Spotless (SPT) has accepted a takeover offer at $2.71 a share. Currently, their share price sits at $2.56. Is this a good deal at this price?
A: The reported Spotless bid price of $2.71 comprises three components:
a) $2.62 per share; and
b) a special dividend of 4c per share, 95% franked; and
c) a dividend of 5c per share, that was paid in April.
Effectively, the bid price was $2.66. Further, if the Scheme of Arrangement is implemented, shareholders won’t be paid the proceeds until mid/late August (at the earliest). The “time value” of money is worth around 4c. So, you could argue that the effective bid price is only $2.62 in total. And then, what happens if the bid is withdrawn, or the scheme of arrangement not approved?
While I agree that Spotless at $2.54 is marginally underpriced, it is not that far way from the true market price.
by Paul Rickard
Bluescope Steel (BLS) trades at about 40 cents (1 May 2012), a big discount to its NAV (was $2.30 a share at 6 November 2011, but certainly much less now). Is this a “deep value” recovery stock worth accumulating?
A: Intrinsic valuations have decreased a lot since your last check. Instead of $2-something, most stockbrokers today have set a price target in the range $0.48-$0.64, still significantly above today’s share price, but not as high as used to be. Also, when looking at consensus estimates for this year and next, it would appear the “deep value” argument is being hampered by the glaring absence of any profit momentum. Not only is fiscal 2012 expected to see yet another year of negative growth, only a very small improvement is currently anticipated for the 2013 financial year.
Certainly, there are some Buy ratings out there, but most stockbrokers, or so it would appear, prefer to stick with a Neutral/Hold rating and given the above, this is not strange.
by Rudi Filapek-Vandyck
What are your thoughts on Gindalbie’s future?
A: Experts in the Australian share market who actively cover Gindalbie (ASX:GBG) all rate the stock Buy and their valuations and price targets are well above the current share price. FNArena’s consensus price target is just under $1 per share, suggesting Gindalbie shares at present price levels are significantly undervalued. Note that market sentiment can have a severe impact on mining stocks, plus ramping up to become a medium-sized producer of iron ore does come with challenges and risks, so there’s no guarantee Gindalbie shares will close the present valuation gap.
If current expert expectations prove correct, overall market sentiment towards resources stocks should improve at some point after the significant underperformance over the past year, which suggests Gindalbie should enjoy some upward momentum in the not too distant future.
by Rudi Filapek-Vandyck
Do you think there is a risk that the Federal Government may reduce the $150,000 after tax contributions limit in the upcoming budget?
A: When the Federal Budget is so tight and the government has made such loud noises about creating a surplus, anything is possible. That said, the polls are tight, so they'll want to try and keep as many people as possible on side. I suggest being prudent. If you have the funds to make a contribution before budget night, then it might be best to do so. The worst outcome will be that you've made the contribution earlier than you otherwise might have.
by Tony Negline
If I borrow to buy a property inside my SMSF, is that borrowed amount considered a contribution to the fund?
A: Whether or not the borrowed amount is considered a contribution depends on how the borrowing is done.
If done via a Limited Recourse Borrowing Arrangement (called ‘super gearing’), then it won’t be a contribution because the super fund is the borrower. If you personally borrow money and give it to the fund, then yes it will be a contribution. If the borrowing is done via any other entity – eg. a family trust – then it may be considered to be a contribution.
by Tony Negline
How can I track Listed Investment Companies’ (LICs) discounts to, and premiums over net tangible assets (NTA) weekly? The ASX produces a comprehensive monthly list, but it comes out weeks after the end of the month.
A: I'm not aware of a way to track the discount to NTA weekly.
Most of the larger LICs publish their NTA on their website around the 10th calendar day of the month. For the ‘style neutral/largely index based’ LICs, such as AFIC or Argo, you could very closely approximate the NTA at any time by taking the closing NTA from the previous month and then adjusting it by the movement of the S&P/ASX200 Accumulation Index since the start of the month.
If anyone comes across any LICs that publish their NTA on a more frequent basis, please let us know.
by Paul Rickard