After buying last November around the 42c mark, my only regret with SNL is that I didn’t buy more. After rocketing up to 72c and paying out another 9c in fully franked dividends, I’m sitting on close to a 100% return for the year with a company set to continue performing. Based on the discount method for Capital Gains Tax calculation, I could sell now and realise a 50% discount on my 30c capital gain.
So should I do nothing, sell out, or add to my position?
The company currently sells for 9.2 times earnings, and the 5c of ordinary dividends corresponds to a yield of 6.9%. Normally figures like this would be the result of a beaten-down share price due to problems in the company, but with the aforementioned appreciation to the share price this year, this is not the case. Gearing is 21% with Operating cashflow of $3.1m. Longer-term, the growth is forecast at 7% per annum, with next year’s growth targeted at 10%.
With all of these factors in mind, I think it is reasonable to consider the business as still being undervalued and having excellent future prospects. For these reasons I am going to add to my position in SNL.