As this week I’m now eligible for the 12 month CGT discount, I’ve been waiting to sell off my Supply Network (SNL) shares at $1.60, and today the order filled. I began buying SNL at 42c, however this block cost me 89c – giving me a mere 80% profit for the period. Not bad!
After only writing about Nearmap (NEA) a month ago, I logged in to see I was currently sitting at a 50% profit, so I sold them too. I believe Nearmap have long-term prospects, but such a fast windfall is worth taking now, and if it falls back around the 7c mark I will buy in again.
Finally, while I hadn’t written about Mincor (MCR) I bought a small block of shares due to their low-cost operation, exploration upside, and competent management. In retrospect I probably should never have bought MCR with the current systemic risk out there, which could easily hammer the price of nickel into the ground. It’s another competent firm which I believe will be cheaper in the future, so I have decided to undo my mistake, and picked up 8% profit while I was at it.
I am planning to sell down my BigAir (BGL) too, but since HY13 numbers came out the share price has been hovering around the 50c mark. I plan to sell down at least part of my shares when they return to 60c.
My medium-term portfolio strategy is not going to be holding a lot of value, I’m more focused on a few explorers, cash, and precious metals. Hardly a value portfolio. I still hold CKL in anticipation of an inevitable re-rate of the stock.
In my view, the global economy (including Australia, China, and everybody else) is going to have to eat an enormous shit sandwich in the very near future. My super is now in 100% cash and I get a guaranteed tax-free return by paying down my mortgage. I will keep an eye out for value picks that are less subject to systemic risk, but in the meantime I am sitting and waiting for everything to play out before I go risk on again.
BigAir today put up their HY13 results, and while I (and so it would seem, the market) was expecting better, the results are still solid:
Revenue $15m (up 36%)
EBITDA $5.5m (up 20%)
NPAT $2.37m (up 15%)
Operating Cash Flow $4.48m (up 19%)
What we see is a business priced at $100 million, with annual revenues of $30m, with EBITDA margins around 37%. The key measure BigAir use as a yardstick for the business’ ability to print money is the EBITDA run rate – an annualised measure of the billing base which can be used to calculate the growth in the business. FY12 saw full-year EBITDA at $9.75m. During the second half of FY13, EBITDA run rate is expected to hit $14m. Given a half year EBITDA of $5.5m it is reasonable to anticipate a FY13 EBITDA of $12m, which would give a full year NPAT around $5.4m or underlying EPS of 3.3c per share.
There’s no getting around the fact that after hitting a CAGR of 50% for revenue over the past few years, that the BigAir’s meteoric growth is beginning to slow down. There are additional synergies to be unlocked from the Allegro acquisition but it’s getting harder to justify a 20x earning multiple (as of today it’s 16.5)
As management were silent on the prospects of a dividend it’s safe to say the 1c per share paid in 2012 will be all for this financial year. Right now I think the business isn’t too overpriced, and will continue to hold. If the share price goes up toward the 80c mark I intend to sell.
Colorpak’s HY13 results were released recently, and are now giving a picture of what the entity will look like post-consolidation.
HY13 figures are as per below:
EBITDA: 10.7m (11.5%)
NPAT: 4.7m (5.1%)
On the surface, it appears Colorpak have transitioned quite well through the CHH acquisition, emerging with a business double the size. While EBITDA margins have fallen from an average around 18%, they are improving. The emerged business now has net assets of 86c per share, debt/equity of 47%, and generated free cash flow of $7m (8.7c per share) in HY13. The fall in revenue is attributed to the loss of a number of low-margin CHH accounts.
Management has also done a sterling job consolidating operations, with headcount falling 16% from 820 to 690. HY dividend has increased to 1.75c. Having been roughly break-even on my shares the past 2 years, one could be tempted to sell out after the recent rise in price from 55c to Monday’s close of 73.5c. But I’m pretty bullish on CKL over the next 2 years, given not many are aware of the business, and EBITDA margins should continue to improve, I’m anticipating a big re-rating of CKL by the market over this period. I will continue to hold and am considering adding to my current position.