AGI (ASX) bounce Coming

Originally posted by savvyinvestor ↑

i admire the optimism of the traders here assuming a bounce after a catastrophic drop of 40% on massive volume.

i would recommend any amateur traders or medium term investors try to catch the falling knife and trade a bounce here.

for some perspective:
1) the company just announced a 40% drop in profit guidance from 57 mill last year to 36 this year
2) the company had eps of 11.5c in fy17 which means at a forecast eps now of 7c for fy18 they are still trading on a 2018 p/e of 16 at a price of 1.21.
3) for a company whose profits are neither falling nor rising, an average p/e is around 10 if they are not paying a dividend but are a safe and stable company. this would value agi at around 70c.
4) they stopped paying a dividend last year after a long history as a reliable and stable dividend stock - always bad for the sp and for sentiment as dividend hunters for income stocks are a large part of the market.
5) they are on a 5yr downtrend with average shareholder return of -10% per year (even accounting for dividends paid) in the context of a solid bull market in which the asx has risen 20% from 5000 to 6000 since around april/ may 2013.
6) the general wisdom of investing is that if they are on a trend of steeply declining profits, the likelihood is usually low that they are on the cusp of a turnaround in profits, despite management universally promising a near term turnaround in profits in just about every downgrade announcement from every company that ive ever read.... including agi over the past 3 years constantly promising a turnaround. so if eps is 7c and down by 40c this year, what may it be next year?
7) management hasnt exactly got any solutions that create confidence that they can stop the bleeding eg if i company has one poorly performing business segment and they sell it off, the market may be reassured that things will turn around and the overall business will stop underperforming as capital is returned to shareholders or reallocated to profitable growth. i dont see any such signs from this ann by agi, just vague babble about how despite a “highly competitive landscape” they have an action plan to fix the problems....

bottom line from my perspective, there may or may not be a short term bounce at some stage but it may fall further first as im sure a huge number of investors are looking desperately to exit this dog of a stock, and any bounce will be a short lived selling opportunity before the bleeding continues. i would buy this at any price, but an entry around 70c once it plateaus could be reasonable for a brave bargain hunter.

fyi: i have no position long or short in this stock but i keep it on my radar as i held it for a short time around 1.80-2.00 a couple of years ago when i thought it may offer growth and yield potential, but i lost 10-15% and bailed out on a stop loss.

im only posting here to help fellow investors by providing my objective opinion, i may be wrong but i am concerned by all the cheerleading on this forum calling for an imminent bounce just coz it fell 40% ina day and because apple is up and unemployment down in the US so indices rose for a day...

fyi despite the biblical adherence to bollinger bands here, a stock is not oversold when it drops 40% based on a sudden downgrade to a 40% profit drop.

Expand

Great analysis. All but fair. But IMO they will get a takeover from the likes of Novomatic etc. They already have the real estate to ensure their machines are there... cut out all the corp costs and leverage one of the largest operators in the world for distribution. Simple.

I struggle to understand why people can't work out the logic behind the fall of 37%. Simple. Last years earnings was $57.4m, this now predicted at $36m. Take the delta, $21.4m and divide it by previous. Ta da! 37.3% downgrade. Anything in this vicinity therefore IMO is a buy.

No.	Vol.	Price($)
1	10000	72.5¢

No.

Vol.

Price($)

10000

72.5¢

Price($)	Vol.	No.
75.0¢	2161	1

Price($)

Vol.

No.

75.0¢

2161

No.	Vol.	Price($)
1	757	0.840
1	23150	0.830
2	3205	0.820
2	5286	0.815
1	1024	0.810

No.

Vol.

Price($)

757

0.840

23150

0.830

3205

0.820

5286

0.815

1024

0.810

Price($)	Vol.	No.
0.880	20000	1
0.890	11917	1
0.895	10400	2
0.900	35870	1
0.910	11089	2

Price($)

Vol.

No.

0.880

20000

0.890

11917

0.895

10400

0.900

35870

0.910

11089

(20min delay)
Last 75.0¢		Change 0.005(0.67%)		Mkt cap ! $252.5M

Open	High	Low	Value	Volume
74.5¢	75.0¢	74.0¢	$8.3K	11.11K

Great analysis. All but fair. But IMO they will get a takeover...

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