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Stockwatch: Billabong (BBG) Macquarie Group (MQG) and Perpetual (PPT)

July 31st, 2012 · Greg Atkinson · 5 Comments

The last 5 years have taken their toll on many Australian listed companies whose stocks were once considered almost a must for any respectable balanced shares portfolio. But will some of these stocks regain their former glory and move on to set new highs, or are their best days behind them? Today we will look at three shares which are in the category of former stock market high flyers: Billabong International, Macquarie Group & Perpetual Limted.

Billabong International (BBG) was once one of those companies that were held up as example of an Australian company taking on the world and winning. The company did grow from very humble beginnings into a major international brand but too much debt and too many acquisitions finally took its toll.

Billabong International (ASX:BBG) 5 year stock price chart


As the chart above shows, it has been a long slide downwards for BBG shares from just above $16 to where they closed today at $1.35.  Maybe the proposed takeover by TPG International will put a floor under the share price, but just looking at the stock price chart is enough to keep me away from adding BBG stocks to my portfolio at the moment.

On the positive side the company is trading well below its book value and the dividend payout is quite high (although only partially franked) so it is a stock worth watching.

The chances however of BBG stocks being near $16 again within the next 5 years I would suggest are very slim, so my view is that this is one stock that is unlikely to relive the good old days any time soon.

Now onto one of the bluest of blue chip Australian stocks – Macquarie Group. Shares in Macquarie Group (MQG) were once tipped to break though the $100 mark and I for one thought that this was going to happen in 2007. But then along came the GFC and shares in MQG slumped to below $20 in early 2009. As of the close of market today they were trading just under $25.

Macquarie Group (ASX:MQG) 5 year stock price chart


Business conditions for Macquarie are going to be tough for this year and probably much of next year, but it’s a quality blue-chip company that looks a touch oversold to me.

At the moment MQG shares have P/B ratio of around 0.77 plus a dividend yield up near 6% and a quick look of the chart above suggests to me that this is one stock that can rally pretty strongly when the planets are aligned.

So I would put MQG onto the list of possible comeback stocks. But please note, I am not suggesting anyone buy this stock based on my ramblings.

The last stock I will have a brief look at is Perpetual Limited (PPT) which along with Macquarie Group was one of those shares which found their way into many blue-chip stock portfolios in years gone by.

Perpetual Limited (ASX:PPT) 5 year stock price chart


PPT is a stock I have not owned but one I have often thought of buying. I cursed myself for not snapping up shares in Perpetual in 2005 but now I sense I may have an opportunity to pick up a quality stock at what may turn out to be a bargain price in a few years time.

The dividend yield of around 5.7% full franked is attractive and the chart above does appear to indicate the stock price might be about to trend higher. But the P/B ratio of around 2.9 and uncertain outlook for the Australian economy will keep me on the benches for now.

Disclosure: The author of this article holds (indirectly) MQG shares.

Greg Atkinson is the Managing Director of Ohori Capital He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp

5 responses so far ↓

  • 1 Josey Ag // Aug 1, 2012 at 5:18 am

    Thank you for the analysis.

    I have a question. Do you have some forecast for australian stock market in the case of a sharp worsening of the crisis in Europe?

  • 2 Greg Atkinson // Aug 1, 2012 at 11:36 am

    Well Josey Europe is China’s largest trade partner so if the situation in Europe becomes worse than this will put further drag on the Chinese economy. This would pull down the share prices of most major Australian mining & resources related stocks which would in turn drag the ASX All Ords/ASX 200 lower in my opinion.

    But there are market commentators out there that believe the Australian economy is largely immune from what happens in Europe. Then again most of them were also dismissive of a slowdown in the Chinese economy a year ago 🙂

  • 3 GoWest // Aug 2, 2012 at 10:18 am

    I know that I have previously said that the stock market will go sideways until the next election, however this will change things (when it happens). In a speech last week to the Anika Foundation Lunch, Reserve Bank of Australia governor, Glenn Stevens signalled that he sees no limit to what it can do to prop-up the Aussie economy:

    ‘We might find that, in an extreme case, the Reserve Bank — along with other central banks — would need to step in with domestic currency liquidity, in lieu of market funding. The vulnerability to this possibility is less than it was four years ago; our capacity to respond is undiminished and, if not actually unlimited, is not subject to any limit that seems likely to bind.’

    We know that Swan has pretty much run out of borrowings to continue his bureaucratic stimulation, so it seems obvious to me that Glenn sees himself as the man to “step into the breach”. If Glenn starts the printing presses as indicated then one of the better places to be would be to invest in the share market or gold / silver.

  • 4 Debra // Feb 4, 2013 at 8:42 am

    Interesting comments.
    PPT, my father-in-law paid about $60 per share in 2008 and when we inherited them they’d lost a LOT of value. We held onto them and sold at $29 late last year. We’re wary of PPT after the massive fall in the value of their shares and we had money in one of their managed funds for a few disappointing years. So, not a lot of faith in the company. It seems to spite us the share price keeps rising and is now high 30s.
    We bought shares in MFG instead and we’re very happy with the results and like MFG.
    Can you see PPT getting back to the lofty heights of $70ps? Wondering whether to buy a small holding…and watch it like a hawk!

  • 5 Greg Atkinson // Feb 4, 2013 at 8:54 am

    Debra I don’t feel I know enough about PPT to make a call about where the stock price will go. At the moment PPT is just a stock I am watching closely although now that’s it near $40 I wish I had picked up a few shares when I wrote the article!

    What I would say is that PPT is one of those stocks which does seem to have the potential to do very well if the stock market posts a few years of solid gains. The big question is – is the current rally sustainable or has it already gone too far? I wish I knew the answer.

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