Boutique beer brewers cream off some of the froth

SELLERS were well to the fore on the directors' trades front this week, with a clutch of folk closely identified with their companies taking some cash off the table.

By InvestSMART · 8 Oct 2011

By InvestSMART ·
8 Oct 2011

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SELLERS were well to the fore on the directors' trades front this week, with a clutch of folk closely identified with their companies taking some cash off the table.

Two of the founders of Little World Beverages collected nearly $12 million after disposing of shares at $3.30 apiece in what is a very thinly traded market.

The buyers are already ahead of the game as the stock closed the week at $3.48. Howard Cearns and Nic Trimboli each cut their stakes from about 9 per cent to 6 per cent of the capital.

The Perth-based boutique beer brewer increased pre-tax earnings by 41 per cent to $13.2 million on sales that improved 24 per cent to $70 million in the latest year.

Fancy enough figures but that sort of growth doesn't come cheaply, with the buyers paying 23 times earnings.

Elsewhere on the growth front, the woman behind OrotonGroup disposed of some shares following another year of useful earnings growth.

Sally Macdonald exercised 81,447 free options and sold 180,000 shares at about $7.68 apiece.

OrotonGroup increased pre-tax earnings by 13 per cent in the July year and said sales for the first seven weeks of the current year had exceeded expectations. Macdonald retains $4.9 million of stock.

Among other sellers, the managing director of goldminer Kingsgate Consolidated collected nearly $4.5 million through the sale of shares at $7 each.

Gavin Thomas noted the sale was a consequence of financing commitments associated with the exercise of 2.5 million employee options in June last year.

Then, he exercised $14.5 million of options at an average $5.80 an option.

Overall, sellers accounted for $22.2 million of business, while buyers outlaid $2.2 million.

Near the top of the buying list was some action in stocks that are not quite as popular as they once were.

Matrix Composites & Engineering, a Perth-based deep-water buoyancy equipment maker, was trumpeted some time back by various tipsters and their followers pushed the stock to $9.95 earlier this year. Some concern about future growth has seen the stock dramatically discounted.

Non-executive director Paul Wright paid about $3.23 a share on Thursday. The shares closed at $3.59 yesterday, giving Wright a more-than-handy profit.

Elsewhere on the diminished share price front was Salmat, whose activities include letterbox direct mail.

Hitting $4.98 early in the year, the scrip is now fetching $2.71 after recently touching $2.50.

Philip Salter, a non-executive director and a joint founder of the group, paid about $2.59 a share on Wednesday.

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Frequently Asked Questions about this Article…

What happened when the founders of Little World Beverages sold shares and how much did they raise?

Two founders of Little World Beverages, Howard Cearns and Nic Trimboli, sold shares at $3.30 each in a thinly traded market, collecting nearly $12 million in total. Their stakes were reduced from about 9% to about 6% of the company.

How is Little World Beverages performing financially and what valuation were buyers paying?

Little World reported a 41% increase in pre-tax earnings to $13.2 million and a 24% rise in sales to $70 million for the latest year. Buyers were paying about 23 times earnings, and the stock closed the week at $3.48, slightly above the sale price of $3.30.

Why did OrotonGroup founder Sally Macdonald sell shares and what were the sale details?

Sally Macdonald exercised 81,447 free options and sold 180,000 shares at about $7.68 apiece. OrotonGroup had increased pre-tax earnings by 13% in the July year, and early sales in the current year exceeded expectations. Macdonald still retains around $4.9 million worth of stock.

What reason did Kingsgate Consolidated's managing director give for selling shares?

Gavin Thomas, the managing director of Kingsgate Consolidated, sold shares at $7 each and collected nearly $4.5 million. He said the sale related to financing commitments tied to the exercise of 2.5 million employee options the prior June. The article also notes he exercised $14.5 million of options at an average $5.80 per option.

Were there any notable director purchases and what were the results?

Yes. Paul Wright, a non-executive director of Matrix Composites & Engineering, bought shares at about $3.23 and the shares closed at $3.59, giving him a handy profit. This follows a previous peak for the stock near $9.95 earlier in the year before it was discounted on growth concerns.

What happened with Salmat shares and what did a company founder buy?

Salmat, which operates in letterbox direct mail among other activities, fell from an early-year high of $4.98 to around $2.71, recently touching $2.50. Philip Salter, a non-executive director and joint founder, purchased shares at about $2.59 each.

How much trading was attributable to sellers versus buyers in this round of director trades?

Overall, sellers accounted for about $22.2 million of trading while buyers outlaid roughly $2.2 million, indicating this week leaned heavily toward insiders selling stock.

Do insider sales by directors always signal trouble for everyday investors?

Not necessarily. The article shows several reasons directors sold: taking cash off the table, meeting financing commitments related to option exercises, or exercising options before selling. Conversely, some insiders bought shares, which can be a positive signal. Everyday investors should consider the context — company earnings, growth prospects, and reasons given for sales — rather than treating any single insider sale as definitive good or bad news.