Part of my long term holdings. Was tempted to top up with recent SP weakness, but decided to keep some "powder dry".
In The Australian newspaper today:
Dream team pleases the investors
STEP by step, Patrick Corp chairman Peter Scanlon and chief executive Chris Corrigan are realising the dream of the late Peter Abeles to build an Australian air, sea and land transport company. The market can see the short and long term potential, which is why the shares jumped yesterday.
Smaller shareholders need to realise that in assessing share values, Patrick's half-yearly earnings can be calculated at around 17c a share or an annual rate of 34c. This puts the stock on a price-earnings ratio of about 16 after the price rise.
Scanlon and Corrigan are a formidable team and together they own close to 10 per cent of Patrick. Scanlon's slice is 6.6 per cent and he is worth $430 million in the latest BRW Rich List.
Corrigan's investment prowess helped put the name BT on the Australian investment map in the 1980s and he owns 2.3 per cent of Patrick but has options.
Scanlon is one of Australia's best strategists and helped mastermind the conversion of the Victorian Football League into the national Australian Football League code.
Corrigan assists in strategy at Patrick but knows how to implement. He is a formidable person to have as an enemy and does not take prisoners.
After taking control of Virgin Blue, Scanlon and Corrigan are already beginning to deliver a message to Geoff Dixon at Qantas that there is lots of money to be made in a duopoly and there is a common enemy to fight -- Max Moore-Wilton and Macquarie Bank, who control Sydney Airport.
In Corrigan's eyes, Sydney Airport has simply become an arm of the "millionaires factory" and to lift the wealth of Virgin he has to stop the airport fee-hike game.
Dixon would also be delighted that Virgin has stopped looking to Asia and will curb its local expansion. Over time, Virgin might take an increased slice of the business traffic but its attempt to be the largest Australian domestic airline, which sparked the massive Qantas retaliation in establishing Jetstar, has been abandoned. Airline traffic will ultimately absorb the excess capacity, so profits for both airlines can move up.
The Patrick rail operation, which includes the Pacific National joint venture with Toll Holdings, was a typical example of the Scanlon-Corrigan strategy. They bought in at low prices, fixed the work practices and invested in better equipment. And they achieved a quick win because the higher fuel prices switched business from road to rail.
In ports, Corrigan is being squeezed by Melbourne's port regulators, who want "competition" for Corrigan via a new stevedore and a revamped P&O. At this week's infrastructure conference Corrigan put them on the same list as the hated Sydney Airport managers.
He had proposed to build one of the region's biggest port facilities in Melbourne but, when he was blocked by the regulators, he looked to satisfy Melbourne's demand for "competition" by going all out to promote a Melbourne-Brisbane railway.
That way he can build the "Melbourne" facility in Brisbane, establishing competition between the two ports.
Patrick's turnover in the half year reached $1.4 billion, which compares with Toll Holdings' $1.9 billion and Qantas's $6.4 billion. If Paul Little and the Rowsthorn family want to sell out of Toll Holdings, Patrick is the logical buyer.
If Scanlon and Corrigan want to sell out of Patrick, then Toll would be the logical buyer.
Officially, Patrick's stated profit was $99.87 million, which converted to earnings per share of 13.2c. But it is far more meaningful to add back significant items and goodwill amortisation, which brings the real half-yearly profit to $124.5 million.
The initial rush of growth that Scanlon and Corrigan achieved after reforming the waterfront has ended.
Profit-boosting actions will be slower but the company has control of vast amounts of irreplaceable infrastructure and operating systems as the dream moves closer.
My comments: All three core activities of PRK are almost cosy duopolies. Pricing power exists. In the case of PRK's majority holdings of VBA, I think it is only a matter of time before Corrigan lifts the ROE. Chris Corrigan is one of the CEOs that I have a lot of respect for (the others are Roger Corbett of WOW; Chip Goodyear of BHP; Michael Chaney of Wesfarmers; Geoff Dixon of QAN and Leigh Clifford of Rio Tinto).