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  1. #711
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    Quote Originally Posted by sanctus671 View Post
    They have been acquiring a lot of companies to expand its global presence. Seems like a good thing long term assuming they did their due diligence before buying them. Revenues are steadily growing along with profits. As JayRiggs said, EPS growth should grow this year if historic revenue split is anything to go by. Of course, all depends on those "challenges" and how much of an impact that had. Ultimately I think robotics and automation is a huge industry that will only grow into the future. No other company on the NZX you can invest in for that as far as I am aware.

    I can understand why the shareprice is going down though given the low yield with slower EPS growth than other companies. When I bought in, I did think Scott Tech had a lot of promise. By no means I am an expert so the declining shareprice does make me feel like I'm missing something. Hopefully things change in the coming years.

    "Just put a handful of electrical and mechanical engineers together and give them enough money and they can do it as well.". That seems like a pretty ignorant statement, and same could be said for a lot of companies. Just because it could be done, doesn't mean a business would be willing to invest years of R&D to develop the same technology. That's why you pay a business that has already done it so you don't have to spend that money, time, and risk for R&D yourself.

    Disc. holding and feeling salty because share price keeps going down
    Share your sentiments there. For tightly held resister that's the problem, it works like s double edged sword.

    Looking at recent trading pattern, it looks way oversold and I'm picking we might have reached bottom.

    In the long term though JBS will take full control and here's hoping they offer good price for holders.

  2. #712
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by sanctus671 View Post
    They have been acquiring a lot of companies to expand its global presence. Seems like a good thing long term assuming they did their due diligence before buying them. Revenues are steadily growing along with profits. As JayRiggs said, EPS growth should grow this year if historic revenue split is anything to go by. Of course, all depends on those "challenges" and how much of an impact that had. Ultimately I think robotics and automation is a huge industry that will only grow into the future. No other company on the NZX you can invest in for that as far as I am aware.

    I can understand why the shareprice is going down though given the low yield with slower EPS growth than other companies. When I bought in, I did think Scott Tech had a lot of promise. By no means I am an expert so the declining shareprice does make me feel like I'm missing something. Hopefully things change in the coming years.

    "Just put a handful of electrical and mechanical engineers together and give them enough money and they can do it as well.". That seems like a pretty ignorant statement, and same could be said for a lot of companies. Just because it could be done, doesn't mean a business would be willing to invest years of R&D to develop the same technology. That's why you pay a business that has already done it so you don't have to spend that money, time, and risk for R&D yourself.

    Disc. holding and feeling salty because share price keeps going down
    Look, if you think my statement is ignorant - be my guest.

    My background is in electrical engineering. I spent several decades in the development of high tech equipment working both in Europe as well as in NZ and ... I have seen what SCT does (though never working for them).

    I think they are a good company, but I don't see them as "special". Can't assess the quality of the companies they acquired, but from a statistical perspective - give me 5 NZ companies who have been successful in buying their international empire and I give you 10 who failed. I don't think the odds are in their favour, but there is always hope ;
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  3. #713
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    Default Transbotics Acquisition Details

    Quote Originally Posted by Snoopy View Post
    Fairly light on detail with this announcement. We have thirty new members in the Scott's team as a result of buying Transbotics. Transbotics do Automotive Vehicle Guidance systems. The completion of the transaction announcement on 8th June says Transbotics has revenues of US$4.5m to US$11.0m over the past five years. Yet no mention of how much Scott's paid for the business? I guess ultimately we will find out when the AR comes out at the end of the year?
    I have decided to tie up a few loose ends on this thread.

    'Transbotics' supplies automated guided vehicles (AGVs) , and is based in North Carolina in the USA. The aim is to provide reliable automated material handling solutions for production and warehouse facilities.

    From information from AR2018 p61 and p62, the total paid for Transbotics (USA) was $4.873m on 31st May 2018. $3.438m was paid in cash and $1.435m will be an earn out payment. The 31st May acquisition date means that Transbotics was on the books for just three months of FY2018 for Scott Technology. Extrapolating from this three month period to try and get an idea of revenue and EBITDA figures for the year:

    Annualised Transbotics Revenue: 4 x $4.0m = $16m
    Annualised Transbotics EBITDA: 4 x $0.8m = $3.2m
    Last three months of FY2018 Transbotics EBITDA Margin: $0.8m/$4.0m = 20%

    SNOOPY
    Last edited by Snoopy; 28-06-2019 at 08:30 PM.
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  4. #714
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    Quote Originally Posted by Snoopy View Post

    sb9 wrote:

    2 1 11:10:35 am 335 1,313,445 $4,400,040 Off market

    "Biggie...."

    A squiz at the latest published share register (AR2017) indicates there are only three outfits that could sell that many shares in one transaction.

    1/ Majority sharehodler JBS (very unlikely, if they wish to remain a majority shareholder. It would also be inconsistent with them acquiring more shares in last years DRP).
    2/ Oakwood Securities owned by former CEO Graeme Marsh. Oakwood reduced their percentage holding during the JBS takeover, and they may be looking to reduce it some more now that Graeme marsh is getting on a bit and there is no Mrash representation at Scott operating company level.
    3/ The "JI Urquart Family A/C" estate who disastrously reduced their holding just at the wrong (capital raising ) time. Since Ian Urquart , a great Scott Tehnology stalwart, died they have gone on record as not being supportive of the company.

    My pick is that it is 3. If we don't get a substantial security holders notice soon, then that will be confirmed by a process of elimination (both JBS and Oakwood would have to issue one, if it was them selling).
    My guess on what was going on with this big trade in April 2018 was wrong. I double checked all three of the largest shareholders year on year. Both 'Oakwood Securities' and the lawyers running the 'JI Urquart family A/C' held exactly the same number of shares at EOFY2017 and EOFY2018. Meanwhile the number of shares held by JBS Australia went up from:

    38,476,592 - 37,415,058 = 1,061,534

    This increase, I think, largely reflects the new shares issued under the DRP in the November 2017 dividend payment. So the 1,313,445 shares traded on 17th April 2018 remain a mystery.

    SNOOPY
    Last edited by Snoopy; 28-06-2019 at 08:04 PM.
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  5. #715
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    Default Alvey Acquisition Details

    Quote Originally Posted by Snoopy View Post
    Alvey’s last year’s annual revenue was $56.5m. That price represented an EBITDA multiple of approximately 4.5 times. So EBITDA for Alvey’s most recent year must have been:

    $56.5m / 4.5 = $12.5m

    To calculate the NPAT of the acquisition under Scott’s ownership, we need to subtract the ‘ITDA’ bits from this. Let’s do that.

    ‘I’ (Interest payable): Because the Alvey purchase was made by cash, the ongoing interest bill associated with the purchase is zero
    There is no information on Alvey’s depreciation or amortisation bills. But because the business looks like a smaller version of Scott’s, (combining intellectual property and spread international manufacturing facilities), I have decided to treat it as a small version of Scott’s and work out the depreciation and amortisation by scaling the Scott figures in proportion to the revenue of both companies before the merger.

    ‘D’ (Depreciation ) for Scott’s was $1.694m. Scaling according to company revenue, I estimate the annual depreciation at Alvey to be:

    $1.694m x ($56.5m/$132.5m) = $0.722m

    ‘A’ (Amortisation) for Scott’s was $1.293m. However, on closer inspection, almost all of this ($1.261m) was a result of amortizing the recently acquired ‘Bladestop’ technology. IMO it is not reasonable to assume that Alvey has similarly spent a large amount of money on externally acquired intellectual property which must be similarly amortised. If I remove the ‘bladestop adjustments‘ from Scott’s accounts, I get a representative amortisation for Alvey of :

    ($1.293m - $1.261m) x ($56.5m/$132.5m) = $0.014m

    So now we have enough information to calculate EBT for Alvey.

    EBT = EBITDA –I –D –A = $12.5m - $0m - $0.722m - $0.014m = $11.764m

    Assuming a New Zealand tax rate of 28% (Note: this is likely a wrong assumption, but I don’t want to make an uninformed guess about EU tax rates and tax subsidies that may exist), I get an incremental NPAT for the soon to be Scott owned Alvey of:

    $11.764m x 0.72 = $8.470m

    This is the kind of gain in net profit after tax I would expect once it is bedded in, and I must say it looks very juicy!
    Alvey specialises in palletising, conveying and warehouse automation and is based in Europe. Alvey was acquired by Scott Technology on 23rd April 2018.

    From information from AR2018 p61 and p62, the total paid for Alvey (Europe) was $19.303m on 23rd April 2018. $14.522m was paid in cash and $4.781m will be an earn out payment. The 23rd April acquisition date means that Alvey was on the books for just one hundred days of FY2018 for Scott Technology. Extrapolating from this period to try and get an idea of revenue and EBITDA figures for the year:

    Annualised Alvey Revenue: (365/100) x $26.7m = $97.5m
    Annualised Alvey EBITDA: (365/100) x $0.9m = $3.3m
    Last three months of FY2018 Alvey EBITDA Margin: $3.3m/$97.5m = 3.4%

    This doesn't compare well with the previous one year result, as noted in the quoted post above, pre-acquisition.

    Previous Year Alvey EBITDA Margin: $12.5m/$56.5m = 22.1%


    SNOOPY
    Last edited by Snoopy; 28-06-2019 at 08:59 PM.
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  6. #716
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    Things have really gone south since one year ago. It would be a much cheaper buy-out today for JBS if that was the overall plan. I feel like a minnow (or a mushroom) in this game.
    Last edited by Jerry; 30-06-2019 at 03:39 PM.

  7. #717
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    Quote Originally Posted by Snoopy View Post
    The acquisition of the Alvey Group in Europe has been treated favourably by the market. But what difference will this make in ‘earnings per share’ terms?

    Alvey’s last year’s annual revenue was $56.5m. That price represented an EBITDA multiple of approximately 4.5 times. So EBITDA for Alvey’s most recent year must have been:

    $56.5m / 4.5 = $12.5m
    Quote Originally Posted by Snoopy View Post
    Alvey specialises in palletising, conveying and warehouse automation and is based in Europe. Alvey was acquired by Scott Technology on 23rd April 2018.

    From information from AR2018 p61 and p62, the total paid for Alvey (Europe) was $19.303m on 23rd April 2018. $14.522m was paid in cash and $4.781m will be an earn out payment. The 23rd April acquisition date means that Alvey was on the books for just one hundred days of FY2018 for Scott Technology. Extrapolating from this period to try and get an idea of revenue and EBITDA figures for the year:

    Annualised Alvey Revenue: (365/100) x $26.7m = $97.5m
    Annualised Alvey EBITDA: (365/100) x $0.9m = $3.3m
    Last three months of FY2018 Alvey EBITDA Margin: $3.3m/$97.5m = 3.4%

    This doesn't compare well with the previous one year result.

    Previous Year Alvey EBITDA Margin: $12.5m/$56.5m = 22.1%
    Quote Originally Posted by winner69 View Post
    From those numbers above re acquisitions it appears the existing ebitda margin was 11.9% but the acquired businesses (on a full year basis) margin is only 5.4%

    Acquired businesses margins seem a bit low?
    Winner, the EBITDA margin at Alvey over the first few months of Scott Technology ownership was only 3.4%. But Alvey's previous full year of results produced at EBITDA margin of 22.1%. I suspect that because the EBITDA margins at Alvey shrunk so much, even as revenue gained, we may have had some unusual costs to contend with.

    In HYR2019, Scott's mentioned that Alvey, mainly based in Belgium, were being integrated with the Scott's existing European business 'Scott Technology GmbH' in Kurnbach Germany. If this process was stretching back into FY2018, this could have involved removing duplication of back office facilities, and some senior management redundancies and or property lease write downs. Or it could be a reflection of Alvey's earnings being lumpy, maybe even as a result of technical difficulties with a particular project. Either way, it looks like those last three months or so of earnings from Alvey incorporated into Scott's FY2018 result were not representative.

    SNOOPY
    Last edited by Snoopy; 30-06-2019 at 08:54 PM.
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  8. #718
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    Default FY2018 Profits: Forecast vs Reality

    Quote Originally Posted by Snoopy View Post
    If we add to this the underlying profitability of Scott Technology today, I get an underlying profitability for the combined ‘Scott’ and ‘Alvey’ group of:

    $8.959m -$0.502m + $8.470m = $16.927m

    This projection assumes no profit growth or decline from either company.

    I do not expect the Scott Technology result for FY2018 to be this high, because Alvey will have only been owned for part of FY2018. Nevertheless I believe this figure is representative of the ongoing profitability of the group and should be used to assess value ahead of whatever the actual FY2018 result turns out to be.

    With 74.681m shares on issue, Scott/Alvey should have ‘eps’ figures of:

    $16.927m / 74.681m = 22.7cps

    With a share price of $3.50, this means Scott’s is currently trading on a projected PE of:

    $3.50/ 0.227 = 15.4

    Note that this projection does not include the expected future ramp up of Meat Industry Robotics work to be done in association with major shareholder JBS. Compared to some of the sky high valuations on the market at the moment and with much growth to come, something around $3.50 is looking reasonable
    Normalised Profit Calculation FY2018 (Refer AR2018 p33)

    Declared Net Profit for FY2018 $10.772m
    add Loss on Property Plant and Equipment Sales $0.021m
    add Due Diligence Expenses 0.72 x $0.271m
    add Unrealised Forex Losses 0.72 x $0.271m
    add Fair Value Derivative Losses held as Fair Value Hedges 0.72 x $1.579m
    add Unrealised Interest Rate Swap Contract losses 0.72 x $0.043m
    less Foreign Exchange Gains 0.72 x ($1.627m)
    less Fair Value Gains on Firm Commitments 0.72 x ($1.579m)
    equals Normalised Net Profit $10.043m

    My previous forecast profit in the post above assumes a full years contribution from Alvey which didn't happen. Adjusting for that, the forecast was:

    = $16.927m - [ (365-100)/365 ] x $8.470m = $10.777m

    To calculate this I had assumed a drop in profit, due to a net interest annual income drop to $0.162m

    $0.664m - $0.162m = $0.502m

    Actual interest income received was a little more, at $0.369m.

    SNOOPY
    Last edited by Snoopy; 06-01-2020 at 06:56 PM.
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  9. #719
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    Which could mean a current share price track down to around 1.95 assuming a p.e of 15x?

  10. #720
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by BeeBop View Post
    Which could mean a current share price track down to around 1.95 assuming a p.e of 15x?
    Hard to predict what the markets will do - however - I would put them more between PE 10 and 12.5 for a non (earnings-) growth company.

    I'd be interested below $1.30 or so ...
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