The run-up to this year's reporting season was much more boring than usual due to the dearth of any news. In fact, 2 weeks into the reporting season, things are still pretty dull in terms of any exciting business developments or news that matter in the long term. The reality is that things just do not move that quickly in the business world.
5 August 2014
COH- NPAT $93m. FCF $80m. Market Cap is $3.8b. FY15 NPAT will be around $150m to $170m assuming half on half performance continues together with growth in the high teens. At current prices, implied growth is over 10% CAGR for 10 years with 10x terminal value. N6 surprised on the upside with good sales. I do not understand COH adequately on a qualitative basis to make an informed guess as to its possible long term growth rates. It also appears that this industry is akin to an arms race, not unlike the smartphone battles, where new products are constantly required to keep ahead of competitors. This is not a healthcare play unlike say Ramsay Health Care, it is a technology play.
TCL- $20b EV. $500m in FCF.
Question of the day: Which businesses are able to provide an analogue experience in a digital world?
6 August 2014
I have an ABC policy- Anything But China. So it was with some reluctance and disgust that I reviewed SBB. I even managed to persuade my darling missus to do some research for me. If you want to know more, I am afraid you will be disappointed, as I am not going to make myself an unwitting target of a potential defamation suit.
OFX 1st quarter numbers up over 30%. 1st quarter EBTDA is $7.8m.
7 August 2014
IPP results out. Still cashflow negative despite revenues up 40%, positive EBITDA before writedowns. Losing ground in Singapore, but making money in Malaysia, and turning profitable in HK as expected. Share price is still strong due to REA taking a big stake. Current market cap is $650m. Maybe REA can make it work, but REA can afford the risk of losses more than me.
IRI- growth in H1 did not follow through to H2 due to lack of once-off license sales. Lack of recurring revenue is spooking market. Not much growth but somehow priced for growth.
TTN results out. Still not much FCF despite being in a good sector.
8 August 2014
REA- Revenue up 30%, NPAT up 37% to $150m. FCF about $150m. Results driven by Australia. Market cap pre-results is $6b- implies 20% CAGR for 10 years. Market marked down REA by 8% because results did not reach expectations.
ASW- full year result flat yoy. Difficult to advance without ability to scale due to small size and already very efficient operations. The registry game is about scale.
UOS- profit guidance of about $64m PBT before minorities. Some headwinds coming due to sliding property market in Malaysia with the introduction of GST.
11 August 2014
COF FY results out. As expected, Geosciences still under pressure but International Developments division revenue improved. Operating Cashflow is over $20m (steady for last 3 years). No restructuring costs this half. Net debt reduced to below $50m. No dividends declared, as directors continue with debt reduction strategy. Contracted work in hand is $100m for ID and $90m for Geosciences. EV at $120m. Geosciences margins continue to be under pressure at 4%. As a leading indicator of conditions in the mining services sector, COF’s results indicate that things are not improving in a hurry. The initial investing thesis remains solidly intact. But it has been a roller-coaster ride with the share price dropping over 75% to 10 cents at one stage, and then staging a recovery. To make matters worse, I failed to top up during the entire ride. Not my finest moment.
FLN- revenue increased 40% but running a loss. CEO certainly likes the word "monotonic." Commented that FLN is like Ebay in 1997. Mate, we can talk again once you show a profit and positive cashflow.
TGA- Perennial ceased to be a substantial holder. TGA has a moat as competitors have little mindspace for this sort of unsexy business, and the banks are not interested in this sector due to small profits. TGA’s size and penetration of the communities it serves give rise to economies to scale. It went through the GFC with hardly a blip, testament to the resiliency of its business model. One of the more neglected quality businesses on the ASX.
OFX- director picked up nearly $60k worth of shares on market.
12 August 2014
SGH- WIP now exceeds total yearly revenue. Expenses/Revenue static at 79%. I have examined the figures for each year back until 2007. It was an exercise which was both intriguing and disgusting. It was also interesting that total revenue and total cash receipts from 2007 to present tally to an exact figure of $1.462b. An exact match...hmmmm. For your information, I am halfway through drafting a blog post which attempts to discuss concepts of accrued revenue, work in progress, prepaid revenue, unearned income and other such similar exciting items in balance sheets. I know, I know, you can hardly wait to read more on accounting arcania.
RKN- results are pretty good, still growing in business market, strong cashflow. News reported hiccup with new software, with lots of complaints on social media.
BOL results out. Total assets is $389m (negligible intangibles). Total liabilities $155m. Equity is $234m vis a vis market cap of $84m. OCF= $23m before asset sales. Management expects further strong FCF in 2015 which will be used to reduce debt currently sitting at $89m net. Finance cost is $8m which will decrease by at least $2m in 2015. Expects infrastructure to kick in in late 2015, and picking up speed in 2016 and 2017. Flagged another $15m to $20m of capex in 2015, which is largely covered by expected asset sales. CEO confident that business is cashflow positive, and asset sales only supplement cash on top.
13 August 2014
CRZ- sales up 10% NPAT up 14%. FCF nearly $100m. Market cap $2.6b.
AMM- FCF $20m. Capex $27m. Maintenance capex=$10m. Since DA=$11.4m, Owner’s earnings= $24m. Forecasted NPAT growth of 20% for 2015. Trading at 20x owner’s earnings.
CPU- results out. NPAT up 60% with flat revenue. Need to check interest margin revenue.
CSL- R & D is US$466m. OCF less capex is $1b- US$1.5b after adding back R & D. Share price has gone off again. The waiting game continues.
VOC splurged another $11.7m for WA data centre. Purchase price nearly 6x EBITDA. Pouring capital into a commodity business at the height of the boom. Wisdom of this acquisition will depend on cross-sales eg revenue synergies. Risky.
SSM FY out. Cashflow from operations is over $50m. Out of this they paid off the Syntheo liability and $5m interest, with a net cashflow of $25m. The money raised was capital raising they paid down debt. Gross debt is $17m, and net debt is $11m. EV is $88m. Next year’s cashflow will be in the range of $30m to $50m, putting SSM at cashflow multiples of 2 to 3x. Cashflow boosted by lack of capex spending which was running at $10m per annum. Normalised cashflow should be about $20m to $40m. SP unmoved. New management remuneration based on EPS and TSR again (current fashionable metrics- way inferior to return on capital).
14 August 2014
TLS and FXJ results out. TLS increased dividend and announced buyback.
15 August 2014
IRI results out. Very little growth, good ROE. Recurring revenues on the increase to over 40% of revenues. Priced for growth at $160m compared to less than $10m FCF.
Lastly, dear readers, a small riddle:
"How would a one-legged man win in an ass-kicking contest?"
Hint 1: Bobby Fischer
Hint 2: Sun Tzu
Enjoy and Prosper,
Yours One Legged