Skellerup (SKL) Fundamentals

[winner69]

Snoopy

I would contend the increase in equity over the last few years is essentially from retained earnings (including the impact of the insurance payout)

It would appear that so far the new building has been funded largely by debt.


One could say that the declining ROE sort of implies that they not really putting retained earnings to work, a bit lazy in fact?

Instead of ROE I prefer ROIC (all capital in the business). This is about 12%/13% so above its cost of capital and the company is adding economic value in the process.

On that basis market cap deserves to be more than $160m but $260m current suggests a lot of good stuff priced in.

Good work though Snoopy

[Beagle]

Year	Dividends	Dividend Total
2011	2.5c+2.0c	4.5c
2012	4.0c+3.0c	7.0c
2013	5.0c+3.0c	8.0c
2014	5.0c+3.5c	8.5c
2015	5.0c+3.5c	8.5c
Total		36.5c

Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35

SNOOPY

Thanks snooper but I think the resident beagle is better off thinking about the next dividend feeds. My old beagle always seemed to be thinking about her next feed so if it was good for her, then may I suggest you follow suit
Pretty clear to me the tailwind of lower currency and the way the company is headed suggests dividends will grow from here and judging from Director and senior management purchases they agree.
My view is that dividends going forward of 10 cps fully imputed appear sustainable based on best known current information so I have them on a gross forward dividend yield of 10.0 / 0.72 = 13.89 / 146 = 9.51%.

[sb9]

Year	Dividends	Dividend Total
2011	2.5c+2.0c	4.5c
2012	4.0c+3.0c	7.0c
2013	5.0c+3.0c	8.0c
2014	5.0c+3.5c	8.5c
2015	5.0c+3.5c	8.5c
Total		36.5c

Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35

SNOOPY

Just a correction divvy for 2015 was 5.5+3.5 - 9c.

[Snoopy]

Just a correction divvy for 2015 was 5.5+3.5 - 9c.

sb9, I am using the calendar year June to June, corresponding to the financial year. You are correct, but that final dividend for FY2015 of 5.5c was actually paid in FY2016. So I stand by my figures as presented.

One thing to note, as you point out, is that with the increased final dividend of 5.5c already paid, my 'figures' are already out of date. On a five year perspective, that 5.5c final divvy replaces the 2.5c from FY2011 in my model. So you might argue my model valutaion should be a bit higher than $1.35. If so I would agree with you. But my calculation is a purely mechanical process calculation based on the financial five calendar years. Add your own fudge factor!

Perhaps I should have said, I see a value SKL at 'at least' $1.35. I find a bit of conservatism in these valuations never hurts.

SNOOPY

[Beagle]

Oh the irony Snoopy. Most people think bean counters are obsessed with historical information but I'm the hungry beagle always trying to peer around the corner to see what feed is coming next. Good reversal of roles going on here

[sb9]

sb9, I am using the calendar year June to June, corresponding to the financial year. You are correct, but that final dividend for FY2015 of 5.5c was actually paid in FY2016. So I stand by my figures as presented.

One thing to note, as you point out, is that with the increased final dividend of 5.5c already paid, my 'figures' are already out of date. On a five year perspective, that 5.5c final divvy replaces the 2.5c from FY2011 in my model. So you might argue my model valutaion should be a bit higher than $1.35. If so I would agree with you. But my calculation is a purely mechanical process calculation based on the financial five calendar years. Add your own fudge factor!

Perhaps I should have said, I see a value SKL at 'at least' $1.35. I find a bit of conservatism in these valuations never hurts.

SNOOPY

Fair enough snoopy, tht you're using FY numbers for divvies.

I thin we might learn more tomorrow from the ASM abut their future growth plans and what else they've in pipeline.

[Snoopy]

Oh the irony Snoopy. Most people think bean counters are obsessed with historical information but I'm the hungry beagle always trying to peer around the corner to see what feed is coming next. Good reversal of roles going on here

Let's be clear what I am saying Roger. The $1.35 is a 'no growth' valuation of a company, bumbling along through the business cycle, and subject to normal cyclical forces. Does that sound like the Skellerup that you and I invested in? Hopefully not. Yet if you look at the historical results only, you can make a case for this no long term growth scenario. You can regard the $1.35 valuation as a bottom line valuation if all growth initiatives fizzle out.

For myself , I believe the long term growth scenario is most likely intact. I would presume the directors who have been buying SKL think the same. The only problem is, they have yet to earn their stripes - on paper. Hence my cautionary alternative valuation, if things do not pan out as planned.

SNOOPY

[banter]

This just in:
"28 October 2015 Skellerup expects strong increase in profit
Speaking ahead of today’s Annual Shareholders Meeting, Skellerup Chairman, Sir Selwyn Cushing said based upon the strong trading performance in the latter part of FY15 and in the first quarter of FY16, the company is forecasting net profit after tax (NPAT) between $24 million and $26 million for FY16, up from $21.9 million in FY15."

Bit disappointing - I was expecting more.

[sb9]

This just in:
"28 October 2015 Skellerup expects strong increase in profit
Speaking ahead of today’s Annual Shareholders Meeting, Skellerup Chairman, Sir Selwyn Cushing said based upon the strong trading performance in the latter part of FY15 and in the first quarter of FY16, the company is forecasting net profit after tax (NPAT) between $24 million and $26 million for FY16, up from $21.9 million in FY15."

Bit disappointing - I was expecting more.

I think its very good, keep in mind they're always bit conservative in their estimates.

[xafalcon]

Skellerup expects strong increase in profit

https://nzx.com/companies/SKL/announcements/272427