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Lizard
10-05-2006, 03:58 PM
Legend Corp (LGD) announced recently as on track for FY06 NPAT of at least $6.6m. Today announced the acquisition of Cabac (electrical wholesale goods) which I calculate could add a further 2-2.5cps to 2007 earnings i.e. could be worth about 30cps to the share price.

Manufactures and sells memory modules and memory based consumer electronics products. Markets in Aust, NZ, SA, Hong Kong, S'pore, Thai, Eur. Manufacturing in Australia and S'pore. Diverse customer base including Acer, Xerox, Dell, Volante, Optima, plus merchandise sold through major retailers like K-Mart, Harvey Norman, Myers etc. Following was calculated at recent sp of 74cps, but up a bit today.

* Market cap $68m
* P/E for year to June on track for around 10 - could be below.
* Revenue forecast up 18% to $200m
* NPAT forecast up 40% on 2005 ($4.7m)
* Rolling year divs of 3cps - yield 4.1%
* Acceptable debt levels - NTA approx 36cps at HY.

Biggest issue is lowish margins - though increasing. Also, working capital increases were substantial in half year, requiring additional capital raising. Need to keep an eye on their working capital management.

Lots of growth initiatives through new products, new distribution agreements, plus geographic expansion.

Bought a few recently at 71cps. I value at $1.15 ps.

Lizard
16-05-2006, 05:38 PM
Presentation yesterday included a forecast of 15% growth in earnings for both Legend and new acquisition, Cabac. Based on that and allowing an interest cost for the Cabac acquisition, would be looking at NPAT equivalent of $10.2m or 2007 P/E of 7.0. However, acquisition will be partially equity funded, which raises both figures slightly.

Valuation $1.15 - $1.25.

Holding up at 80cps and looks like a bargain.

Lizard
21-07-2006, 03:04 PM
LGD has fallen back to below 70cps since I posted on it. Although I'm uncertain as to longer term potential, it is certainly going to look cheap when they post the FY result of at least $6.6m NPAT - confirmed several times and putting them on FY P/E of 11.5 allowing for the recent share issue. But pro-forma including recently acquired Cabac must be closer to P/E 8.8.

Just another in my pile of under-valued small-caps that stand a good chance of a re-rate in results season.

Lizard
12-09-2006, 09:14 AM
LGD reported NPAT of $6.7m yesterday, in line with forecast. Cabac was acquired after June 30th and therefore not included, but had EBIT of $5.5m. Allowing for interest on the purchase cost of $25m, the pro-forma NPAT for combined group is estimated at $8.9m. This gives a fully diluted P/E of 8.7 at yesterdays price of 71cps, with further strong growth expected. Final dividend of 1.5cps means yield of 4.2%.

However, negative operating cashflow and expansion of debt to fund working capital and CABAC acquisition would suggest caution. The increase in inventory has been disproportionate to the increase in sales and levels seem very high. The company statement says "The opening of our new Singapore factory and the addition of many new higher margin products has contributed to a significant increase in our working capital position".

While the company remains sound, I suspect the market may want reassurance that the high inventories are not just a prelude to the write-off of obsolete stock and that the debt position will be managed appropriately.

Lizard
07-10-2006, 11:36 AM
Went ex-dividend this week and then staged a small recovery on good volume. Could be thinking about breaking out. Put it on the watchlist for a possible trade.

http://img.villagephotos.com/p/2006-8/1204598/lgd-chart-oct06.gif

OneUp
07-10-2006, 11:49 AM
Hi Liz,
P/E of 9-10 for a business like this seems fair.

Do you have info on LGD's track record? (sales, profits, profit margins).

Without knowing much about LGD, sounds from your description like CLT, which the market with good reason has awarded a low PE.

Why does it deserve a higher PE?

Can we confident this expected increase in earnings will be permanent?

(As a former shareholder I CLT, I found it a bit frustrating to see one year's $10m profit turn into $4m...)

Lizard
07-10-2006, 12:47 PM
Hi One Up. Do not have time to completely answer your questions, as also trying to entertain 5 children, so excuse a short answer for now...

I think P/E of 9-10 is a little harsh and am interested on what basis you say that. Also, I think the forward P/E is closer to 7 based on indications of expected growth.

I have already mentioned my concerns with working capital management, but don't consider it poses an immediate danger at this point. It needs to be watched.

My last post was really just meant to point out the possibility of a short term trade on price action. At this point in time, they will be coming up to the agm (not sure what date) and most likely to get indications of an 06/07 year profit well ahead of last year. We should have a few months before anything can go wrong, so seems like a safe trade. Just my thoughts.

Lizard
07-10-2006, 02:38 PM
Some more data for you One Up.

Legend formed in 1987, listed in Mar 2004. Prospectus shows revenue and EBIT from 1999 onwards. Margins look to have had a hiccup in 2001 and revenue static from 2000-2002, but otherwise yoy growth in revenue and EBIT. Compounded ave revenue growth over the 7 years to 2006 is 26% (excluding CABAC). EBIT growth compounded at 33% pa. However, it is difficult to know how much of that growth was bought via new equity.

Historical EBIT margins roughly in the 2.5-4.0% range, but 2006 at 4.8% and, with CABAC result included would have been 5.9%.

EBITA/total assets ratio of 16% suggests there is enough margin for profitable debt funding.

By comparison, at peak of $9m NPAT, CLT had EBIT margin of 3.3% and EBITA/total assets of 10.4%, which left a little less wriggle room with the debt.

OneUp
07-10-2006, 02:50 PM
Hi Liz,
having difficulty with Adobe at the moment so can't browse the final report.

PE of 9-10 isn't necessarily cheap if it earns $9m one year, but loses $4m the next. Very low (2%) margins (basing this on 1H06) suggest a slight change in industry conditions could wipe out this year's profits. So some info on earnings variability and sensitivity to changes in economic conditions is important from that perspective, IMHO. From your description LDG came across as a commodity business with no competitive advantage, and in a very competitive sector.

P/E of 7.0 might be undervalued, if confident they will meet forecast and the earnings are "clean" (though in the electronics industry big inventory write offs are presumably common? Bit of a worry with the build up, as you noted).

Don't know much about this company so just trying to generate discussion :).

Lizard
31-10-2006, 02:02 PM
Good to see from today's update that they have reduced inventory by $4.6m (excluding CABAC inventory acquired) and were operating cashflow positive ($1.3m) for this "seasonally slow" quarter.

CABAC performing to plan and in line with historical levels of growth.

Seems they are planning to focus on growth in margins rather than revenue growth at this point.

Recent purchase was by Thorney holdings. I'm still waiting patiently for the market to re-rate this one. Yawn!

Lizard
30-11-2006, 09:57 AM
Recent acquisition of IES investments looks good to me. Fully equity funded, which will improve the balance sheet, although may create a bit of an overhang with approx 36m shares issued at 68-70cps for funding.

Only a part year contribution to FY07 and will be some integration costs. I'm working on 07 NPAT of $10.5m and 2008 of $15.7m, putting them on forward P/E of 10.8 and 7.2 respectively. I value at $1.19.

Big improvements in return on capital should make them much more attractive - need a re-rate in the share price so they don't keep funding acquisitions out of cheap shares! But now that the balance sheet has been improved, this should not be necessary for a while.

Lizard
02-02-2007, 01:56 PM
Been very patient with this one. Has been a long time, but I think if they can demonstrate improved quality of earnings and working capital management this half, they should fly. At over the $100m market cap, they are large enough to be on a few institutional watchlists.

Lizard
26-02-2007, 08:06 PM
Disappointing half year result announced today and got sold down heavily. :(

Hard to comment further without the detailed accounts yet provided. But revenue seemed very low c.f. the September quarter.

Lizard
27-02-2007, 01:49 PM
I think they could get alot cheaper. Doubt memory prices can come back from a 30-40% drop as fast as they fell. And with a loss in the first half, even a "back to normal" performance in the second half would still leave them on a high P/E with latest equity issues. So their chance to redeem their share price is possibly at least nine months away.

Lizard
27-02-2007, 02:42 PM
Not arguing that they're not value. Just arguing that the market doesn't have any imperative reason to value them upwards for a while. So the price could drift off a bit and therefore not a time I would choose to buy more, as probably get them cheaper in a few months.

Lizard
25-04-2007, 10:27 AM
Sorry, I thought I'd said that I sold out after HY result, but reading back, it looks like I only wrote it on Share Investor. Had a big post results season clean-out. Only got 53.5cps for them though, so I could have timed it better!

I still have them on my watchlist. Hoping the market takes longer to process FY result than HY and I get the chance to decide whether HY has created a blip/buying opportunity or was a warning of more serious long term issues.

Lizard
12-08-2010, 08:16 PM
LGD expecting a good result and pricing creeping up in advance. Probably worth closer to 30cps (currently 19cps), but not sure where the growth will come from to take it beyond that.

Lizard
16-08-2010, 02:06 PM
Result came in pretty much as expected and seemed to attract some interest. I thought the best part was the op cashflow, which was pretty spectacular and made a considerable dent in debt. Comes from a wind down in receivables and use of tax losses, as well as low capex for the year.

Initially I thought outlook sounded positive, but then realised it is in fact a rather cautious view. So difficult to see if they can improve much beyond this year. I value at 29cps, but without a compelling growth story at this point, so there may be better buying elsewhere (currently 20.5cps).

Lizard
17-08-2010, 07:37 AM
Been picked up by Tim Boreham of The Australian, so might win a few more friends today. (Scroll down article to read section on LGD).

The Australian - Tim Boreham (http://www.theaustralian.com.au/business/cost-cutting-key-to-steelmakers-future-bluescope-steel-bsl-239/story-e6frg8zx-1225906075667)

mark100
13-12-2010, 04:58 PM
LGD was tipped by a newsletter

Lizard
13-12-2010, 05:39 PM
No, I am not on this for now. Still think it is an ok stock, but not on my "hot list".

mark100
09-02-2011, 01:29 PM
I was surprised they didn't give a profit guidance range until I read the bit about the major customer not buying as much from the Memory Module business in the future. Maybe they are unable to quantify the impact at this stage. I hold a few, was going to buy more but that bit put me off for the moment, given that division contributed over half the profit

drillfix
02-03-2011, 12:25 AM
Ohhh Legend. One of my very first shares. And today it is worth exactly half what I paid. I never sold out too, simply because it is such a lovely reminder how one can lose 90% in almost no time whatsoever.

Hey Mo,

Mate could be worst, could have been URA the worst stock and management on the history of the ASX run by a woman who think she is a man.

drillfix
02-03-2011, 01:04 AM
Hey KW, what are you gonna do once/should/if you get it back in the money?

Cleanse your sins or keep them and see how they go?

Looks like the MACD is about to turn negative histogram, but you can always tell with these stocks.

mark100
19-10-2011, 01:48 PM
Nice profit forecast at the AGM. At the mid point of their guidance, 1st half profit will be up 15%. Annualised, the stock is trading at around 7.5x FY12 earnings

Joshuatree
17-05-2012, 01:31 PM
NPAT expected to be $9to $9.5 million up 8% thats gotta be good?

Lizard
16-08-2012, 11:15 AM
Finally got back in at 32cps today on that result... been meaning to get in earlier, but when I punched the numbers in, it nudged me.

Would expect to see north of 50cps in next 9 months if they can get some momentum from acquisitions in first half. Somewhat concerned re ability to maintain margins, but looks cheap - heck, might even be the year that MoSteph makes his money back :)

Lizard
01-11-2012, 08:56 PM
Oh well, looks like MoSteph will have to wait a bit longer to get his money back (and I will likely be taking a hit to mine)... profit downgrade today due to fall in sales and rise in costs. :(

Lizard
23-02-2013, 07:17 AM
I only just got around to looking at the LGD half yearly. At the top end of downgraded forecast given in November, so that is good. MSS fibre and MSS power acquisitions supposedly operating at close to the projected EBIT multiple of 4. Given a total of $12.6m has so far been spent on acquisition, I would guess that equated to at least a $1m NPAT contribution for the first half.

At least the forecast appears to be for significant improvement second half, although still seems unlikely they can jump back from $3.1m NPAT at half year to match last years $9.5m result. I think they are a little cheap here at 30cps, but will need to prove themselves in second-half and probably time to buy will be late April/early May.

Joshuatree
23-02-2013, 08:33 AM
Always appreciate your summaries and opinions Liz ,thanks.

Joshuatree
12-06-2013, 01:41 PM
Update; NPAT $6.4 to $6.9 million to june 2013, 2012 NPAT $9.4 million; div policy of 35% to 50% of NPAT in place.Sig non reocurring expenses; bad debt of $750,000 (gulp) and $370,000 in write-off of lease hold improvements.

Net debt circa 1.1 times EBITDA ..." continued decline in certain key mkts"

Lizard
13-06-2013, 06:10 PM
Yes, looks like "April/May" would have been a little early to get back in... but I still think maybe June/July will look good to top-up. I would like to get at around 21cps. If depth stabilises, I may buy more.

Lizard
19-06-2013, 08:50 PM
Looking a bit more balanced on depth. Picked some up at 23.5cps. Fingers-crossed.

Lizard
10-07-2013, 04:07 PM
Yes, looks like "April/May" would have been a little early to get back in... but I still think maybe June/July will look good to top-up. I would like to get at around 21cps. If depth stabilises, I may buy more.

Okay, so I got them today at 21cps too. They can stop falling now. :eek2:

I've re-visited the profit update announcement a few times and it looks like normalised second half is pretty good. So, all being well, should see a higher profit next year, with continued strong div and low earnings multiple. Though, of course, not all is well with the Aussie economy at the moment, so there are no guarantees.

Lizard
14-08-2013, 03:42 PM
Bots are buying. I still think there's room for movement on results announcement from here at 26cps, despite the low volume it is moving on at present.

Lizard
21-08-2013, 06:29 AM
Result out yesterday - I thought it was on track, but market initially dumped before buying back at end of day. Perhaps the outlook was murkier than hoped and MSS fibre underperformance disappointed? No clear signs as to profit direction in coming year - cautious positive tone means little at this stage.

I value at 35cps, but LGD has rarely come close to my target value in the past, so treat with caution. Closed at 28cps. Total div for year of 1.7cps + franking.

Lizard
23-08-2013, 09:25 PM
Has made a good recovery from the post-result lows to finish at 30.5cps today. Those who bought on the dump will be happy.

Lizard
30-10-2013, 01:49 PM
AGM speech today highlights NPBT 17% above prior YTD as at end of October and forecasts this to continue for the rest of the year. A 17% increase looks fairly healthy against the backdrop of current PE of 10.7 (at 32.5cps). Seems like a good buy/hold at these levels, despite a generally weak environment for them.

Joshuatree
24-02-2014, 01:25 PM
Sturdy and stable with div up 25%. Management believe they are well positioned. Here endith the taciturn note

Lizard
24-02-2014, 01:40 PM
Second quarter looked a bit weak to get excited and may portend a tough second half. Div should hold it here, but they had a good second-half last year, so yoy may end up weak and I would think no rush to invest until closer to FY or beyond.

Lizard
24-02-2014, 01:40 PM
Second quarter looked a bit weak to get excited and may portend a tough second half. Div should hold it here, but they had a good second-half last year, so yoy may end up weak and I would think no rush to invest until closer to FY or beyond.

Lizard
20-10-2014, 08:21 PM
LGD share price has been on the wane for a few months now, hitting lows of 24cps recently. However, it may be worth watching for the turnaround, as PE is about 8.4 at current share price of 25.5cps, the selling volume seems to have dried up and it is possible the bots were on the buy side in the last couple of trading sessions...

AGM is 30 October - not expecting too much then, since first quarter last year was a good one and would be difficult to beat after the fizzer that followed. However, they don't need to find growth to be cheap at these levels... so any slight optimism in the outlook could be enough to trigger some recovery in s.p.

6376

Lizard
12-05-2015, 09:52 AM
Seven months later... lets try that again. I think this looks more hopeful, although still would be nice to see more volume. Not many companies still on these sorts of value stats with P/E 7.7 and div of 7.3% (at current price 24cps).

The outlook statement in yesterdays investor presentation seemed suitably vague on first read, but I think may imply a small increase in NPAT for the current year. After that, there is potential further growth from latest acquisition in FY2016. Not sure if this will be enough to give the market confidence to re-rate. Market depth looks promising.

7340

babymonster
12-05-2015, 07:41 PM
Hi lizard, I like your post thanks. You always find some interesting stocks. Thanks for sharing.

Lizard
13-05-2015, 06:13 AM
Hi lizard, I like your post thanks. You always find some interesting stocks. Thanks for sharing.

Thanks babymonster. The chart improved yesterday, but more volume would have been preferable. I did increase my holding a little. I'd like to see it head to 32cps for now, but will need some more oomph to get there, so hope I don't get another pullback and three months of wallowing through to full year...
7345

Although looking at that chart, pullback and consolidation at 24 - 24.5cps for a few days is probably an odds-on scenario. Hoping after that we will see some institutional interest to give 30%+ on the back of solid yield.

babymonster
13-05-2015, 06:23 PM
I think I will wait for its pull back. Raising a bit too fast..

Lizard
14-05-2015, 03:28 PM
The bots have arrived. Seems like it is getting the insto interest that it needed.

babymonster
14-05-2015, 08:12 PM
Yes, maybe they will drive it up a bit but you never know when they will pull the plug.

Joshuatree
23-05-2019, 11:01 AM
Holding atm lizard?Trading halt re Takeover at around 45c im hearing ;current s/p 31c.