Unacceptable ROE and unrecoverable loss of Market Cap
______________PaperlinX_______________
|
__Amcor__
| ||||||
Tax
Year
|
Sales
$M
|
Adj PreTax Profit $M
|
Profit to
Rev %
|
ROE
%
|
Mkt Cap $M
|
ROE
%
|
Mkt
Cap $M
|
2001
|
2,363
|
157.5
|
6.67
|
13.37
|
1,198
|
14.28
|
3,900
|
2002
|
3,182
|
176.9
|
5.56
|
14.58
|
1,437
|
9.77
|
5,960
|
2003
|
3,636
|
190.4
|
5.24
|
11.57
|
1,730
|
12.41
|
6,442
|
2004
|
6,260
|
141.2
|
2.26
|
7.79
|
1,987
|
12.14
|
5,726
|
2005
|
7,588
|
111.6
|
1.47
|
7.14
|
1,233
|
16.95
|
5,504
|
2006
|
7,421
|
86.2
|
1.16
|
5.36
|
1,278
|
16.49
|
5,503
|
2007
|
7,833
|
113.9
|
1.45
|
5.98
|
1,533
|
5.67
|
6,189
|
2008
|
7,560
|
69.6
|
0.92
|
3.62
|
714
|
15.41
|
3,972
|
2009
|
6,570
|
-133.2
|
-2.03
|
-10.48
|
257
|
14.83
|
3,934
|
2010
|
4,885
|
-35.7
|
-0.73
|
-3.86
|
374
|
13.96
|
7,792
|
2011
|
4,663
|
-20.0
|
-0.43
|
-2.72
|
97
|
20.97
|
8,838
|
The above results ignore one PXUPA distribution missed in
2009 and one in 2010, so the losses are understated by $12M in each of those years.
Compare $1,000 invested in Amcor and PaperlinX for the 10 years since PaperlinX was spun off from Amcor:
Amcor grew to $2,266 or +8.5% pa
PaperlinX fell to $81 or -22% pa
The difference in returns is dramatic over 5 years since PXUPA was listed on 2 April, 2007.
None of the above trends look encouraging. A return on equity (ROE) of
less than 15% isn’t worth the risk of equity investment.
Excuses are in abundance; however the reality is that PaperlinX management has
been consistently inadequate for the task for a decade, or Amcor sold off an
absolute dog; or both.
The reason why “both” is plausible is that when divesting an unwanted
business, the vendor can take the opportunity of also divesting its less
effective senior executives. Maybe that’s the answer as it accounts for
the relative financial outcomes of PaperlinX vs Amcor over a decade. A dud business run by dud executives.
Dismal Fact 2 of 2
Unrelenting loss of NTA per ordinary share
The rapid deterioration in net tangible assets (NTA) per ordinary share is frightening - refer p 95 2011 Annual Report and 2011 Interim Financial Results
Year
|
06/07
|
06/08
|
06/09
|
12/09
|
06/10
|
12/10
|
06/11
|
12/11
|
06/12
|
NTA $
|
2.58
|
2.59
|
0.85
|
0.60
|
0.40
|
0.34
|
0.27
|
0.18
|
0.06
|
With PPX trading at 7-9¢ the market is factoring in further deterioration of NTA.
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