This week’s (18/8) Stock report covers Adelaide Brighton (ABC). Timely in the sense that the company announced its 1H12 results yesterday.
All numbers showed improvement on the previous period (including cash on hand) subject to a 20% increase in debt – quite manageable and still below our 1:1 (50%) benchmark). An asset sale of $7M contributed to the end result. Consensus opinion was not positive, but you know my attitude to this - I am simply not prepared to take a great deal of notice of forecasts and projections. I like to live with the facts.
Residential and non-residential activity didn’t show signs of improvement which is an ongoing deterrent to earnings growth, but the resources and infrastructure segments continued to gain strength.
Despite the results being in line with expectations, management failed to give a positive outlook for 2H12 outcomes and the share price was hammered, gapping down to $2.90. In my view this is getting closer to 'value' for this industry leader. PE remains above sector and market averages.
ABC continues to interest me and I would buy if the share price retracts a further 10 cents to around 2.80. Worth watching. Existing shareholders might well consider ABC as a 'HOLD" particularly with a dividend yield of 6%.
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