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Good H1 2023 for REH, impressive resilience to inflation - looks like they have been able to be a price maker.
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Recent Posts
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Very poor result for KME this H1 2023, basically another business paying a dividend out of borrowings. Really poor capital allocation. I am conflicted about continuing to hold this business, red flags for the last couple of reports on various grounds. I will sit it out for a bit longer but need to see some better management outcomes in the next 12 months.
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SFC H12023 results in line with my expectations, earnings down due to the impacts on the automotive trimming business, Delta returned to profit and investments (RE & equity) doing ok.
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Disappointing H1 2023 for AMO, poor capital allocation as well with the dividend maintained and payed with borrowings. Negative OCF & FCF as well.
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CDA H1 2023 results were in line with my expectations and showed a steady turnaround in the business back towards former performance. Importantly the negative OCF turned positive again and FCF was about break even. Share price started to recover strongly as the market rerated CDA.
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Shares / Re: Companies I didnt buy
« Last post by galumay on February 03, 2023, 04:11:52 PM »Had another look at VMT, signs that it might be becoming a decent business,
I think $VMT might be one I got wrong. Its actually showing signs of being quite a good business now. Should probably have a deeper dive.
$VMT has Interesting management, a bit underpromotional to be honest. Have just continued to perform under the radar. Huge derating in the multiple over the past year thats been offset by pretty mental earnings growth. Capital allocation is the big question.
Have been eyeing that one for a while as a value investor, just looks so unloved by the market for whatever reason despite continually solid fundamentals... such a flat chart & unfortunately sentiment/publicity matters so much in the market 😑
My investing strategy means I am agnostic to market love or otherwise, I am just looking for good businesses I can buy at a price that I believe is a discount to range of IV. Also never look at charts.
The aggressive growth in share count is a concern.
Dont like the large SBP which makes the FCF even less than it appears. Have to see whats going on with those loans to the related entities too.
Sadly, I agree. Got spooked by their India/Bird issues and the cost of their Italian JV partners. But underneath all that marketing hype, their could be a real business!
Growth runway way they have is enormous. Seems to be well managed, strong cashflow.
I am cautious to see how if they can get the money out of China and return it to shareholders though.
Low IR effort as no capital needs, which is a good thing. Hold v. small position
"Growth runway they have is enormous" is a 🚩for me!! FCF is pretty anaemic once you back out SBC.
Agreed the Cheena risk is something that would concern me.
I will keep having a scratch around, but its probably not for me.
Agreed, I sold out when huge compensation packages paid out to incoming Italian Stallions. Just noticed >4M performance shares given to management recently. Bottom line FCF and profit growth getting heavily diluted on a per share basis
I think $VMT might be one I got wrong. Its actually showing signs of being quite a good business now. Should probably have a deeper dive.
$VMT has Interesting management, a bit underpromotional to be honest. Have just continued to perform under the radar. Huge derating in the multiple over the past year thats been offset by pretty mental earnings growth. Capital allocation is the big question.
Have been eyeing that one for a while as a value investor, just looks so unloved by the market for whatever reason despite continually solid fundamentals... such a flat chart & unfortunately sentiment/publicity matters so much in the market 😑
My investing strategy means I am agnostic to market love or otherwise, I am just looking for good businesses I can buy at a price that I believe is a discount to range of IV. Also never look at charts.
The aggressive growth in share count is a concern.
Dont like the large SBP which makes the FCF even less than it appears. Have to see whats going on with those loans to the related entities too.
Sadly, I agree. Got spooked by their India/Bird issues and the cost of their Italian JV partners. But underneath all that marketing hype, their could be a real business!
Growth runway way they have is enormous. Seems to be well managed, strong cashflow.
I am cautious to see how if they can get the money out of China and return it to shareholders though.
Low IR effort as no capital needs, which is a good thing. Hold v. small position
"Growth runway they have is enormous" is a 🚩for me!! FCF is pretty anaemic once you back out SBC.
Agreed the Cheena risk is something that would concern me.
I will keep having a scratch around, but its probably not for me.
Agreed, I sold out when huge compensation packages paid out to incoming Italian Stallions. Just noticed >4M performance shares given to management recently. Bottom line FCF and profit growth getting heavily diluted on a per share basis
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Shares / Re: Companies I didnt buy
« Last post by galumay on February 03, 2023, 03:44:33 PM »Had a look at UNI, a mate Morepork Capital drew my attention to it,
Ok, I have looked back at the reports and updates available since IPO, latest trading update is irrelevant because it only talks about sales, no idea if they have been able to turn the slide in FCF around.
It looks like a decent business, that had a big boost thru covid like so many retailers, but FCF is now only 20c per share and when I reverse engineer the current price its implying an expectation of either a pretty high growth rate for a clothes shop, or a large step change in FCF (hard to do without that significant growth rate!
Some other good metrics, the operating cushion of 30% means they are producing 30c of OCF for each incremental $1 of sales.
I usually look at ROIIC, reinvestment rates and value compounding rate of business, but I look at it across 5 years of data that I pull into my spreadsheet, so I dont have any of that for $UNI.
I reckon its the sort of business I would be happy to hold if I owned it, but I wouldn't be paying $5.80 for it now!
Spoke to my 19yo son about it, he knew exactly what store I was talking about and said he and his mates are customers of the Darwin store when they want better clothes for going out. Mind you he is a bushie tradie with all his fashion sense inherited from his father so I am not investing on his glowing review! UNI would also have practically zero competition in that market in Darwin!!
He sent me a thesis he had written on UNI a while ago and I read that and replied,
Yep, that worked. Interesting, I should have mentioned I own $HLG, given their limited presence in Aus, and different demographic market I didn't compare them in looking at $UNI.
My valuation process is probably even more conservative than yours, and more focussed on FCF. I also try to think probabilistically about a range of outcomes and the impact on share price (as you did in talking about a 35% chance of a price over $6.75) and then end up with an expected value - which I can consider against my calculated range of value.
Given that I already own $GLB & $HLG, it would have to be very cheap or very compelling for me to consider - and it doesnt quite fall in either of those categories!
I would be comfortable if I held at the price you bought, as you say its a solid business, has been around a long time (always a plus in retail), and apparently is a better run business than most of its direct competitors.
Thanks again for sharing with me, always interesting to read the thoughts of more experienced and sophisticated investors. Cheers, RIck
ps. My son also commented about the look of the stores, lots of glass & light, he made the comment that it looks classy, like an Apple store. Looking at storefronts on an images search in my browser its immediately obvious what he meant.
Ok, I have looked back at the reports and updates available since IPO, latest trading update is irrelevant because it only talks about sales, no idea if they have been able to turn the slide in FCF around.
It looks like a decent business, that had a big boost thru covid like so many retailers, but FCF is now only 20c per share and when I reverse engineer the current price its implying an expectation of either a pretty high growth rate for a clothes shop, or a large step change in FCF (hard to do without that significant growth rate!
Some other good metrics, the operating cushion of 30% means they are producing 30c of OCF for each incremental $1 of sales.
I usually look at ROIIC, reinvestment rates and value compounding rate of business, but I look at it across 5 years of data that I pull into my spreadsheet, so I dont have any of that for $UNI.
I reckon its the sort of business I would be happy to hold if I owned it, but I wouldn't be paying $5.80 for it now!
Spoke to my 19yo son about it, he knew exactly what store I was talking about and said he and his mates are customers of the Darwin store when they want better clothes for going out. Mind you he is a bushie tradie with all his fashion sense inherited from his father so I am not investing on his glowing review! UNI would also have practically zero competition in that market in Darwin!!
He sent me a thesis he had written on UNI a while ago and I read that and replied,
Yep, that worked. Interesting, I should have mentioned I own $HLG, given their limited presence in Aus, and different demographic market I didn't compare them in looking at $UNI.
My valuation process is probably even more conservative than yours, and more focussed on FCF. I also try to think probabilistically about a range of outcomes and the impact on share price (as you did in talking about a 35% chance of a price over $6.75) and then end up with an expected value - which I can consider against my calculated range of value.
Given that I already own $GLB & $HLG, it would have to be very cheap or very compelling for me to consider - and it doesnt quite fall in either of those categories!
I would be comfortable if I held at the price you bought, as you say its a solid business, has been around a long time (always a plus in retail), and apparently is a better run business than most of its direct competitors.
Thanks again for sharing with me, always interesting to read the thoughts of more experienced and sophisticated investors. Cheers, RIck
ps. My son also commented about the look of the stores, lots of glass & light, he made the comment that it looks classy, like an Apple store. Looking at storefronts on an images search in my browser its immediately obvious what he meant.
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2 related articles that are very helpful in understanding FCF.
cash-flow-its-all-that-matters
CashFlowAnalysis
cash-flow-its-all-that-matters
CashFlowAnalysis
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Shares / Re: Companies I didnt buy
« Last post by galumay on January 23, 2023, 08:40:57 PM »Spent more time looking at $MFB today, went back thru all the Annual Reports back to 2017, the metrics for this business are outstanding, just hard to reconcile with a packaged food retailer operating in a tiny market (NZ).
Here is a grab from Uncle Stocks -
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The trouble is their most recent half yearly report, not only were sales, earnings and cash flow crushed as NZ came out of Covid, but there was an act of almost criminal capital management/allocation IMO, in that they continued to pay a dividend - despite having to take out an overdraft to cover it!
So the big question is what happened to all the cash from the IPO 2 years ago? The short answer is it all went on equity repurchase, debt reductions & IPO costs. The main purpose of the IPO actually seems to have been to provide majority holder, Waterman Fund an exit for its 66% holding at a very high premium!
At this point, despite the strength of the metrics from the previous years, the appalling capital allocation by management in funding the dividend with debt is a game stopper for me.
A friend on twitter sent me this -
https://fundamentalgoob.com/2021/10/19/nzxmfb-my-food-bag-bright-future-or-a-sinking-ship/
Confirmation.
24/1/23 35c
Here is a grab from Uncle Stocks -
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The trouble is their most recent half yearly report, not only were sales, earnings and cash flow crushed as NZ came out of Covid, but there was an act of almost criminal capital management/allocation IMO, in that they continued to pay a dividend - despite having to take out an overdraft to cover it!
So the big question is what happened to all the cash from the IPO 2 years ago? The short answer is it all went on equity repurchase, debt reductions & IPO costs. The main purpose of the IPO actually seems to have been to provide majority holder, Waterman Fund an exit for its 66% holding at a very high premium!
At this point, despite the strength of the metrics from the previous years, the appalling capital allocation by management in funding the dividend with debt is a game stopper for me.
A friend on twitter sent me this -
https://fundamentalgoob.com/2021/10/19/nzxmfb-my-food-bag-bright-future-or-a-sinking-ship/
Confirmation.
24/1/23 35c
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Thoughts and Ideas / Success...
« Last post by galumay on January 09, 2023, 10:41:17 AM »....Success is stumbling from failure to failure without losing enthusiasm. Anon.