Ann: Presentation to Merrill Lynch Emerging Stars, page-5

re: Ann: Presentation to Merrill Lynch Emergi... S1mon, dividends are a valuable part of a portfolio's earnings, but I've also learned to be cautious chasing them. More than a few stocks this past year looked good on dividends, but the companies tripped up so badly that shareholders were left with lower valued shares and no dividend. (At the same time, I also bought lots of TLS at $2.80/sh last year when no one wanted it and the dividend was 10%.)

I don't think EHL is a dividend trap (although it and other mining services did have sharp SP falls this year). It's cash flow is very strong -- $114 mill in FY12 before growth capital purchases whereas dividends cost under $38 mill in FY12. EHL recently signalled that it might not spend much on growth capital equipment in FY13. So the company should have plenty of cash to pay a dividend.

During the annual results talk in August, mgt hinted that another special dividend is a possibility. I wouldn't count on that, because the regular dividend is now almost 10% fully franked. More likely EHL will continue its share buyback and pay down debt.

As for EHL's further tumble this past week, my guess is that it's associated with the Goldman Sachs presentation last week (in HK or Singapore, I believe). Even though identical to the Merrill presentation two weeks earlier, the latter had a wider audience. Remember the cautious guidance for OZ business stated in the Merrill Lunch presentation. But then, many mining services have fallen badly this past week as the market retreated to defensives.