Those of you who hold are happy,those of us who don't hold, are happy too.
A real win win situation....??.........lol.
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Those of you who hold are happy,those of us who don't hold, are happy too.
A real win win situation....??.........lol.
The Eurozone seems to be doing OK at the moment.
Eurozone growth smashes forecasts
http://www.dw.com/en/eurozone-growth...sts/a-40113502
Well, well, well. Not owned them a year yet and up about 40% (dividends included).
Fairly amazing really.
I was looking around yesterday for something to sell as I have something I want to buy but the pockets are currently empty and this came up as the share most likely to go to the market.
But with today being a public holiday here (Independence Day) I had to do sight-seeing and eating stuff and generally being a Happy Tiger and so it was still in the portfolio as the sun set.
Having revalued it in light of today's results announcement I, in theory, have a one year forward value for SKL of $1.61 but the old Tiger senses tingle when I write that down and I am going with a more conservative current value of $1.48 and one year forward value of $1.54.
Best Wishes
Paper Tiger
After reviewing my reduced number of investments exited stage left PT to pay down some debt.Been a happy holder since the capital raise and in my mind still a well run company at all levels and a safe haven.:)
Sold out completely today.
Bought more CBL with the some of the proceeds.
So now need to sell something else to continue with Plan A.
While not a spectacular share if they actually achieve moderate growth and keep paying a divvy then it is not a bad share to own.
Best Wishes
Paper T
For what its worth I reckon that's very good selling PT. Go buy yourself a good steak and give yourself a pat on the back.
Skellerup is organised into two principal divisions:
1/ Agri: manufactures and distributes milking liners, tubing, filters and feeding teats. It also sells dairy vacuum pumps and other agricultural products, notably rubber footwear. Skellerup is the second largest manufacturer of dairy rubberware in the world. The new dairy rubber-ware manufacturing facility at Wigram is the base for future growth. 60% of Agridivision sales are now outside of NZ. Markets targeted for future growth are Brazil, India, China and Russia as these nations gear up to meet pent up home market demand. Growth prospects come from the ability to customise short runs of products based on Skellerup's intimate knowledge of their rubber raw materials and how it reacts with dairy animals. Given Skellerup make all their production tooling 'in house', there is no better company to design products that are lighter and more ergonomic to use. The Skellerup market presence through 'Argi' is definitely major.
2/ Industrial: manufactures technical polymers for construction, infrastructure, automotive, mining and general industrial applications. This division also sells industrial vacuum pumps. The static revenue performance of the industrial division over recent years does not give an accurate picture of the potential for this division. The near simultaneous collapse in iron ore and oil prices after 2013 hit this division hard with 50% of Industrial Division sales going to iron ore mining companies in Australia and petroleum companies in the USA. Fast forward to FY2017 and the iron ore and oil industries make up just 20% of sales. 50% of sales today are from potable water and waste water projects.
How did this market adaptation take place? In simple overall terms, much of what Skellerup does can be summed up by using rubber compound engineering to to keep liquids either 'in' or 'out'. When put in these simple terms you can see how existing rubber technology can be relatively easily adapted to other industries. Lessons learned in oil and gas transportation were directly applicable to the waste and potable water markets. Fundamental global trends of 'growing populations', 'changing weather patters (flooding more common)' , and 'ageing infrastructure in many developed cities' all produce a tailwind of opportunities that is less susceptible to the vicissitudes of commodity markets. A rubber seal is not the most expensive component of an underground piping system. But it is an absolutely critical components. So saving money on a seal is likely a poor risk strategy when the quality of the competition is unknown. Skellerup works closely with pipe manufacturers and this gives them a competitive 'moat' that potential competitors will find hard to breach.
So is Skellerup's presence in industrial rubber 'major' in a global context? Skellerup supplies critical rubber componentry for other industrial manufacturers. Few would know that Skellerup manufactures all the drive shaft couplings in their Italian factory for the Mercedes Benz E class cars that are made for the Chinese market , for example. Yet no-one would call Mercedes Benz a minor player in the luxury Chinese car market. I think being a manufacturer of world class componentry qualifies Skellerup as 'major players', albeit in their own specialised niche of rubber products.
To summarize,
1/ Strong and deep relationships not just with manufacturing partners but also final end users, AND
2/ Industrial standards and approval processes that provide a barrier to entry for competitors, AND
3/ Adapability of rubber technology across industries opening up organic growth opportunities
provide solid reasons to expect that Skellerup will continue as a strong player in the niche markets where they choose to operate.
Conclusion: Pass Test
SNOOPY
2013: ($26.631-$0.871-$7.595)m/ 192.806m = 9.4cps
2014: ($29.202-$0.093-$8.458+$1.6)m/ 192.806m = 11.5cps
2015: ($30.956-$0.558-$9.023)m/ 192.806m = 11.1cps
2016: ($29.099+$0.800+$1.275-$8.429+0.28*$0.145)m /192.806m = 11.8cps
2017: ($31.435-$2.507-$9.300+0.28*$0.025)m /192.806m = 10.2cps
Notes:
a/ Results for all years have had foreign exchange currency gains removed. Foreign currency gains (or losses) are not a measure of operational business performance.
b/ Result for FY2014 adds back a $1.6m long standing warranty dispute adjustment.
c/ Result for FY2016 adds back $800,000 in restructuring costs.
d/ Result for FY2017/FY2016 adjusts for not including a $25,000/$145,000 cost from relocation expenses respectively, by adding back the 'after tax' effect of not having incurred these costs.
Conclusion: Fail test
SNOOPY
2013: $18.165m /$189.496m= 9.6%
2014: $22.251m /$196.606m= 11.3%
2015: $21.375m /$203.011m = 10.7%
2016: $22.786m /$211.415m= 10.8%
2017: $19.635m /$210.232m= 9.3%
After a grudgingly but nevertheless slowly persuasive increase in net profit margin in recent years, FY2017 has reversed all the good work. The last time profit margins were this low was in FY2010! I guess shareholders will have to hope that FY2017 was a rogue transition year?
Conclusion: Fail test
SNOOPY
I wrote the above based on the FY2014 perspective, and my how things have changed. From being in a position to pass 'all four' of the Buffett growth tests, the FY2017 Skellerup only passes one! The biggest surprise, and one that was not evident from a casual read of the published earnings was the very significant $2.507m foreign currency gain that made the headline FY2017 result look a lot better ( 'above guidance' [sic] ) than it really was. Of course this doesn't mean that SKL has necessarily become a dud investment. It just means that the 'Buffett Growth Model' will likely prove unreliable as a predictor, so a different valuation technique is required.
I refer readers to my post 614, using an alternative valuation technique, the 'Capitalised Dividend Valuation Method', based on an FY2017 perspective. I quote from the end of that post:
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Now using my plus and minus 20% range to get a feel how the SKL share price might behave at the top and bottom of its business cycle.
Top of Business Cycle Valuation: $1.59 x 1.2 = $1.91
Bottom of Business Cycle Valuation: $1.59 x 0.8 = $1.27
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At $1.71 (the Friday close) and just ex a 6c dividend, I would regard SKL as 'ever so slightly overvalued', but still well within fair valuation bounds. I am a long term holder and consequently won't be either buying or selling based on any revelations from the results of the FY2017 financial year.
SNOOPY
Just making an on line note to myself so that I don't get confused in the future when looking back over this:
1/ I don't believe that relocation costs are indicative of the ongoing picture of the Skellerup business. THEREFORE
2/ I should remove the relocation costs of $25,000 from this year's results for ongoing comparative purposes.
3/ If the relocation costs had not occurred, then NPAT for the year would be higher.
4/ The $9.300m tax bill for the year takes into account the $25k in relocation costs as a pre-tax expense. If this $25k cost had not happened, then the NPAT after tax for the year would be higher by the amount of extra tax not paid, as a result of the relocation costs not being incurred. This amount, which comes in as 'extra profit' calculates out, assuming a 28% tax rate, as:
$0.025m x 0.28
SNOOPY
It is informative to 'track back' through the annual reports and see what growth plans they announced to the auditors as the goodwill on the books was assessed annually. Shareholders can find this information under the 'Intangible Asset' section of the Annual Report.
Revenue assumptions
FY2014 take
"Revenues have been forecast to moderately increase over the following five-year period in line with the Group’s strategic business plans to develop
and introduce new products, in addition to continuing to support and grow the Group’s existing global customer relationships." (actual overall revenue increase FY2015 to FY2014: 3.3%)
FY2015 take
"The revenue growth percentages range from 3% to 20% on average per annum over the five years across the individual cash generating units." (actual overall revenue increase FY2016 to FY2015: 4.1%)
FY2016 take
"The revenue growth percentages range from 3% to 20% on average per annum over the five years across the individual cash generating units." (actual overall revenue increase FY2017 to FY2016: -0.5%)
FY2017 take
"The revenue growth percentages range from 2% to 15% on average per annum over the five years across the individual cash generating units." (actual overall revenue increase FY2018 to FY2017: 14%)
Looking out from June 30th 2015 and June 30th 2016, there were some pretty bullish growth assumptions built in. Looks like the new Chair Liz Coutts may have reigned in those expectations a bit. But they are still backing themselves. A 15% revenue growth compounding over five years is:
1.15^5 = 200%
That is a 100% increase in business from the base determined five years previously. For sure it is gunna happen this time?
SNOOPY