I noticed on Saturday that earlier in the year ANZ listed CXG as...

I noticed on Saturday that earlier in the year ANZ listed CXG as one of the gaggle of equities that ANZ held as part of the Opes Prime fiasco. How does one know if ANZ is still selling CXG?

I ask the question because I remain astounded at the low price of CXG in spite of being profitable, increasing profits, being in the right business with an MD who seems to have a good track record and a great deal of his personal wealth locked up in CXG.

If one looks at the debt/equity ratio in various analyses, it is very high, which could spook investors. However, if one looks at the same set of numbers one notices a high current ratio, and that is because at 30 June 2008 there was $100 million or so of completed work that had not been paid, and CXG had stated that it was going to use about $70 million of this to reduce debt to bring it within CXG's target debt/equity ratio of no more than 46%. This could already be the situation by now.

46% is perhaps on the high side, but the profit cover is there. Also if one compares the return on capital to the return on equity one can see that the debt contributes to the bottom line, rather than detracting from it.

Anyhow, in spite of thinking earlier that I had enough CXG, I bought another 10,000 today at $1.11. Had I not dithered for so long I could have got them at about $1 in recent weeks.

Another negative could be the shares that came out of escrow recently, and those to come out of escrow in December, but I do not expect these holders to be keen on selling at current prices, and even if they were myopic enough to do so, it does not alter the fundamental value of CXG.

When it comes to brokers, I admit to having the selective quirk that gives them credence when they opine what I want to hear, otherwise I ignore them. Anyhow, one broker who supports CXG with a "strong Buy" has lifted the 2009 and 2010 EPS guesstimates to 24.6 cents and 26.1 cents, so if you pick any PER that you fancy, you can arrive at a target price to your liking. In my view a PER of between 10 and 15 seems reasonable, so that gives a TP of between $2.46 and $3.72. The PER is now below 5, and this for a firm that pays 100% franked dividends!

An acquaintance founded Prophecy International (PRO), and although I have never owned PRO, I look at it occasionally, and recently wondered why it was selling at 28 cents. I leaned too late that ANZ was selling seized-from-OPES PRO shares, and when this was completed about a week ago PRO's SP surged to 44 cents, to settle at 37 cents. Are there other shares that remain depressed because of ANZ's fire sales?

Pioupiou