SNL - Supply Network Ltd

[Lizard]

Good spotting, HC. I'm still holding, but starting to feel it is close to fully valued here at $1.82. Would think any attempt to push through $2 would bring out sellers, in the absence of any other drivers?

[cloggs]

Moving fast, 190 today. No actual news that I've seen.

[Huang Chung]

Still enjoying the ride.

Just like the nature of the business, and their proven record of conservative, but consistent growth.

[Huang Chung]

Picking up dribs and drabs in the $1.70s, when someone throws a few shares in my direction.

Not a bargain any more, but still reasonably priced given the metrics of the business in my view.

Growth will be crimped this year, as they put the building blocks in place for future growth. Payoff for the business should start to kick in next year.

[Huang Chung]

Really getting smashed now.

Still picking up stock, but now getting seriously overweight in them.

Just love the way these guys steadily grow their business organically, keeping debt under contol, but still achieving very good ROE and EPS growth.

[steve fleming]

Really getting smashed now.

Still picking up stock, but now getting seriously overweight in them.

Just love the way these guys steadily grow their business organically, keeping debt under contol, but still achieving very good ROE and EPS growth.

Hi HC and other SNL followers

Given the import/distribution business model, is there a risk to earnings with a lower AUD?

Also, I saw the following acquisition from MTS
http://stocknessmonster.com/news-ite...E=ASX&N=735797

Its good that they see potential/growth in the industry, but are they a competitive risk to SNL?

[Huang Chung]

Hi HC and other SNL followers

Given the import/distribution business model, is there a risk to earnings with a lower AUD?

Also, I saw the following acquisition from MTS
http://stocknessmonster.com/news-ite...E=ASX&N=735797

Its good that they see potential/growth in the industry, but are they a competitive risk to SNL?

Hi Steve

I've been thinking about both issues you've raised.

The falling $A.

Obviously, a falling $A makes parts SNL sells more expensive for them to purchase. The question would seem to be, firstly, whether they can pass this cost on to customers, and, secondly, do higher prices translate into lower sales to customers. Given their customer base are truck and bus operators / fleets, a lot of their expenditure on parts would be fairly non-discretionary for reliability / safety reasons. Should be remembered that these vehicles face stringent annual inspections so skimping on maintenance really isn't an option. (as an aside, I sold my AP Eagers shares, because, being motor vehicle retailers, their sales are more discretionary, and could fall away if prices rise). So, overall, I would think the falling $A would be a very small negative.

The Metcash acquisition.

Worth remembering that Metcash acquired an existing competitor to SNL, so the competition already existed. MTS might be able to use their distribution channels to make them more efficient, and maybe a better competitor, so, on that basis, MTS' acquisition might be a small negative to SNL. Conversely, I think it's encouraging that MTS thought vehicle parts distribution is a good sector to invest in, and, you never know, SNL might come onto their radar as a bolt on acquisition. The biggest hurdle / potential windfall is that SNL is tightly held, so it would potentially take a decent offer for the SNL insiders to be swayed.

SNL don't talk to the market much, so I guess we won't know for a few months if their outlook has changed in any material way.

[steve fleming]

Thanks HC

Appreciate your comments - the good thing going for SNL is their management, who, you would think , have the experience and skills to help mitigate any such risks.

Would you know if SNL and Metcash have different agency/ distributor agreements (ie different brands/makes)? or are they both importing the same types of products?

[Huang Chung]

No sure Steve, but SNL supply parts for a wide variety of trucks, buses and trailers, so I would imagine there is a fair amount of overlap.

Through their Multispares business, SNL supplies parts for:

European - DAF, Iveco, MAN, Mercedes, Scania and Volvo

Japanese - Hino, Isuzu, Mitsubishi Fuso and Nissan UD

Trailers - BPW, Fuwa, Hendrickson, Meritor, SAF and York

Agree, SNL management is second to none, and this year is the year they are doing the groundwork to increase the efficiency of their distribution network, with the benefits to start flowing through from next year. Last year's annual report spells out their plans quite well I think.

[Huang Chung]

Rebound day today.

Looks like there was someone who had to drop a line of stock in the last couple of days, driving the stock down to a very cheap $1.40. That selling now seems to have finished, and the bargain hunters are stepping in.

So thinly traded, it doesn't take much to drive the price.....in either direction.

Grabbed a few this morning to top up my holdings.