SNL - Supply Network Ltd

[Lizard]

Latest micro-cap of the week is Supply Network Ltd (SNL).

Some stats from latest result:

Market cap = $12.5m (at 42cps)
P/E = 7.6
Yield 3cps / 7.16% (plus franking)
P/S = 0.29
Pr/NTA = 1.01
EV/EBIT = 5.44
ROE = 13.5%

SNL is a supplier of components to road transport industry. This is their "third successive record result".

Outlook:

Supply Network Limited is in the middle of a three year organic growth plan that is expected to deliver compound revenue growth of around 7% p.a. with steady improvement in EBIT. This financial year, the second year of our plan, will see continued investment in capacity expansion and customer service improvement. These investments will constrain EBIT growth in the short term but by the end of the third year Supply Network will have built strong foundations for continued growth in the years ahead.

Put on the watch list, though (based on outlook) it may be better for 2012.

[Lizard]

Another 4cps special div for SNL announced at today's agm, plus indications of more flexibility in future payout ratios/overall higher payouts going forward (basic per year is currently 3cps, so probably looking at around 4cps underlying).

Seeing some small growth in EBIT, with forecast increase of 14% - though off a low base, so it's a while before they'll hit any radars. Looks like equivalent to about $1.8m NPAT - forward P/E of about 7.5 or 6.8 after clocking the special div.

(Don't own this one, but seems sound enough to be worth following for a bit)

[drillfix]

Hi Liz, how are ya. long time no see and I hope your keeping well

Interesting call here Liz, should the rocket past 53.5c then it will be away.

Will watch with interest. (only 30M shares on issue and hardly any sellers).

Cheers

[Lizard]

Hi Drillfix,

All good here - having too much fun in the real world to post much on stocks unless there is new information to crunch through. Markets are paying for a few more holidays and projects than they had for a while...

Not really a call on SNL - more of a record of where they are at. Just posting a few thoughts following agms on some of the small stocks I'm following. Forum posts make a better searchable database of what I last thought on a stock than my grey matter or scribbled envelope-backs manage to be!

My "extreme" spec punts at the moment are in HIT and MBD, while the core stuff in Aussie is still much the same as it was - MAQ, MFG, TWO, BHP, DWS, WHG and a few in the middle like ESS, HSN and GXL. Need someone to tell me if RHE is a good bet on the exploration side as it is tempting me...

NZ is still SKL, CCC, TEN, BGR, HLG, AWF, TEM and a few other bits and pieces. Probably another 30 unexciting stocks scattered around for yield or a "toe-in" (bad habit that!).

[drillfix]

Good to hear your having fun out there Liz, and you a great knack at the way you study companies FA, value etc.

Dont know about RHE, seems to be suddenly just come off the boil a bit, but who knows with these markets doing some zigzag.

Say, maybe not RHE but how does Tungsten grab ya? Can take a lookie at HAZ and let us know your thoughts on that?

Cheers again Liz

[Lizard]

SNL seems to be trucking along and made it to 60cps today.

As predicted in the outlook statement, the first half was not particularly exciting, coming in a fraction lower than prior year. However a surprising update on 20 April announced that revenues had been higher than expected in the second half and upgraded FY EBIT forecasts to $3.5 - $3.8m. This compares favourably with the $2.63m in prior year and should equate to roughly $2.3m NPAT or a 43% increase yoy.

At 60cps, it is therefore likely to be roughly on the same P/E as it was when I posted at 42cps just under a year ago - about 7.7. Growth outlook seems likely to remain. Market cap now $17.8m - still a micro-cap, but gradually becoming a more liquid one.

[Lizard]

Result in line with forecast - NPAT at $2.5m and EBIT at $3.87m. At share price of 62cps, EV/EBIT is a low 4.77. P/E = 7.4, Yield 8.06% + franking. No net debt.

Forecasting 10% revenue growth. They were able to increase margins as well last year, but this may be more difficult as they hint at expanding to additional locations. Any growth at all from here should also support a re-rate against those cheap multiples, so I'm hoping for 90cps out of these over the next 6 months.

[Lizard]

AGM forecast of $4.5m EBIT suggests about $2.9 - $3.1m NPAT for FY12.

Forward EV/EBIT of 4.6 at 70cps and forward PE about 7. I think they'll push on to 85-88cps over the next 6-12 months, although think they're worth $1.05 given good ROE, no debt, dividend, steady performance and sufficient internal funds for growth.

[Lizard]

Love this little share. Another great forecast out today, with HY NPAT up 50% to $1.8m.

Started this thread at 42cps and with yield of 7.15% and EV/EBIT 5.5.... 18 months later it's 80cps and, based on forecast, looks like those stats have actually improved to 7.5% yield and EV/EBIT probably under 5. Given they've also paid out a total of 11cps in divs over that time, it is a remarkably solid performance for a micro-cap, that even now only has a $27m market cap.

Think this result will get it pretty close to that 90cps I was calling for it 6 months ago.

[Lizard]

Think this result will get it pretty close to that 90cps I was calling for it 6 months ago.

Hit the 90cps. I'm holding out for $1.20+ at some stage, but may have trouble getting there. Should be safe enough for the next 6 months and pick up the divs anyway. After that, should get some more indications on future growth strategy.