Replies to post #91772 on China Growth Stocks

[Scandle34]

typically this is a good reason not to pay dividends in a growth phase as well. I am generally leary of start up phase companies that issue stock but pay dividends and declare buy backs.

i realize that AERL's share issuances are incentive payments under situations where the benefit being incentivized is more valuable than the shares issued.

I also realize that the dividend is a small enough fraction of the profits not to hamper growth.

[abh3vt]

Viking, thanks for the data on AERL's business model. I would disagree on one essential part of your post.

Putting every marginal dollar into cage capital? Why not do more aggressive share buybacks RIGHT NOW with the stock trading at such depressed forward PE multiples?

Let's assume that your ROI for additional cage capital expansion is accurate at 36% IRR, although I would argue that net profit margins as a % of RCT are a tad bit lower than your 0.375% (probably more like 0.350%). The current run rate for earnings (without any new investment in cage capital or acquisitions) is approx 1.50 in fd eps.....so buying back shares at current levels would provide an even higher ROI of 46% ($3.25 share price / 1.50 fd eps).

So, if AERL managers are the ruthless, efficient allocators of capital that we hope they are, why aren't they plowing much more money into repurchases? Perhaps they are, and just aren't going to acknowledge their actions until the next 6K.....but I'm a bit surprised that more insiders aren't buying stock at these levels either.

For that matter, why isn't AERL getting the attention of PE firms who should love to get these kinds of internal rates of return? I just don't think that the stated reasons for being public are justification enough for the majority shareholders of AERL...eventually they will tire of the additional public company expenses and embarrassingly low valuations here in the US.