Made in New Zealand from local and imported ingredients
Congratulations to the team at Xero, who have released their global version.
The new marketing videos even come with a friendly American accent (or is that Canadian, Sara?)
With this version they have a product that anybody anywhere in the world can buy directly off the website, use, and tell their friends about.
Let the word of mouth begin…
Disclaimer: I worked at Xero until February ‘08 and am a shareholder.
Mark at Valuecruncher has recently been publishing a lot of valuations for NZX listed companies on the Valuecruncher blog.
Each post contains a brief description of the assumptions that he’s using and a link to the valuation on the Valuecruncher site, where you can interactively change some of these assumptions and see how it changes the underlying valuation.
For example, see what he thinks about these companies:
This week he’s trying something a bit different.
He’s nominated Rakon as the stock of the week, and rather than just publishing his own valuation he’s asking: what do you think it’s worth?
At the start of September a share in Rakon was worth about $3. Today, just a few weeks later, the same share is worth just slightly above $1.
See: Google Finance Chart for Rakon Limited
Obviously it’s a pretty volitile time for all stocks at the moment, but Rakon has also announced that sales are slowing and their expected profit this year will be much lower than previously expected as a result.
So, how does that feed into the valuation?
At $1 per share, is that cheap, or a fair price, or still too expensive?
Valuecruncher provides a starting point for a valuation by automatically generating estimates for each of the key inputs.
As I type this is calculating a valuation of $1.82, and the current market price is $1.04, suggesting that the shares are 75% undervalued (i.e. cheap!)
But, when you look at some of the inputs it’s using to come up with this valuation there are some things that look a bit optimistic given the recent announcements.
So, let’s play with some of those assumptions …
In my valuation I’ve assumed slightly lower revenues and profit margins (the grey lines show the starting assumptions, the blue bars show my values).
I’ve also assumed a lower terminal growth rate (which is the amount of growth beyond the initial three years), at 7% rather than 8.5%.
This leaves me with a valuation of $1.02, which is more-or-less the current market price.
So, if you’re comfortable with my assumptions then you could say that the current price is about fair value.
What do you think Rakon is worth?
Start with the Valuecruncher valuation, just like I did, follow these simple instructions, if you need some help, and let us know what you think.
Disclaimers:
This is not intended to be a detailed analysis, and anyway I’m no expert and am mostly following my nose, so I’ve used round numbers.
In case it’s not blindingly obvious, please don’t buy or sell on the basis of what I’m saying here - this is not investment advice.
I have some Valuecruncher shares but no Rakon shares.
I also have some $10 vouchers to give away to anybody who is new to Fishpond.
If you’d like one just drop me an email (my address is in the right hand sidebar).
Valid today and tomorrow only. :-)
How often do you floss?
Honestly!
For me it’s one of those things that I know I should do, but which I don’t actually do nearly as often as I could.
Validating HTML is the same.
We web developers all know we should, but so often don’t.
Why?
Is it because we don’t think standards are important? I know this is true for a small minority, but I don’t think this is the reason for most, because I think smart developers and testers understand how having valid code makes life easier for both them and the people using their sites.
Is it just too hard?
When we were migrating Trade Me to .NET we decided we would take the opportunity to improve the quality of the underlying HTML as we touched each page. The intention was to validate all pages using the free tools provided by the W3C.
But, as we quickly discovered, this is no trivial undertaking.
It’s fine when you’re working with a mostly static page. But, as soon as you’re working with a dynamic data driven page the number of different variations of the page can quickly become overwhelming.
If you have pages which require authentication (either on the server or in the application), or requires a user to post information into a form, it becomes more or less impossible. If the validator can’t reach the page directly you have to save a local copy of the HTML and upload this manually to the validator.
Who has time for that?
Even when you do make the effort the results often confuse more than they help.
Validators are (almost by definition) pedantic, and as a result do a generally poor job of differentiating between things that make a real difference to users and things that, while strictly and correctly identified as errors, are not so critical.
And, there is no easy way to keep track of the errors that exist on a page over time. So, when you’re presented with results it’s difficult to identify those errors which are new or to easily exclude results you’ve seen before.
This is not so bad if you have a page that is normally fully compliant, but a much more common scenario, unfortunately, is working on improving a page that is full of invalid code. In that case it’s a nightmare.
The tools really don’t make it easy.
So, what do we do? Continue on wishing we could be more diligent, but lacking time and tools?
I think we can do better!
A while back I wrote about an idea I had for solving some of these problems.
I was stoked when one of the smartest developers I know put his hand up. Over the last couple of months we’ve been working on turning this idea into a real working tool. And now we have something to show you all…
We’re calling it Wingman.
It’s a Firefox browser plug-in, which automatically sends the exact pages you visit to the server, making it trivial to validate.
And, it’s a website which organises the results, making it easy to identify the errors you’re interested in, and to spot trends so you can fix things as soon as they occur.
Plus, it’s designed to get smarter as more people use it, by aggregating information about what types of errors are commonly ignored across all users.
In time we imagine a system which runs various different types of validation, including potentially hooking into validations services which are hosted outside of Wingman itself. But, for starters, we have implemented a simple HTML validator, based on the service created by validator.nu. CSS and Javascript validation are the next obvious candidates, but we’re really interested to hear your ideas for what other things we could include in this mix - for example, a spell checker, a test for basic SEO rules, or an outbound link checker are three ideas that have been suggested to us already.
Today we’re opening up a free invite-only preview of the service, so we can start to see how people might use a tool like this.
If you’d like to have a play please register on the site. We’ll be sending out the first group of invite codes shortly.
I’ll look forward to hearing what you think!
Hmmm?
The books I listed earlier in the week have been selling fast. I’ve updated the previous post to show which are still available. Get in quick!
Also, as one observant reader pointed out, I forgot to list my copy of The Dip, which as I mentioned was part of the motivation for this whole exercise. So, that book is now also for sale, plus I’ve just listed a few more new titles that may be of interest to somebody out there:
Have you got a shelf full of books that you won’t read again too?
List them on Fishpond, give somebody else the opportunity to enjoy them, turn them into cash and replace them with some new ideas.
It’s all good!
Read any great books lately? If so, what did you do with them when you finished them?
Earlier this year Seth Godin encouraged everybody who had purchased a copy of his latest book The Dip to sell or give away their copy, in an effort to double the number of people who had read it. It’s a good thought.
So, encouraged by that, I’ve decided to follow my own advice and clear out some space on my bookshelf.
<shameless plug>
This also gives me a great chance to try out the “Sell Yours” feature on Fishpond, where anybody can list second-hand books for sale and they appear on the site along side the new titles.
</ shameless plug>
If any of the titles below sound interesting to you it would be good to give them a new home - they are priced to sell from $9.95 and all at a significant discount to the price of a new copy. I should also say, by way of promotion, that I’m a bit of a pedant when it comes to keeping books like new, so in most cases you’ll hardly be able to tell it’s not a new copy.
And, if you have a bookshelf full of ideas that could also be shared you might like to do the same (and maybe add a link to your list of items for sale in the comments here, so others can find them).
Books for sale:
Note: I listed most of these a couple of days ago and some have already sold. Plus I have some more on the shelf that I haven’t had time to list yet. Check the site for an up-to-date list of the titles still available for sale. And, if the title you wanted is already sold, I’m sorry but I only have one of each to sell - you could always buy a new copy (use the same links above).
It’s great to see that all of the major NZ banks are now providing automated bank feeds for Xero customers.
When I was working at Xero the percentage of bank accounts that were setup to receive automated feeds was one of the metrics we watched closely and were actively trying to increase - the user experience when your bank transactions just appear ready for reconciliation each day is just SOOOO much better than having to manually upload them yourself. So, I’m sure the team will be really excited to have all of these banks online now and will be working hard to convince customers to take advantage of this feature.
If you’re a Xero customer and you’re not using automated feeds, there is some more information about how to set these up in the help.
Reading the comments on that post it would seem that Westpac, the last cab off the rank and over a year or more behind some of their competitors, have decided to charge their customers $25 for the privilege of setting up each account on the feed. If that’s true it’s a really dumb decision from them in my opinion. Any excuse to clip the ticket, it would seem.
No surprise then that Westpac has been consistently last in recent customer satisfaction surveys, with around 30% of their own customers saying they were not satisfied with their overall relationship with the bank in the latest one. Wow! Despite this they recently announced a profit after tax for the six months ending 31 March 08 of $244 million (about $1.3 million per day), so Westpac customers can at least be reassured that their setup fees are contributing to a good cause I suppose.
If you’re a Xero customer and this fee is enough to convince you to switch banks, then it looks like BNZ would be a good choice as they are currently the only bank providing feed data for all types of accounts, including credit cards.
Related posts:
This cartoon from Hugh MacLeod at GapingVoid is a goodie:
I think there is a corollary which applies to investing in start-ups:
The trick to angel investment is to be smart enough to want to do it, but not smart enough to be objective about the true potential of the companies you invest in.
:-)
A selection of other GapingVoid cartoons from previous posts:
Last week I asked: what is a share price?
How do you determine if a share price represents good value or not?
I got a bunch of different answers.
For example, this from Greg:
“Which shares to buy? I buy for different (often terrible!) reasons. Eg, I bought Telecom because I hated Telstra so much. Bad decision! I bought Apple because I like my Mac so much and noticed that Dick Smith and Noel Leeming were selling them. Good Decision!”
Finding companies you admire is a good start, although no matter how good the company is it doesn’t make sense to buy shares if they are currently overvalued by the market.
He went on to say:
“My feeling is, in general, you really have no idea whether its a good price or not. And no way of telling.”
Really? Surely there must?
Chad explained one approach:
“To use a simple calculation…If a company is making $1 million in earnings/profits today, and earnings are growing at 20% per annum. Then it’s pretty easy to work out what the company should be making after say 5 years:
$1,000,000 x 1.20…x1.20…x1.20…x1.20…x1.20 = $2,488,320
Thus, in five years the company should be worth:
Earnings $2,488,320 x 12 (times earnings) = $29,859,840″
That makes sense. But, how do you know if 12x is the correct earnings multiple to use? As we’ve seen this number can vary quite a lot depending on the company.
What all of this shows is that people often have an opinion on whether the share price of a given company is too low or too high – but they usually can’t explain “why?” let alone determine what the price should be in any structured way.
We’re hoping the change that, with a new website which we’ve been working on for the last few months: valuecruncher.com
Valuecruncher is a tool that allows anyone to find, create and share valuations for publicly listed companies.
Valuecruncher uses the same framework that is used by professionals: discounted cash flow analysis.
In simple terms this says a business is worth the present value of the cash that it will generate for shareholders into the future. To calculate these you start with the revenues a business generates and deduct all the costs associated with getting those revenues (including taxes and capital expenditures).
Up until now putting together the calculations and collecting the values you need to plug-into this sort of model has been too hard for most.
But, Valuecruncher is designed to make this accessible to everybody.
For a start the model is at your fingertips (complete with sexy graphs) - so there is no need to mess around with complex spreadsheets etc. It even give you a starting point for your valuation by automatically generating estimates for each of the key inputs. You can simply update these estimates with your own numbers and Valuecruncher will update the resulting valuation for you in real time.
You can also explore valuations saved by others, and drill into the assumptions that they have made around the future performance of the company.
As exciting as this all is, it’s just the beginning. We’ve started with the largest companies in the major world markets (S&P 500 in the US, FTSE 350 in the UK, the ASX 200 in Australia, the TSX Composite in Canada and the NZX 50 here in New Zealand). But, we’re hoping to soon extend this to a much wider set of public companies, including those in smaller markets which are typically overlooked by analysts.
And, there are lots of ideas for how we could use the tool we’ve created in other ways to help investors of all levels of experience.
But, before we get too far ahead of ourselves, we’d love for you to take a look, find some companies that you’re interested in (if you own some shares already that will be a good place to start) and save some valuations. And, then tell us: what do you think.
Some more information:
Some valuations that others have already created:
You can buy a share today in Google for US$568.24. That’s US$7.34 more than it would have cost you yesterday, and more than US$100 more than it would have cost you in March, but US$150 cheaper than at the start of this year.
Or, maybe a share in Apple for US$187.01 or Microsoft for US$28.18.
Or, if you prefer kiwi companies, a share in Air New Zealand for $1.08, Fletcher Building for $7.60 or Contact Energy for $9.11.
Or, if you like, a share in Xero for 85c.
Do those prices represent good value or not?
Q: What is a share price?
I’m interested to hear your answers…
Congratulations to Tim and the rest of the team at PlanHQ for picking up the “Emerging Gold” at the Wellington Gold Awards this week. The list of previous winners of this category is quite impressive, including Icebreaker in 2001 and Virtual Katy in 2005. Hopefully PlanHQ will live up to the billing and go on to great things.
Celebrations aside, there were a couple of ironic moments for me during the evening …
The last time I attended was in 2005, when Trade Me was nominated in the “Cyber Gold” category.
The speaker that night was the Brazilian Ambassador. So, of course, we all went dressed as Brazilian footballer supporters. I was Rowanaldo (on the right):
It wasn’t such a successful night. Maybe we got ahead of ourselves, but on the night we didn’t even win our category.
If you wanted to be really cynical you might say that it didn’t help that at the time we were completely eating the lunch of the major sponsor (in fact just a few months later, said major sponsor would acquire the company!)
Bit, of course I wouldn’t be so bitter and twisted! :-)
I did have a quiet laugh to myself last night when the introduction video to the same category trumpeted the achievements of Sam and Trade Me, going right back to the famous heater story.
Anyway, it was a good night this time around and we all dressed much more sensibly.
Congratulations to Kiwibank and the other 2008 winners.
Disclaimer: I have a small stake in PlanHQ and also generally support Brazil (unless they’re playing England).
A couple of weeks ago Russell Brown from Public Address visited the office to talk to us about what we’re up to at Xero.
The segment includes an interview with me and also with Darryl Gray who is the brand manager at Xero. It aired on Radio Live last week and has now been posted on their blog for you to consume at your leisure …
http://www.publicaddress.net/system/topic,605,pa_radio_ground_xero.sm
Enjoy!
PS This post is taken from the Xero Blog. If you want to keep up with what we’re doing at Xero check it out. :-)
We’re coming to a town near you:
http://www.xero.com/revolution/
If you’re an accountant who is interested to learn more about Xero get in touch with Lucy and register today. Each session will include a product overview; explain how Xero enables the concept of the Virtual CFO; and outline the Xero Partners Programme.
Our first partners are now listed on the Find an Expert page on the Xero website. We’d love to have you be part of this programme.
More information about the roadshow is available on the Xero blog:
http://www.xero.com/blog/2007/07/10/xero-revolution-roadshow
See you there!
I’m a couple of days late with this, but …
Congratulations to the team (Tim, Natalie, Koz, Ben, Oliver + Nik).
You have a great v1 product. Now the real fun begins!
Here is a good quote:
“If you ship your product and you’re not a little ashamed of it, you shipped too late”
– Reid Hoffman, LinkedIn
From: http://blog.guykawasaki.com/2006/08/startup_success.html
If you haven’t heard of PlanHQ yet, it’s a tool designed to transform your business plan into a living online document which can be viewed and maintained by your whole team. This makes it much easier to keep your plan up-to-date as you go. It’s also great if you’re just starting out on the process of creating a plan, as it guides you thorough the various sections you should include. Take a tour.
I like this description:
“[It's] a system as flexible as a wiki with focus on business plan development.”
From: http://www.solutionwatch.com/578/a-roundup-for-developers-developers-developers
Enjoy!
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