Laserbond Ltd - LBL

[Lizard]

I mentioned this micro-cap on the profitable micro-caps thread and thought I might write it up more fully with it's own thread. However, pre-warn readers that this share is small and highly illiquid, so will not be to everyone's taste!

The company was first formed in 1993 with the aim of providing a parts maintenance service to increase the wear performance of metal parts. They initially provided thermal spray surface coatings, focussing on HP-HVOF (High Pressure High Velocity Oxy Fuel) process. Along with this they also provided cheaper coating methods such as plasma spray and arc spray. In 2001, they launched the Laserbond process, which forms a metallurgical (welded-type) bond between the coating and underlying component using a controlled heat level. This is considered an improvement over the other mechanically-bonded processes.

In 2007 they IPO'd on the ASX with the intention of raising funds for geographical expansion. Given the size of parts that are re-surfaced, it was not proving economical to transport parts from further afield to the plant at Ingleburn, NSW. The IPO raised $3m through the issue of 15m shares at 20cps. Prior to listing, sales had been steadily rising from $2.6m in 2003 to $2.9m in 2006.

In 2008, they used the IPO proceeds to acquire Peachey's Engineering in Queensland. The purchase price was $2.5m cash, $0.5m scrip (@15cps) plus earn-out. Sales for Peachey's were noted as $6.8m and EBIT of $1.4m for the 2008 year.

For FY 2009, with growth in Laserbond and the addition of Peachey's, revenue came in at $9.1m and underlying NPAT at $670k, although some abnormals pulled that down to $271k. Unfortunately, the coffers were drained in financing the acquisition and the company issued 350,000 convertible notes. These notes have the potential to overhang the share price, as they can convert prior to June 2012 at the lesser of 15cps or at 85% of the 5 day VWAP (which could be rather easily manipulated!). It appears that so far, about 110,000 of these notes have been converted at 0.1042 per share.

During 2009/10, the original Ingleburn plant continued to grow, but problems relating to the GFC and management dented returns from Gladstone (formerly Peachey's). This produced a FY result of $10.4m revenue and $0.5m NPAT. Cashflow remained tight as the earn-out payments were made for the acquisition.

However, 2010/11 looks like being the "bounce back" year for this business. Ingleburn revenues were up 40% in first half and, while revenues at Gladstone declined, their order book bounced back, setting them up going into the second half. Free Cashflow also turned positive, to put them in a stronger cash position. The recent update from LBL has forecast FY revenues of $12.7m and NPBT of $1.5m. It also noted that the company was now "perfectly positioned" to meet 2012 growth and profit targets (had to put that in for percy - he'll have to keep up with the latest lingo taking us from "well" to "perfectly" :) )

In summary, at current price of 11.5cps, the forward P/E is looking like about 8.0 (at 12cps), even after allowing for conversion of remaining notes to about 2m shares. Forward EV/EBIT comes in at around 4.75.

The company has a reasonable record for revenue growth, so could be a good micro-cap to pick for combined value plus growth going into the next result. Just be aware that they may need to work off the convertible note overhang at some point, particularly if the price were to rise to above about 18-20cps, where it would be worth the holder converting at the 15cps maximum and then gradually selling down. I currently see value as closer to 21cps with upside.

[Lizard]

An unusual trading halt... never had one because un-audited accounts turned out to be surprisingly high and need checking - in this case "significantly higher than what Laserbond consider the market would be expecting". Even more surprising given the substantial profit upgrade of a few months ago!

I should probably be concerned about any company that finds a surprise in its accounts, but, in the short term, I'm happy with this one and look forward to seeing the outcome. :)

[Lizard]

The recent update from LBL has forecast FY revenues of $12.7m and NPBT of $1.5m.

Looks like final count will now be $13.28m revenue and $2.06m NPBT. Makes for a 27% increase in revenue and a 237% increase in NPBT over pcp. At 12cps, P/E will be under 6 and EV/EBIT maybe around 3.1.

Okay, you can all re-rate it now so they can put together a decent WA acquisition! :)

[percy]

New lingo is exciting. "Perfectly positioned" must be a new "classic" ,however the PGM [percy gold medal] goes to GXL who have appointed an "acquisition facilitator".
The question must be asked, do LBL already have one ,or possibly two or more "acquisition facilitators" ?.
Technical analysis and fundamental analysis have now been overtaken by language analysis.

[Lizard]

Result out and maiden 0.5cps div to go with the forecast result. Market liked it and bumped it up to 16-17cps, although can't see it going too much further for now unless this whole div-paying, micro-cap stock sector gets a re-rate.

Forecasting more growth and sounds like they are making progress through rolling out the re-surfacing technologies into Queensland, with intentions to take it to WA sometime soon, so fingers-crossed there is more in this one over the next year. Continuation of second half strength alone should be enough to give it some more interest at the 1H 2012 result.

[Lizard]

Been making another small leg up and took a 20cps buyer today before the sellers came back out. Settled at 18cps, but getting gradual support.

Haven't seen an agm date out for this one yet, but any profit indications are likely to be positive on the basis that 2H10 was a large improvement over 1H10, so likely to see a good % increase in any forecasts or updates.

[h2so4]

A great pic Liz.

30% plus a dividend in a couple of months.

[drillfix]

Had a quick read of their website and a listen to the cheesy 80's music in their video..LOL
(kinda sounded like a track from the Breakfast Club..hahaa)

Saying that, this stock is also technically in an uptrend, so will add it to the up trending stocks List.

A bonus for those who grab this for the div's whilst being in an uptrend~!

[h2so4]

Outstanding pick Liz.

Looks to be a very profitable business.

[Lizard]

Hi Sulphuric,

Has been a profitable trade so far! :)

Their forecast for first half suggests revenue about the same as 2H11, but NPBT about $0.5m down - although that's not too unexpected when they had a bit of a rush up in profit at the end of second half. I think they are worth about 30cps, but don't expect them to get much past 27cps this year unless they go into upgrade cycle in the second half as happened last year. I'm working on NPAT of $1.7m for FY12.

If they manage the "investing for growth" part well, then there is quite a bit of upside. But could also be bumpy in a business this size, so I may take a bit off the table somewhere along the way.

[4be]

Hi Sulphuric,

Has been a profitable trade so far! :)

Their forecast for first half suggests revenue about the same as 2H11, but NPBT about $0.5m down - although that's not too unexpected when they had a bit of a rush up in profit at the end of second half. I think they are worth about 30cps, but don't expect them to get much past 27cps this year unless they go into upgrade cycle in the second half as happened last year. I'm working on NPAT of $1.7m for FY12.

If they manage the "investing for growth" part well, then there is quite a bit of upside. But could also be bumpy in a business this size, so I may take a bit off the table somewhere along the way.

Hi Liz,

my concern with LBL is if China slows down -hard or soft its going to effect LBLs revenue. They seem completely correlated to the aussie mining boom To me the macro risk here is high that LBL might not have the growth its looking for in 2-5 years time? What are your views?

[Lizard]

Can't really answer - they're such a small player at this stage that it is pretty hard to know what they will be able to do - after all, the mining industry might reduce and make growing the market more difficult, but it won't be disappearing overnight.

Neither do I see them as a "super-high-quality" company for a long-term hold at this point, so still very much a "spec" in my books which means reduce risk when appropriate. Doesn't mean they won't grow into something more (as, say, Imdex once did), but it's a wobbly path for any company this size.

[Lizard]

Tidy report out for first half. Some capex to work through for future growth, so hence encouraging holders to take up DRP for the new interim div (0.3cps). Some effect expected from increased fixed costs/capacity initially underutilised but I am working on $1.7m NPAT. I have value to 28-31cps (currently 25.5cps).... notes to convert at 15cps this half should keep the sell side topped up with over 1m shares to go. Enough to let new holders in, not enough to spoil the trade. :)

[percy]

Tidy report out for first half. Some capex to work through for future growth, so hence encouraging holders to take up DRP for the new interim div (0.3cps). Some effect expected from increased fixed costs/capacity initially underutilised but I am working on $1.7m NPAT. I have value to 28-31cps (currently 25.5cps).... notes to convert at 15cps this half should keep the sell side topped up with over 1m shares to go. Enough to let new holders in, not enough to spoil the trade. :)

Thank you Lizard.I brought some this afternoon at 24.5cents.

[Lizard]

I have sold half my holding into the recent run as have had a good return on my 12cps entry with capital gains and divs over the past 9 months.

Cash always handy so I can find new shares for the collection. Happy to keep holding the rest.

[percy]

I have sold half my holding into the recent run as have had a good return on my 12cps entry with capital gains and divs over the past 9 months.

Cash always handy so I can find new shares for the collection. Happy to keep holding the rest.

Funny ??!! I looking to add to my holding>>>!!! maybe I have too much cash.!!
Although looks as though up trend has stopped on chart.

[slimwin]

A pause I hope. I bought at 27.

[Lizard]

Funny ??!! I looking to add to my holding>>>!!! maybe I have too much cash.!!
Although looks as though up trend has stopped on chart.

Different circumstances require different styles! I tend to spend more cash than I get in, so only get excess to invest when I sell something.

I'm just reporting that I've sold a few. Just trying to keep the integrity of the thread, not a recommendation to others.

[Lizard]

I have sold half my holding into the recent run as have had a good return on my 12cps entry with capital gains and divs over the past 9 months.

Cash always handy so I can find new shares for the collection. Happy to keep holding the rest.

In trading halt pending cap raising to be followed by spp with record date at todays date.

Cash from selling half might end up back in again if the price is right.

Sounds like they have a larger contract with Alcoa too for parts to alumina refineries in other parts of the world. Though, on the downside, the various growth initiatives looked to have dragged down second half, so probably see some disappointment.

[percy]

In trading halt pending cap raising to be followed by spp with record date at todays date.

Cash from selling half might end up back in again if the price is right.

Sounds like they have a larger contract with Alcoa too for parts to alumina refineries in other parts of the world. Though, on the downside, the various growth initiatives looked to have dragged down second half, so probably see some disappointment.

SPP will save me brokerage.!!! Looks as though we are "well positioned."

[slimwin]

I'm pretty new to investing (at least not using paper trading) and haven't been involved in a SPP before. Is it usual for the shareprice to tank as bad as LBL has after the announcement or is that more the turbulent markets at the moment?

[percy]

I'm pretty new to investing (at least not using paper trading) and haven't been involved in a SPP before. Is it usual for the shareprice to tank as bad as LBL has after the announcement or is that more the turbulent markets at the moment?

No.When I saw the announcement the SPP price would be 23 cents I thought great.Now with share price under 23cents it is cheaper to buy on market,so who will support the SPP.? Why the big drop.Deal with Alcoa must be positive.? The fact they are expanding a proven proccess must be positive.?Yet the SP tanks.I am pretty old at investing and still can't understand the market.

[slimwin]

Is it likely they'll drop the SPP price lower to make it attractive or find another means of making up the shortfall?

[percy]

Is it likely they'll drop the SPP price lower to make it attractive or find another means of making up the shortfall?

I don't think so,as the placement was done at 23cents,and the organising broker of the placement would not accept the SPP being at a different price.What happens next I don't know.Should the SP go up, we take up the SPP.Should the SP keep dropping we do not add money to a losing position,so hold onto our cash.I don't intend selling my holding.We have time before we have to front up for the SPP as no dates have been given yet.

[slimwin]

Thanks for the insight Percy. I'm in for the long term anyway. This is another wee lesson on the way.

[Lizard]

In my view, the spp was still dilutionary to valuation - although my valuation only fell 1cps to around 31cps.

However, right now, the market is focussed on cashing out. There will be many with good profits in LBL who decide to cash some out.... worst case, if the market turns, they might have to buy their spp shares back a few cents higher... if it doesn't, they might get to buy them back lower on market... or buy something else that gets beaten up in this rout.

Also, their heavy dependence on the mining sector might be spooking some who are fleeing everything mining related in light of China slowdown.

[h2so4]

I think growth companies are at the bottom of the heap in this market.

[percy]

Gee Whiz,I hope Mr.P is not watching,as I sinned this afternoon and brought some LBL at 20.5cents.
As the old saying goes,"do as I say, not as I do."

[soulman]

I think Mr P left the market at the right time and has left leaving us wiht educational wisdom of the market.

What you do now is to read as many thread by Mr P and learn from his/her wisdom.

[percy]

Gee Whiz,I hope Mr.P is not watching,as I sinned this afternoon and brought some LBL at 20.5cents.
As the old saying goes,"do as I say, not as I do."

Gee Whiz,Must say a warm welcome to the buyer at 23cents today.Welcome.Don't feel so bad about the rush of blood to the head I suffered the other day.

[percy]

[QUOTE=Lizard;374186]In my view, the spp was still dilutionary to valuation - although my valuation only fell 1cps to around 31cps.


No dilution.Share Purchase Plan cancelled.

[4be]

Anyone still in this? Big hit today, saw one of the Hoopers buying on market last week- not large value however. No news of acquisition yet, general market sentiment not good I guess and the market probably factoring in the lower EBIT for FY12?
4be

[percy]

Anyone still in this? Big hit today, saw one of the Hoopers buying on market last week- not large value however. No news of acquisition yet, general market sentiment not good I guess and the market probably factoring in the lower EBIT for FY12?
4be

Was a bit surprised as I thought having raised money people would be looking ahead at the expansion they will be undertaking.I suppose this expansion will take time.With SP all over the place I will hold until more news from the company.

[4be]

Hopefully management provide some guidance shortly along with an update on their acquisition hunt. Technically the price has broken both trend lines on my chart and is under the 200 day moving average.

http://afr.com/p/technology/it_swim_or_sink_in_wa_for_laserbond_hlJenhldVLcAWL RH9Oid4M#none

Good point in this article re management being able to implement the acquisition successfully.

[percy]

Hopefully management provide some guidance shortly along with an update on their acquisition hunt. Technically the price has broken both trend lines on my chart and is under the 200 day moving average.

http://afr.com/p/technology/it_swim_or_sink_in_wa_for_laserbond_hlJenhldVLcAWL RH9Oid4M#none

Good point in this article re management being able to implement the acquisition successfully.

Thanks for the link.Market judging they will do the wrong thing before they have done anything.!!!!!! I will give them a bit longer as I feel expansion into WA is the right move.I feel sure they will already be dealing with a lot of the firms in NSW.

[4be]

Thanks for the link.Market judging they will do the wrong thing before they have done anything.!!!!!! I will give them a bit longer as I feel expansion into WA is the right move.I feel sure they will already be dealing with a lot of the firms in NSW.

No worries, I hold too....just

[Lizard]

I still hold remainder after selling half earlier. No particular reason to hold at this time, but helps me keep it on watch as I figure there is a reasonable chance of it becoming a buy again in 6-9 months time.

[Lizard]

Market update out today reported a small loss in 1st quarter, but lots of optimism based on increased value and volume of quoting activity... so probably buying opportunity still coming. Currently 16cps, but may well go lower.

[percy]

Market update out today reported a small loss in 3rd quarter, but lots of optimism based on increased value and volume of quoting activity... so probably buying opportunity still coming. Currently 16cps, but may well go lower.

You could say "we are well positioned for the upturn".
I recently read the printed copy of the annual report and thought all looked pretty good to me.

[Ricky99]

Anybody still following or holding?

[percy]

Yes.
Now a long term holder,ie a short term holding that did not work out.!!!! lol.

[NZSilver]

Percy, might be worth becoming a short term holder again if you aren't still a long term holder.

I followed this company years back, it came onto my radar again a few months ago but I never followed up on digging into the details. Anyway finally did a couple of weeks ago and see that it has entered a growth phase with alternate revenue streams coming online (licencing their technology and product division - see us steel below). Also management is targeting to double revenue and this will significantly increase EPS as they have very good control on expenses.

I've always thought they have had a good product, but they are now getting traction offshore and have growth in Aussie too. Management/founders still holds around 50% so its more like investing in a private company than the share market.

Risks are downturn in mining sector, product division have won and are pushing into US steel industry with rollers (which basically thin/mould out the steel during manufacturing) - not sure how resilient the US steel industry is without trumps handy tariffs. Also key person risk.

Financials - generating cash, cash flow +ve, profitable. Investing in growth, pays div
Balance sheet - no debt, cash on hand.
Forward PE around 10-12 if I remember my modest assumptions correctly.

Anyway a long story short I should have looked a few month ago and would have a tidy return now, but had a good look the other day and i'm in now. I like the robustness of this company and the fact they really have a product that had worked for many years.

Worth a look, 40mil market cap, could be significantly higher if plans play out, and they look to be working so far.

[percy]

Percy, might be worth becoming a short term holder again if you aren't still a long term holder.

I followed this company years back, it came onto my radar again a few months ago but I never followed up on digging into the details. Anyway finally did a couple of weeks ago and see that it has entered a growth phase with alternate revenue streams coming online (licencing their technology and product division - see us steel below). Also management is targeting to double revenue and this will significantly increase EPS as they have very good control on expenses.

I've always thought they have had a good product, but they are now getting traction offshore and have growth in Aussie too. Management/founders still holds around 50% so its more like investing in a private company than the share market.

Risks are downturn in mining sector, product division have won and are pushing into US steel industry with rollers (which basically thin/mould out the steel during manufacturing) - not sure how resilient the US steel industry is without trumps handy tariffs. Also key person risk.

Financials - generating cash, cash flow +ve, profitable. Investing in growth, pays div
Balance sheet - no debt, cash on hand.
Forward PE around 10-12 if I remember my modest assumptions correctly.

Anyway a long story short I should have looked a few month ago and would have a tidy return now, but had a good look the other day and i'm in now. I like the robustness of this company and the fact they really have a product that had worked for many years.

Worth a look, 40mil market cap, could be significantly higher if plans play out, and they look to be working so far.
I sold nearly all of my holding last May to buy the new house,just a few months before they took off.!!
I notice a couple of Aussie tipsters have written them up.
I have been avoiding the Aussie small caps.Been concentrating on NZ yield stocks.
I should have a bit of spare cash in a couple of months,so may look at them then.
LBL have a divie reinvestment scheme.

[NZSilver]

Ahhh I know the feeling, sold a bunch of a2 to buy a herd of cows a few years back.

[NZSilver]

Has found new base around 38-40c, the more I look at this company the more I like. Comparing to other companies of similar size and prospects it should be prices at 50-60c. To me its the lack liquidity and high private ownership of founders/family which mean its under the radar. However in some ways these are very positive attributes in terms of management doing best for shareholders. The dividend should grow quickly with the growth, so even if the price dosn't end up reflecting the true value, yield should increase significantly.

https://www.finnewsnetwork.com.au/archives/finance_news_network200973.html

[NZSilver]

Anyone on this

[percy]

Held for years.Sold most off, and left with a very small holding,[mainly so I can eligible for a SSP].
I think it is Livewire, who has been promoting it recently.They have a lot higher hopes for it than I do.

[NZSilver]

Percy, yeah ok thanks for that I'll have a browse on LW, I think it's either going to be the same old lbl, revenues and profit lumpy = sp stays the same or dips a bit. New growth intiatives succeed (already some initial success last results) and re rate to 15-20 forward Pe (currently approx 10). I'm in with decent chunk. Let's see how it goes.

[percy]

Try Livewire,also,
twitter..Matt Brazier's Investment Diary. He has it in his portfolio.
Just googled Laserbond research, and ethicalequities also showed up.

[NZSilver]

Anticipation of a good result and value is bringing buyers to the table for laserbond.

[percy]

Anticipation of a good result and value is bringing buyers to the table for laserbond.

Interesting seeing LBL strong, while most of my Aussie stocks are down.

[NZSilver]

Interesting seeing LBL strong, while most of my Aussie stocks are down.

Just excellent risk reward for profitable small cap with potential growth over the next 2 years, trading on a PE of 10..

Average up Percy.

[NZSilver]

Up another 7% today.....