$ALY.L – Laura Ashley – Hmmm
It’s about that time of month when I can have a trawl of the Stockopedia rankings to see what looks interesting.
ALY (Laura Ashley) has a Stock Rank of 99, and has fallen 9.8% to 30p today. Paul Scott picks up the story (http://is.gd/X1JMZq):
at the time of writing, I hold a long position in this share … It has decided to spend £31.1m buying the freehold to an 8-storey, 98,254 sq.ft. office building in Singapore. This is to give the company a Far Eastern base, apparently. That’s a lot of office space, for a company which does 90% of its turnover in the UK! … property purchase seems bordering on the bizarre … Overall this company is one of my favourites at the moment
Paul is a much better investor than me, so bear in mind that anything I say here is pretty much worthless.
The company has a full listing (at least it’s got that going for it), and seems to be under the control of Asian directors. Dr. Khoo, a director of ALY is locked in a divorce battle. There was also the business recently of a shareholders meeting being held in Malaysia. Taking a look at the cashflow statements shown on Stockopedia, I see that the net income for y/e 30 Jan 2010 is £12.7m, rising to 23.8m for y/e 31 Jan 2015. However, the actual cash flow from operating activities has decreased from £11.9m to £-3.5m (negative). The cashflows seem to have declined progressively, too, although the year before was worse than the most recent report.
The Asian growth story seems exciting enough, but then it would, wouldn’t it? No doubt I’m wrong, but my gut instinct tells me to avoid this one. There’s too much intrigue. It’s all too bizarre for my liking. I’m not happy at all. It’s off my list, on the basis of “if in doubt, don’t invest”.
Let’s catch up in a year’s time and see how this one panned out.
May you all be well.
30p ASX 3585
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3 comments
Historically it has seldom paid to be minority investors in any company as your interests are unlikely to be aligned with those of the controlling family / shareholder group. There are exceptions to the rule eg Luksic family own 65% of FTSE100 copper miner Antofagasta, Brain Souter and his sister Ann Gloag at Stagecoach....in these examples you have done well as shareholders
BUT
You must ensure that as a minority your interests are seen to be served by the company. Take Vedanta as a negative example: the Top Co is controlled by the Agarwal family through v complex series of shareholdings. The accounts are opaque. It has been a terrible investment for minority shareholders. Ultimately, you pays your money and takes your choice.
In Laura Ashley's case, Instances like shareholder meetings being held in Malaysia, buying Singapore office space when you are a retailer in the UK doesn't really qualify for me. Especially if things go wrong, there is unlikely to be a willing shareholder base to support the company.
So it's not a definite "never" but make sure you understand who / what you are dealing with
Mark,
The cashflow figures from Thomson Reuters are wrong - I've already flagged this to Stockopedia, but will do so again.
Here is (below) an excerpt from the 2014/15 Annual Report for Laura Ashley Holdings (LON:ALY) which clearly shows strongly positive cashflow. It's a cracking business, which is a cash machine - this is how it can pay out a 6.5% dividend yield!
The issue is that, for some bizarre reason, ALY shows the huge dividends it pays right at the top of the cashflow statement:
Paul, yes, I agree. I had made annotations in my blog article to that effect after it was transcribed here.
Stockopedia shows the same figures as Digital Look, so I guess the data is from a common source. Stockopedia's "Cash from Financing Activities" is all blank, and should have tipped me off that the data were wrong.
I guess the moral is: always look at the primary data source.