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  1. #1
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    Default Skellerup (SKL) Fundamentals

    New thread to separate from the chart view.

    One thing worth noting re SKL fundamentals is the comment in the Chairman's notes that states "...its (the Industrial division) EBITDA is anticipated to increase to approximately 60% of group EBITDA in the 2007 year".

    This statement is significant. Last year, agri provided $16m EBITDA and industrial $17m. Now, unless agri is shrinking, this is a substantial change. Based on agri remaining constant, a 60% contribution from industrial would indicate EBITDA of $40m - a $7m or 21% increase on prior year. A small amount of growth in agri to $16.5m would indicate EBITDA of $41.3m, or a 25% increase.

    While interest expense is likely to increase, an estimated increase in interest cost of $2.5m would still see an increase in NPAT of $3 - $4m, taking NPAT to $16.4-$17.4m. Allowing for some dilution from the DRP, this would put them on a forward P/E of 8.8 - 9.3 at current share price of $1.44.

  2. #2
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    It always seems that the number of responses is inversely proportional to the time spent researching a post. Before I go off for an extended sulk, I shall give myself a response.

    1. Is the company being unrealistic in their figure of 60% EBITDA from industrial? Possibly. But last year industrial had organic growth of 16% ($11m revenue). The remaining $24m revenue increase came from acquisitions. However, the major acquisition, Gulf Rubber, was included for only 5 months of operations. I estimate that Gulf Rubber should therefore contribute at least a further $20m to revenue for this year. An additional 16% organic increase would bring industrial revenue to $140m. Using the same EBITDA margin as for 2006 would give industrial an EBITDA contribution of $23m - a $6m increase over 2006 (c.f. the $7m calculated from the Chairman's comments).

    2. Why aren't analysts calling this? Analysts appear to me to be low-balling either the revenue projections or margins or both. Reports I have seen have given revenue of $186 - $189m, c.f. my calculation giving $195m. This means they can produce a result which shows a conservative NPAT growth in line with past years.

    3. How risky is this? Very. Forex and raw material prices can swing things quite markedly. Comments at this afternoons AGM should give some better guidance, so safer to wait .


  3. #3
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    quote:Originally posted by Lizard

    It always seems that the number of responses is inversely proportional to the time spent researching a post. Before I go off for an extended sulk, I shall give myself a response.

    1. Is the company being unrealistic in their figure of 60% EBITDA from industrial? Possibly. But last year industrial had organic growth of 16% ($11m revenue). The remaining $24m revenue increase came from acquisitions. However, the major acquisition, Gulf Rubber, was included for only 5 months of operations. I estimate that Gulf Rubber should therefore contribute at least a further $20m to revenue for this year. An additional 16% organic increase would bring industrial revenue to $140m. Using the same EBITDA margin as for 2006 would give industrial an EBITDA contribution of $23m - a $6m increase over 2006 (c.f. the $7m calculated from the Chairman's comments).

    2. Why aren't analysts calling this? Analysts appear to me to be low-balling either the revenue projections or margins or both. Reports I have seen have given revenue of $186 - $189m, c.f. my calculation giving $195m. This means they can produce a result which shows a conservative NPAT growth in line with past years.

    3. How risky is this? Very. Forex and raw material prices can swing things quite markedly. Comments at this afternoons AGM should give some better guidance, so safer to wait .

    OK, LIZ the true story is every one looks at it and NO one BUYS it such a boring stock is a great candidate fore TAKEOVER.. [8D]

  4. #4
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    I held this for sometime, and got out for frankly psychological reasons. Far from being boring, I felt that management had an appetite for risk which was out of step with the sort of business that this is. They also seem to be hoping that macroeconomic conditions move in their favour. I am watching and if they start to demonstrate that they can actually produce consistently improving results, then I'll be onboard.

  5. #5
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    What are the actual details of this reported $4m hit when currency cover runs out?
    om mani peme hum

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    Hi PT. I'm a bit surprised at the size of that! From memory, I thought the cheap currency cover fell away more gradually and ran out completely in early 2007. An amount of that size off the bottom line certainly puts a dent in my analysis. Seems the company is forecasting to still grow NPAT, despite the forex hit, but only by an amount similar to last year.

    Still think SKL will work out as an investment, but less enthused than I was.

  7. #7
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    SKL looking good today with close at $1.60 and a dearth of sellers. Has also paid a 5cps dividend since my post of a few weeks ago.

    In true forum style, I should now point out (after the fact) that I bought more at $1.46 the day after my initial post...

    ...and am about to go spend the dividend on patagonian toothfish with miso sauce for mothership's belated birthday celebrations!

  8. #8
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    Bless you my child - I was not really looking forward to the KFC

  9. #9
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    Lizard, how do you feel about their debt levels? I was initially interested in SKL, with their high ROE and reasonable dividend, but that ROE is really the result of some substantial leverage. This leaves me wondering how they would do in a bad year.

  10. #10
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    The ROA still looks good though. So debt pays off. But still need to see how that looks without the hedges...so I am non-committal [8)]

    (DRP is a good move in that regard though)

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