Codan - CDA

[tosspot]

my god this is carnage. opportunity i feel though. It will be very hard to pick the bottom. I think ill wait and see how it plays out for a bit first

[blackcap]

What is happening with this stock. Man that is a sell off if there ever was one. That is in total contradiction to the statement released by the company on 14th June. Has anything material happened since then? Shouldnt the company be reporting that to the market? I have seen too many of these situations where after the event the company said.... we need to revise... but by then it is too late. Still its getting tempting around these levels isnt it.

p.s catching falling knives not really my favourite pasttime!

[AndyLP]

I'd say at least some of the sell off is due to the long term prospects looking rather dodgy at best. If the future success of Codan is tied to stability in Africa.. well.. its a bit of an unknown.
Doesn't help that the company's 'profit guidance' was cagey to say the least.
Luckily this is one of my smaller holdings but it still stings..

[tosspot]

I just jumped in at $1.65 I just cant see it dropping any lower is almost halved in the last 2 days of trading.

[blackcap]

In its favour is that debt levels are low. Instability in Africa? Isnt it always relatively unstable there? The announcement was cagy indeed but falling by 50%... hmmm hmmm falling knives etc. I will do some more research and have a look later. Maybe its a buy on the way up story.

There really is not that much information available on this company. I like it that it has little debt, but their announcment was rather meaningless when forecasting FY 14. If the profit is expected to be $45million then that would suggest second half earnings of $+- $18 million. Not too bad, but when did the rot set in. Ie is this because of a bad last 2 months and if so this could impact badly on FY 14. If it is from the last 6 months well, I could live with that.

I also note that their huge increase in profits and revenues from H/Y 13 was mainly driven by their metal detection division, so if it is this that is impacted it could fall back quickly to profits closer to $20-30m per annum. More really is needed from the company and as such this could be a good opportunity to enter. I guess what I am trying to say is if you bought at $1.65 would you be comfortable with a profit of $20-30m and EPS of 11-17cps (annually). The fact that debt is negligible is something I find rather attractive as is their seemingly healthy working capital ratio.


p.s Lizard, do you still hold a view on this company?

[Lizard]

Hi blackcap - and a belated welcome back!

My view on this company is slightly marred by irritation that I have inexcusably held for the whole ride - each time I knew I should sell down, I put it off for a "better day" and then got busy again...

That aside, I think they are back to "cheap" and the reaction is overdone. However, that would be more of a short term trading opportunity than the longer term I am more typically keen on - they will need to prove themselves again and allay concerns re earnings instability and transparency. That's not a quick process - and could take another 15-18 months to find a new longer term uptrend.

[blackcap]

Hi Lizard and thanks for your thoughts. Interesting to see that many of the same people are still on this site.
I spoke with a friend this afternoon regarding this company because he sometimes likes to buy Aussie stocks that are oversold and catch the bounce back up. This looked like a classic example. Sympathy re your plight, its an easy trap to fall into. Always take some profit when you can works well for me. I have an associate who cannot sell regardless. He has to his horror experience many train wrecks.
I am also keen on the long term with most my stocks but isnt this a severely harsh reaction to a slight (ok I may have changed the definition of slight slightly here) change in profit guidance? Or maybe it just looks harsh because I am used to the NZ market where something like this falls over the space of a few weeks. Thanks for your thoughts on "proving" themselves and "allaying fears". Will take it on board.

p.s If the Dow were to drop another 1% overnight it could just propel CDA that much lower..... (yes if tomorrow is positive it could bounce it too...)

[AndyLP]

Looks like there was a decent chunk of shares bought by various directors over the last couple of days. A good sign?

[tosspot]

Price beginning to pick up again. Technicals all positive. Lets hope a recovery is underway.

I hope so, I bought in at 1.65 when it first dropped, it just needs to break that damn 1.75 appears it wont be today

[AndyLP]

Sold out of this one.... seems to be too attached to the gold price and the stability in Africa causing that latest downgrade is outside my scope. All the best