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What's cooking with Wearne

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Anybody have an idea why WEA with an historic 9,3 PE at current price 250 (JSE Construction Category PE average is about 16) has been under such downward pressure since posting its excellent results? Even more so considering its acquisition of Portland Group (bought at PE of 8 by issue of its own shares at a PE of about 12 and therefore locked in a fwd 25% growth never mind its own prospects of substantial growth next year and thereafter). I think this is a great little share that the market seems to be missing - in fact punishing? Is it just overwhelming (Small Cap / Altx) market sentiment or is something wrong with the company that nobody is telling???
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8 REPLIES 8
saash
Super Contributor
See my other post - I'm all for the market sentiment theory since there seems to be a lot of value on the AltX lately.
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I am also interested in this share. I think that there statement re: their RMC division is driving down its price. Wearne has quite a bit of exposure to the retail (and small commercial) building. We have seen a significant slow down in this area over the last 3-6 months and I think that their RMC division mya not post positive growth. Still seems a little overdone. I think they still push out HEPS growth of 10-20% this year.
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Retail is only about 20% of their market and they are changing that to focus on high growth low cost housing, quite quickly so am still a little unsure whats up !
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I am keen on this stock but the fact they have to change their focus worries me, they clearly see a downturn then. And how do you know that retail only makes up 20%? As far as I can find it is not in any financial documents. Wearne has traditionally been a largely retail supplier.
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Mer - have a look at this Business Day Article 22 May by Bheki Mpofu http://www.businessday.co.za/articles/companies.aspx?ID=BD4A770931 It was comment on the results by the CEO John Wearne and the comment relevant to our discussion is below: "Wearne said though the residential market was slowing, the group was not worried as this sector made up only 20% of its revenue. He said there was still scope for growth in the low-income housing market, where the government was investing billions to reduce the housing backlog. Wearne said planned expansion projects and acquisitions put the company in a good position to sustain the levels of growth that had been achieved in the past two years. "
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jamoo
Frequent Contributor
it is currently trading at the level it was in Aug 2006! there is a serious fundamental problem. and it is still on downward trend despite oversold situation.
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Jamoo - that was essentially my first question (is there something fundamentally wrong with the company?) - however if you analyse the sector and sub sector and look at (TFX - 19.0), (WTL - 9.4), (OLI - 7.5), (MZR - 11.0), (IRA - 6.2), (CSP - 13.5), (BWK - 7.0), (ACE - 6.0), (ABK - 2.75), (WEA - 9.25) there are only 4 (of 11) with a PE above 8 and they have all (except for 1 or 2) taken a share price hiding since Nov/ Dec - so I am inclined to agree with MER that it is a function of market sentiment on Small Caps, Altx and general market conditions. My point about WEA was that because only 20% of its income is retail, it should be less affected by interest rates (and therefore retail building conditions) than some of the others. In fact it should be able to capitalise on the heavy infrastructural building taking place. - Anyway - your guess is as good as mine!
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Thanks for that Thor, made me a little more confident in the stock. I guess it all demands on if a retail slow down will be covered by the comemrcial side. Still not in, think I will want a few weeks, and see once it has established a clear base. Other stocks on Alt-x that are in a similar position and I am taking an interest in are SAN and DLG... both have produced strong historical growth with good prospect comments by execs and at multi-year lows!
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