10 years time: about $28 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $34 (share price of $28 plus $6 of the 10 years worth of dividends if the current payout ratio of 65% persists)
• Rate of Return in next 10 years based on the beginning of December 2007 price of $10.8 per share: 12.1%pa

Pros and cons:
+++ Dominant company operating the nationally established, de-facto standard taxi fares facility
+++ Excellent ROE
+++ Strong balance sheet
— Planning further expansions into perhaps less profitable public transport areas
— Currently popular stock which is difficult to obtain at prices guaranteeing sufficient margin of safety

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established: 1982, ASX code: FLT, homepage: www.flightcentre.com

Overview
Flight Centre is arguably the most dominant player on the Australian retail travel services market with significant international exposure. Apart of it own flagship Flight Centre travel offices it also generates significant earnings from fully owned specialized travel agency chains such as Student Flights, Escape Travel and various leisure businesses including Quickbeds.com, Travel Associates and others.

Analysis of 2007 financial results

• Market Cap: Depending on the daily stock price of this company the total market capitalization is around $2.4 billion over 94 million shares on issue
• Shareholders Equity: $484 million making the stock’s book value approx. $5.15 per share (18% growth on FY2006)
• Earnings per share: $1.28 making the average EPS growth in last 3 years about 17.5%
• Return on Equity: 24.8%, averaging around 20.5%pa in last 3 years
• Balance Sheet: Working capital of $223.1 million (ie. $2.4 per share) versus total debt of $75.3 million

Sharemaket’s valuation:
Average FLT’s Price to Earnings ratio of 19 suggests the share price around $24.3 ($1.28 EPS x 19 P/E)

GROWTH STOCK

• Conservative forecast of average EPS growth in next 10 years: 14%
• Share price in 10 years time: about $90 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $105 (share price of $90 plus $15 of the 10 years worth of dividends if the current payout ratio of 55% persists)
• Rate of Return in next 10 years based on end of November 2007 price of $26.5 per share: 14.8%pa

Pros and cons:
+++ Dominating company within its industry
+++ Excellent both ROE and EPS growths not only in currently prevailing booming market conditions, but also if averaged long term
+++ Strong balance sheet (entire debt could be easily wiped out by part profits of one single year)
— Operates in cyclical industry where profits are to be affected by both global and local economy performances, fuel costs, levels of disposable incomes and similar factors
— Stock trades constantly at high P/Es and obtaining it at comfortable margin of safety levels is very difficult

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established: 1994, ASX code: ADB, homepage: www.adelaidebank.com.au

Overview:
With only 25 branches across Australia, Adelaide Bank is one the smallest and youngest Australian banks formed only about 13 years ago. Its 2007 income seem to be evenly spread across various banking categories - business lending and wealth management were each responsible for 26% of the total profits, retail banking contributed by further 25% and the remaining 23% was made on wholesale mortgages.

Analysis of 2007 financial results:

• Market Cap: Depending on the daily stock price the market cap of this company, the total market capitalization is around $1.7 billion over 108 million shares on issue
• Shareholders Equity: $651 million making the stock’s book value approx. $6.03 per share (1.25% growth on FY2006)
• Earnings per share: $0.93 making the average EPS growth in last 3 years about 13.6%
• Return on Equity: 15.4%, averaging about 14.2%pa in last 3 years
• Return on total Assets: 0.32%, averaging about 0.4%pa in last 3 years
• Balance Sheet: Total assets $31.4 billion versus total liabilities of $30.5 billion (TA/TL ratio of 1.03)

Sharemaket’s valuation:
Average ADB’s Price to Earnings ratio of 14 suggests the share price around $13 ($0.93 EPS x 14 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 8.5%
• Share price in 10 years time: about $29.3 (EPS in year 10 based on fore casted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $39.45 (share price of $29.30 plus $10.15 of the 10 years worth of dividends if the current payout ratio of 68% persists)
• Rate of Return in next 10 years based on mid November 2007 price of $14.50 per share: 10.5%

Pros and cons:
+++ Well established stable banking institution
+++ Good ROE
— Total assets vs. total liabilities ratio uncomfortably
— Rather low and still decreasing returns on total managed assets

Note: Upcoming merger with Bendigo Bank in the current time of credit markets instability may bring some new and unknown risks into this long established business.

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