LRG - Longreach Group

[Lizard]

This stock deserves a new thread - the old one found here (http://www.sharetrader.co.nz/showthread.php?3310-LRX-reverse-t-o-of-Allied-Technologies-(ATZ)).

Warning - extreme spec end with low liquidity and market cap under $10m!

The old Longreach Group (LRX) was a bit of a disaster - after merging/buying/selling various businesses, this version is a substantially different business, mainly comprised of the original Redflex (RDF) business - C4i. The earlier business of LRX ended up in receivership and the old management have (thankfully) all moved on. Major shareholders, Nightingale, wore huge losses on their investment before pushing their way into the Board and management.

What's left now seems to be a good little business that seems to be winning and running a steady stream of contracts and turning them into cash. Currently the market cap a mere $8.9m, but have $5.4m cash in hand. Last qtr managed $1m of free cashflow on $4.8m of cash receipts. Going off contract announcements, current qtr should also be good.

There are also 39m of management options in the wings - but they exercise at around current price, so aren't dilutory for now.

From memory, the original price paid for C4i was about $5m (was going to be $8m, but didn't pay performance premium), so market cap still well below cash plus purchase value of C4i business.

Reported a profit last financial year of $1.1m from continuing operations. However, tax paid was on the low side and has resulted in an adjustment to this year, so may end up lower this year. Tends to capitalise a bit of R&D as well, so best to look at free cashflow rather than NPAT

[percy]

A lot of water gone under the bridge.
SP was around 10 to 11 cents late last year.I saw cash on hand was a lot more than the market cap.
Brought about the right time.
Company announced the sale of major business and the SP has been on a great trajectory since.I sold 60% of my holding for 40 cents.
Today's announcement of a 30cents divie has seen the price rise to 56cents.
Well, I think it is $0.30 is 30cents?!!!
Hope so.!!!! lol.

[soulman]

A lot of water gone under the bridge.
SP was around 10 to 11 cents late last year.I saw cash on hand was a lot more than the market cap.
Brought about the right time.
Company announced the sale of major business and the SP has been on a great trajectory since.I sold 60% of my holding for 40 cents.
Today's announcement of a 30cents divie has seen the price rise to 56cents.
Well, I think it is $0.30 is 30cents?!!!
Hope so.!!!! lol.

It is 30 cents percy with franking for Oz resident. Value of LRG has now has exceed cash. Basically they are a cash box and with this distribution, they will be a shell with a 6 months shelf life.

[percy]

It is 30 cents percy with franking for Oz resident. Value of LRG has now has exceed cash. Basically they are a cash box and with this distribution, they will be a shell with a 6 months shelf life.
Thanks for your reply soulman.30cents distribution means at sp of 55cents people are paying 25cents per share [or nearly $9.5mil] for a cash box.
Very expensive cash box?

[percy]

Lizard,
Thanks for your advice at ChCh sharetraders meeting.As you pointed out a fully imputed divie is of more value to an Australian investor than me.So sold today at 55cents.

[tosspot]

god lord that is the biggest drop ive ever seen. The ex div is 30c but this drop is much bigger. if the SP is now lower than 30c and a div is 30c then the share price must go down atr the end of the day by 30c it will be below 0. whats going on with this share

[Snow Leopard]

god lord that is the biggest drop ive ever seen. The ex div is 30c but this drop is much bigger. if the SP is now lower than 30c and a div is 30c then the share price must go down atr the end of the day by 30c it will be below 0. whats going on with this share

It has gone Ex-Dividend (http://stocknessmonster.com/news-item?S=LRG&E=ASX&N=732139).

Best Wishes
Paper Tiger

[tosspot]

It has gone Ex-Dividend (http://stocknessmonster.com/news-item?S=LRG&E=ASX&N=732139).

Best Wishes
Paper Tiger

my bad. still an 8c drop pretty large.

[Snow Leopard]

my bad. still an 8c drop pretty large.

Fully franked = +12.86c tax credits.

Best Wishes
Paper Tiger

[percy]

Already better answered by PT.

[Lizard]

Had another look at this today - they are quietly working away, expecting to acquire "Stream" which operates outsourced insurance processing. Before completing, they expect to pay a 7.9cps capital return, but will then issue shares for acquisition. Seems like a good little acquisition, with $30m revenue and growing, $5m NPBT in 2013. Possibly good value at 18cps still if all goes smoothly with acquisition execution.

[The Big Ease]

6.5m MC vs 5m NPAT?
Is this right?

[noodles]

6.5m MC vs 5m NPAT?
Is this right?
As part of the acquisition, they are issuing a lot of shares.

Post consolidation from 24mil to 152mil

Not sure where you got the 5mill NPAT.

Last years(2013) NPBT was $4.6M. This was down on 2012 of $5M

So NPAT for 2014 might be 4.6 (1-.27) = $3.36M
meaning eps of .022

Seems like reasonable value if growth does not drop.

[noodles]

Not sure where you got the 5mill NPAT.

I see the initial announcement had a 5mill NPAT. However, after reading the AGM notice, it looks like it has been lowered. Weird.

[percy]

The acquisition is The Stream Group Holdings Pty,who provide outsourced insurance claims management.
I wonder how good a business that is? Living in Christchurch, I am feed daily articles of abuse by insurance companies in "The Press".
Is it a good sector to invest in? Would The Stream Group find they are answerable to a "pack of bastards"?

[The Big Ease]

sorry i was quoting Lizard's 5m NPBT above.

[Lizard]

Had a closer look after someone pointed out that Stream are reliant on only two major customers at this point (RACQ in Australia and Tower in NZ). It also seems that the Tower contract only runs until June 2014 at this stage.

I also note that the way they book revenue may have meant they were still booking revenue from Christchurch earthquake and cyclone Yasi claims in 2012 & 2013, so there may be some decline in revenue as the tail from these events is dealt with.

They have taken a small investment in Cerno and NIRS, but are likely to write down this investment in 2014 due to poor performance of Cerno.

I have some faith in the management of LRG given what they achieved in recovering shareholder value from the old LRX/ATQ mess and believe they can make this one work too - however this IS largely a related party transaction as there is a lot of overlap in between shareholders of Stream and directors/managers of LRG.

[percy]

I think you are right to have faith in the management of LRG.

[mark100]

Anyone in this? (code now SGO). I am interested but the prospectus was a bit of a dogs breakfast and with the potential write downs for FY14 etc I feel the market might not get a good look at the true earnings picture until FY15.