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Sunday, February 18, 2007

Wisc Elect pfd, Westfield Group (WFGPY), Winner Medical (WMDG)

WELPM, WISCONSIN ELECTRIC POWER CO., website, sec, yahoo, chart, Pfd 6% Cum ($100)
WELPP, WISCONSIN ELECTRIC POWER CO., website, sec, yahoo, chart, Pfd 3.60% Cum ($100)

Determining the value of these preferred shares is outside of my area of competence. I could gain that competence with perhaps 15+ hours of work, but I don't expect it to yield much in the future. Therefore, I'm discarding this. If the price goes up say 30% within the next year or two, then I would be deemed wrong.

23.8% of their electricity is generated from nuclear (page 7).
2003: 25.0%
2004: 24.4%
2005: 20.3%
2006 (est): 23.8%
I'm also tossing out some other similar listings on the pink sheets.

WFGPY, WESTFIELD GROUP, website, no useful sec, yahoo, chart, Sponsored Amer Dep Rec; (representing 2 Ord shs)

Their website has the financials. World's largest retail property group, based in Australia, listed in Australia. They're the result of a merger (in 2004?).
Australia: 44 shopping centers
US: 59 (US$440 million large redevelopment in San Fran)
New Zealand: 11
UK: 7
Total: 121 shopping centers
21 projects under construction (A$8 billion cost).
Is this bigger than Simon Property Group (SPG) at $26 billion? Seems hard to believe.
They have Trumbull CT, Connecticut Post, Garden State Plaza, Topanga, Old Orchard, etc. Lots and lots of malls with > 1 million sq ft.

Half year review for 6 months ending June 30, 2006:
"close to 100% occupancy in AU, NZ, UK. 93.5% leased in US. Acquired 16 Federated stores in US.
About A$46 billion in assets, half equity. A$3.4 billion net income for 6 months (a 5% boost from mark-to-market derivatives). That would be about 14.6% return on assets! Very good (is it sustainable?). A bit less than 1/3 of profits are distributed as dividends.
Cash flow looks reasonable, but let me look at the 2005 annual....

Full year 2005:
One thing I notice here is that part of their revenues is due to revaluation of properties. This is tricky and it would be easy to end up double-counting parts of the value of the business. Cash flow from operations is A$2.3 billion and capex is A$1.2 billion (not sure how much is recurring, but this doesn't include acquisition of properties). But they expect earnings to grow at around 6% going forward, so let's say the free cash flow is A$1.1 billion growing at 6%. Given the expected growth rate of the global middle class, that growth could continue for a long time. Note that share count grew by 2.3% year over year to around 1.73 billion shares.

If I understand correctly, my estimate of free cash flow is around 64 Aust cents per share. I could be wrong as Australian GAAP seems a lot different and they are often not clear about the currency they're talking about (A$, US$, and just plain $ which I assume are A$). I figure each share is probably worth about A$18 or US$14. Since each ADR consists of 2 shares, I'd guess a value of US$28 per ADR. The ADRs are selling for around US$38.
Don't follow this one.

WMDG, WINNER MEDICAL GROUP, INC., website, sec, yahoo, chart, Com ($0.001)

Chinese reverse merger making various medical products (wipes, bandages, dressing). Cotton grown in China has a low sugar content and moderate fiber content making it good for medical use. Textile quotas were lifted Jan 1, 2005. They have Chinese patents granted and under application. Also a mostly worldwide patent applied for relating to spunlace non-woven cloth with x-ray detectable element.

10-K for period ending Sept 30, 2006:
Customers in 80 countries.Sakai Shoten Co. (Japanese purchasing agent) accounted for 21.6% and 24.5% of revenue in 2006 and 2005 resp.
Lower cost, lower quality competitors in China.
5,400 employees.
CEO Jianquan Li of Shenzen owns 80.77% of the company.
Pinnacle China Fund owns another 9.39%.

Europe is 38% of revenues
Japan is 26% of revenues
North Am is 13% of revenues
China is only 12% of revenues
All regions are growing significantly

BDO McCabe auditors (I looked at them before)
Unqualified opinion

Current assets are mostly inventories, AR, and prepaid, with significant cash.
Assets are very roughly half PP&E, half current assets.
Some bank loans, AP, other accrued liabilities.
Current ratio is about 2.
Capital is mostly equity.

9.4% revenue growth in 2006.
32% revenue growth in 2005.

28% gross margins (and have been increasing somewhat)
13.5% net margins
SG&A has been expanding rapidly: 15% of revenue in 2004, 15% in 2005, 18% in 2006

44.7 million shares on Dec 19, 2006. 5 million options reserved, but only 41K issued. Only 8K outstanding.

Cash flow from operations across 3 years has matched earnings.
Capex has been enormous every year, more than operating cash flow every year!
Some of the negative operating cash flow has been shifted to investing.

The business might be worth $2.00 per share. But the red flags are a big issue. If capex has been so large, why haven't revenues been growing more??? Stock is selling for $4.75.
No thanks
why Milton Friedman was important

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