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NTD

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galumay:
NTD, National Tyre and Wheel Limited is a little company i discovered who import and distribute tyres and wheels in the Australian, NZ & SA market. They have only floated in late 2017 and have not really set the world on fire but its been a steady business in a pretty shitty, low margin sector with no glamour whatsoever.

When I first had a good look at them I liked everything but the recent acquisition they made which had increased debt to way beyond what I was comfortable with. But, a fellow investor pointed out that the debt basically just bought inventory at cost or lower because the acquisition was very favourable and basically they just paid the NTA value for the business - so essentially bought a lot of inventory with the debt.

The business is profitable, makes reasonable FCF, has management with serious skin in the game, Terry Smith holds over 30% and the top 20 hold over 75% of the business.

Something I really liked that i picked up in the 2019 AR was the directors funding employee bonuses of shares out of their own personal shareholdings - I have bever seen that before!



At this stage I have picked up a parcel of 22090 shares at 55c and will watch how they execute following the acquisition.

Why will this business be around in 10 years? - people will still be buying tyres for their vehicles in 10 years, even if they are EVs. Again, these guys have been doing this for 30 years.

galumay:
H1 2021 A good 6 months for NTD, bedding in the acquisition started to flow thru to the bottom line, the potential loss of the Cooper's tyres distribution shot a hole in the SP on the same day, down up to 20%, probably should have topped up! Will have a good full year IMO.

galumay:
FY 2021


Outlook -

galumay:
H1 of 2022 hasn't been good for NTD, I now wonder if their aggressive acquisitions may have been ill timed given the obvious impacts of covid on the business. The debt is my biggest concern, its now grown to the point that I would not invest in the business. The negative FCF is a further worry. I am going to have to have a think about what I do with my position in NTD.

Very disappointed that management specifically said they would prefer to reduce debt as a priority over dividends - they have done the opposite of what they said with no explanation.

This has switched from a high conviction hold to one of my lowest conviction positions.

galumay:
NTD released an update for FY2022, grim stuff, my comments above reinforced. Should have sold as soon as they lied about the debt and increased instead of reducing, need to get better at responding to the redflags and offloading poorly managed businesses like this.

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