Interdum stultus opportuna loquitur...

Tuesday, December 07, 2004

ION gets the ULTIMATE Buttered Carrot

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Ion Limited (ION: last 93c) just declared itself insolvent; the company, which had been highly praised (and widely owned) as a result of its tie-up with Harley Davidson has appointed an administrator.

This ought to make everyone take note: from the data I can see, ION was trading at just 7.3x FY2003 earnings, and less than 4x this year's estimate of 26c (which, I am guessing, had better be revised!! lol).

It paid a 6c dividend (therefore giving it a dividend yield 6.5%).

It was rated as a HOLD by 5 of the 7 ticket-clippers that covered it (one rated it a SELL, and one a STRONG SELL).

Basically, it comes down to this: even if a company is apparently a solid earner, it continues operations pretty much at the whim of its banks.

We should all remember how banks pulled the rug out from Pasminco - at almost the exact low for the global Zinc price.

It also goes to show - as I have banged on for several years - tie-ups which the market thinks are sexy, but which place a company in an inferior negotiating position, are generally not EPS-accretive. Stuff can be hidden, and the reports will focus on "Gross Margin" or "EBITDA" for a while... I willbe very interested to see who is the fall guy for this one.

Ion Chart - 1 year, Daily.