23
August 2013
LYL results out. NPAT for FY 2014 will
be reduced by 50%. Price is getting interesting, but my call is that there could be slightly more pain for LYL given their position in the food-chain.
CAB analysis. Postulate that market is
overweighing the impact of ACCC recommendation to reduce 10% to 5% for payment
systems. The absolute downside is that
$45m being wiped from the top travels right to the bottom, reducing FCF from
$60m to $15m. Multiple compression follows as ROE of 20% becomes 5%, turning a
good business into a capital intensive substandard business. A compression of
multiple to 8 means the current market cap of $500m falls to $120m, which is a
75% drop. It is probably obvious that the outcome lies somewhere in between the
absolute downside and the current situation, therefore it will be helpful to
map out multiple scenarios in preparation for a price opportunity.
26
August 2013
SCD results. Operating cashflow of $2m, resulting in $7.2m
in cash, but there is $1.2m in tax liability and $1.6m tied up with banks as
security for bank guarantees. Factory
revalued downwards from $4.4m to $3.2m. Equity increased from $10.2m to
$12.6m. Service revenue increased from
$4.5 to $5.2m. Orders on hand $6.9m. One
customer made up 30% of revenue. I have covered this company in a previous post.
MTU results. Underlying margins appear to be
declining. ROA declining. Debt increased.
VTG results.
MLD results.
HSN results out.
27
August 2013
SRV results out. Operating cashflow of
$27m (after paying tax of $10m). Occupancy increasing. Cash on hand $99m.
Weakening AUD may boost earnings in FY14. 23 out of 38 immature floors will mature
in FY14. Opening another 8 large floors
which will boost total office space by 10%.
All USA floors are cash flow neutral and all expected to mature in FY14.
Occupancy rate is 88% as at June 2013 (USA recovery). Using $27m of FCF, with 10% RRR, assuming
zero growth for 10 years and adding unencumbered cash of $90m, yields $345m
value. Using dividend discount model, on
grossed up dividend figures, current market cap requires dividend to rise by 5%
every year, and terminal value of 10x grossed up dividend. Current price means that an investor gets
growth for free. I have held this for over 5 years now (first post here), and this long holding period has been helped immensely by a very competent management.
FLT results out. NPAT up 20%. Amazingly, current price implies growth of 5%
per annum in FCF for the next 10 years. I missed picking this up during the GFC for under $4, which means a 10-bagger has gone down the gurgler.
VEI results out. All metrics declined. Revenue down, gross
margins down, cashflow down, but surprisingly, wage expenses and doctor
payments were also down. FCF of $18m,
debt of $45m. DCF of $168m, less debt of $45m, yields $123m. 148m shares on
issue.
Examples of edge- information,
analysis, behavioural, structural. From Robert Robotti.
28
August 2013
TWD results out. Good yield. Exposure to housing in SE
Queensland. Worth a deeper look.
AMA results out. Revenue up, but EBIT
down. EBIT margin increased by 2%. Company
is debt free, with cash at $10m in August 2013.
Cashflow very strong at $10m. 332m shares. Net of cash, AMA priced for
no growth. Good to see a capable and honest CEO delivering on his promises.
IFM- founder CEO is leaving and has
sold all his shares.
WTF results out. Revenue down, profits down, and cashflow down.
But somehow market is valuing shares for 10% growth pa for 10 years. Madness.
MLB results out. Heavy in cash, new
management team coming in, but premium core business under pressure. Core business valued at 5x cashflow after
backing out cash chunk.
TTI results out. Debt still of
concern.
29
August 2013
VOC prelim results out. Revenue
increased to $66m. Profit down. Cashflow $18m, tax $3m. Free cashflow $15m. Fibre and DC showed tremendous growth. Cash balance of $14m will fully fund next year’s
$13.3m capex. Locked in recurring cashflow will pay off IRU obligations of
US$10m next year. USD hedge runs out in Dec 14, so some exposure to declining
AUD. FCF $15m, current market cap implies 5% growth pa for 10 years. Adding
debt to get EV of $220m, with FCF $15m, implies less than 10% growth pa. In the presentation, VOC stated that FY14
capex is in response to
customer demand, and this was repeated.
CTE Prelim report out. NPAT
$1.25m. Operating cashflow $1.9m. FCF $1.6m. Cash on hand $5.7m. No dividend
declared. Wage costs up $300k and
one-off capex spend. $2m tax losses
remaining. Record number of blood cord
clients. FCF estimated at $1.7m. Fair value at $23m, assuming no growth. But
note: “The Board is confident that subject to any unforeseen
circumstances, the benefits of its common infrastructure and operations systems
to support the business units will allow it to increase revenue, improve margins and overall financial performance
of the Company during the next financial year.”
IPP HY report out. Revenue period to period hardly moved. Not a good sign, as M’sia went backwards due
to elections, but increase in prepaid services plus record month in July, so
momentum will continue. HK shows very good growth and is close to breakeven,
locking in 4 out of 5 major developers. INA
growth slowing but still strong, whereas Singapore is lagging (still number 2).
REA trading at 14X revenue. IPP is trading at 12x revenue. We await next quarterly cashflow statement.
30
August 2013
DDR results out. Cashflow negative.
SST results out. Loans paid to other
entities??
UOS HY results out. I have held this for over 3 years, and posted about it here. Within the HY report, I found an amazing and pristine balance sheet:
|
Cash
|
$429m
|
|
Receivables
|
$159m
|
|
Inventories
|
$294m
|
|
Land held for property development
|
$20m
|
|
Property plant and equipment
|
$28.2
|
|
Investment properties
|
$566.8m
|
|
Total of Asset Items above
|
$1497m
|
|
Financial liabilities
|
$319m
|
Rent and parking fees for half year is
$20m. Shares on issue is 1.1b, market
cap is AUD$580m. Book value increased
15% over 6 months.
That's it folks. Time to sit back and think through ideas. By the way, the reading list has been updated, for those interested.
Disclosure: My family and I own shares in AMA, CTE, SRV, SCD, TWD, IPP, VOC and UOS.
Disclaimer: the content of this post is not to be relied on as financial advice. It contains my personal opinion only, plus facts that I cannot verify to be accurate. Do your own research and seek financial advice where appropriate. I have made many mistakes in the past, and will continue to do so in the future.
