CAV - Cavalier Corp (Carpets)

[noodles]

Maybe one of Sparky's negatives is playing out. I wish I had his problem:)

"Negatives:a) Cavalier is only worth $120m market cap. It is not very liquid, and it took me several days to get the holding size I wanted. Obviously, if I needed to get out quickly, I’ve got a problem. "

[winner69]

CAV one of the stars of the bourse today - up 7% and more

On a real down day as well, a good sign

Must be those 'value' investors coming back in

[blackcap]

CAV one of the stars of the bourse today - up 7% and more

On a real down day as well, a good sign

Must be those 'value' investors coming back in

haha very clever!

[winner69]

ACC selling down

Must just be a rebalancing exercise

Still over 5%

[percy]

Well I read it that they brought 121,670 shares for $180,611.81 on the 28th April taking their holding from 5.616% to 6.759%.

[777]

My understanding is they have increased their holding.

For this disclosure,--
(a) Total number held in class: 4,642,261
(b) Total in class: 68,679,098
(c) Total percentage held in class: 6.759%
For last disclosure,--
(a) Total number held in class: 3,845,347
(b) Total in class: 68,470,128
(c) Total percentage held in class: 5.616%

[winner69]

Yes you are all so so right and I am so so wrong

Hope these purchases do better than previous ones

[winner69]

At least a short announcement this time around .... probably realise nobody believes their tales of woe any more.

So $8m-$10m a while ago became $6m-$9m in Feb and now it is $5m-$6m

With only a week to go on the new year suppose about $5m will be the answer

[winner69]

Originally Posted by SparkyTheClown View Post

I’ve recently finished accumulating a number of Cavalier (CAV) shares. I thought I would post on Sharetrader my thoughts as to why Cavalier Corporation represents deep value and likely to gain more over the next two years.

In a strongly performing sharemarket like the NZX, most NZX listed companies look like they are at full or fair value, without the adequate margin of safety that a value investor would demand.

Cavalier is presently one of the few stocks out there today that offered me sufficient margin of safety in an NZ equity investment.

Here are the reasons why I liked CAV enough to buy in:

1. It’s a cyclical “smokestack” stock, which was punished throughout the GFC, but has pulled itself together and is well primed to take advantage of the improving economy in NZ, and the hopefully improving economy in Australia (still yet to see signs of growth but not getting worse). CAV is “well positioned” to improve as construction and discretionary spending improves.

2. CAV has addressed concerns with its balance sheet by paying back debt. While debt remains high-ish, it has come down from 42 to 36%, which is probably ok for the foreseeable future (I’d prefer under 30%). Inventory has also improved, down from $63m to $57m.

3. CAV has addressed concerns with a deficiency in its business, which was the lack of a synthetic/nylon carpet. Wool used to be the favoured textile, now nylon is more popular. It has recently released to some market interest the “Habitat” range of synthetic carpets, at price points that suit medium to medium-high price buyers. This carpet is made by Cavalier but yarn supplied through a partnership with Invista.

4. CAV earnings are forecast to improve dramatically in 2014 as it pulls out of a difficult trading environment and some significant redundancies and scale-backs. It has mothballed excess production capacity and its workforce is 21% less than in 2011. Operating leverage has dramatically improved as a result. Earnings growth is forecast by brokers to improve from 9.7c actual in 2013 to around 22.5c in 2017 (assuming terminal growth rate of 3% in 2017). This suggests growth of around 18.5% per annum for the next five years, with big growth expected next year, and more normalised earnings growth thereafter.

5. CAV is trading on a dividend of around 3% based on a shareprice of $1.80, but I forecast this to improve to around 5% for next year on the basis of improved profits and cashflow. Its current 2013 dividend is 4cps (100% imputed), and it is forecast to double to 8cps according to broker reports I have seen.

The two favourite metrics I like applying to assess the rationality of a share price is the Ben Graham Intrinsic Value score, and the Peter Lynch YPEG score.

Using the Ben Graham Intrinsic Value formula, I get the following based on current EPS of 9.7c in 2013:

12% growth = $2.40
16% growth = $3.03
18% growth = 3.34

Using the Peter Lynch score of P/E divided by long term growth of 16% plus dividend yield of 3.1%, I get 18.5/(16+3.1), or a final score of 0.97 . Lynch seems to think anything under 1 is good value, anything under 1.2 deserves a sniff. Naturally, if you use the higher growth rate of 18%, then the score looks better, being around 0.87.

So applying my usual 40% margin of safety to an intrinsic price of 3.03, I get a margin of safety buy price of $2.16, which is roughly 34-36c more than the price I’ve been acquiring at. Using the Ben Graham IV calculations, I see around 67% upside on current known earnings and 16% growth.

Negatives:

a) Cavalier is only worth $120m market cap. It is not very liquid, and it took me several days to get the holding size I wanted. Obviously, if I needed to get out quickly, I’ve got a problem. But if someone else wants to get a sizeable holding into CAV in a hurry, then they will drive up the price ferociously.
b) Debt – if the cost of interest rises significantly, then CAV will find the higher debt to be an imposition on future earnings. Reducing the debt may be a bigger priority than reducing the dividend. 1c foregone in dividends equals almost $1m in debt repaid.
c) Carpets are substitutable and subject to competition. People can have wooden floors, tiles, rugs, and polished concrete instead of carpets. And even if they choose carpet, they can then choose a number of brands, and not just Cavalier.
d) Carpets are somewhat elastic in demand compared to other products in the building sector. People can choose to defer carpet replacement, but they can’t defer a leaking roof or perishing weatherboards in the same way.

For all that, I think there is at least almost 70% upside in CAV. Again – this is a value play based on anticipated improvements in the economic cycle, not a secular growth story on a company immune to economic fortunes. If Australia's construction picks up in the next 12-18 months, then CAV will sing.

Disclaimers: I am not an authorized financial advisor. I’ve posted what I have done, not want I want you to do. If you act on the comments of an anonymous poster on the internet called “Sparky the Clown” then you will have some explaining to do to loved ones if the investment goes sour. Do your own research. I am unavailable to enter into discussion on this post, but hope that it spurs on others to consider this company’s merits, or otherwise

Just for you moosie

[winner69]

So less profit than last year (even though headlines after the ASM before Xmas said Cavalier sees 2014 earnings growth of up to 51 percent .... sucked a few in eh)
But more than the year before that (good eh)

And on a PE of about 20

Hope is a strategy ..... one day they will come right ... we hope

[Schrodinger]

Question to all you investors: why do you never consider the credibility of the management team and the sales approach companies pursue?

Sparkys analysis is fine and all but does anyone realistically think CAV is well run and have a slick sales strategy. Everytime I look at this company it feels like a time warp from the 80s

[blackcap]

Question to all you investors: why do you never consider the credibility of the management team and the sales approach companies pursue?

Sparkys analysis is fine and all but does anyone realistically think CAV is well run and have a slick sales strategy. Everytime I look at this company it feels like a time warp from the 80s

Well as shareholders its time to vote out the management then isn't it. How do I go about contacting major shareholders and write to them to vote against re-election of directors?

[percy]

Well as shareholders its time to vote out the management then isn't it. How do I go about contacting major shareholders and write to them to vote against re-election of directors?

Just sell them your shares,so it becomes their problem.

[percy]

Looks a very risky bet to me at present.SP at $1.52 means to me it is still in a down trend as the 50 day moving average is $1.60 while the 200 day ma is $1.74. Both moving averages are still in a downtrend.The ma,s need to turn upwards before I would consider buying.Also I am not sure what the MACD is signalling.

Posted 21-8-2013.
Since then the share price has gone from $1.52 to a high of $1.97 on 6th November 2013,to a share price of $1.40 today.So turned out to be a very risky bet.!!

[muss1]

Haven't kept much of an eye on CAV since I sold out.. But surprised the SP is still at 1.40. I thought after the last profit guidance it'd head lower than it is now. Will be interesting to see where it goes

[winner69]

Punters get sucked in by what the Company says .... and the continued hope that this time is different

Last 4 earnings announcements

16th August 2013
Report a $6.6m (normalised) NPAT and say ‘we believe the Company is now well positioned to lift future profitability.’
Shareprice week after announcement $1.65

19th November 2013
Expecting a better year with NPAT in the $8 to $10 million tax-paid range.
Shareprice $1.90

28th February 2014
(Tales of woe and misery) we are revising our earnings outlook to $6 to $9 million
Shareprice week after announcement $1.65

26th June 2014
(No tales of woes and misery) but guidance is now between $5 million and $6 million NPAT
Shareprice really should be less than $1

Shareprice has hung in there pretty well over the last year ....s yesterdays liitle bit of news the last straw for some

[winner69]

No doubt shareholders are keen as well that CAV will bounce back

Good to see that that management is keen though

Unfortunately they continue to lose share to Godfrey Hirst and continue to struggle in meeting the challenges of a changing market


Cavalier keen to bounce back after shock
http://www.nbr.co.nz/stayconnected?return=158409

[Schrodinger]

Need to clean out the board and get some fresh thinking.

[winner69]

OMG the price is down to 120 something

As whatsup used to say what's up

Sparks said CAV was worth over 3 bucks ....there was a lo of ifs in his report bu jeez the market can't be that wrong

[percy]

OMG the price is down to 120 something

As whatsup used to say what's up

Sparks said CAV was worth over 3 bucks ....there was a lo of ifs in his report bu jeez the market can't be that wrong

I think the market has it right.!!
I think Sparky would have been very quick to realise he "got it wrong."!!!!!!!!!!!!! [still miss his input]

[Sgt Pepper]

OMG

did some research, on Findata, in 2004 CAV was $5.40

[Food4Thought]

Where did Sparky go?

[winner69]

OMG the CAV shareprice hit $1.00

Surely such an iconic company such as Cavalier wont see its share price fall below a buck, surely not

I understand still losing market share even though their pricing in the commercial sector is getting really keen.

Those Godfrey Hirst guys going gangbusters. A large bit of irony that Feltex probably doing better than Cavalier at the moment.

Even so surely a buck is the bottom.

[winner69]

Full Year announcement must be out any day now.

Cant be any worse than they indicated in June, can it?

Prob will be in line with expectations. Add a few soothing remarks about growth in Christchurch and margins getting better and FY15 will see improved profits the shareprice will quickly rebound to 120 / 130

Maybe next year it will even reach Sparky's $3 plus mark

[winner69]

I honestly thought the Mad Butcher (VIL) would go below a buck first

VIL nearly did it the other day and looks a bit stronger now so maybe CAV will win that race ...or maybe neither will go below

[winner69]

Well 99 cents today

If its any consolation CAV being 50% off its 52 week higher means it not as bad as Xero which is 56% off its 52 week higher .... and CAV even doing better than PEB which is 63% off its highs

Maybe CAV got a bit of catching up to do to outperform the glamour stocks of the NZX

[zigzag]

Well 99 cents today

If its any consolation CAV being 50% off its 52 week higher means it not as bad as Xero which is 56% off its 52 week higher .... and CAV even doing better than PEB which is 63% off its highs

Maybe CAV got a bit of catching up to do to outperform the glamour stocks of the NZX

And with CAV you get a dividend chucked in as well !!! Growth stocks are great when there're growing, but other times, it's good when someone puts a nice, fat, fully imputed divy into your bank account.

[blackcap]

And with CAV you get a dividend chucked in as well !!! Growth stocks are great when there're growing, but other times, it's good when someone puts a nice, fat, fully imputed divy into your bank account.

Don't know how fat it will be this year though zigzag. They have cut it before in the past. Not saying that they will this time round and I did think they said they were going to be in profit at least. In fact with all their profit announcements did they mention anything about the dividend? At some stage this stock will become a "buy" again but I do not know if I have the balls for that yet.

[okay]

Their free cash flow in the December accounts was weak at 2.4m, not actually enough to cover the dividend for that period of 2.7m, so they had to dip into the bank account.
Given their June guidance I can't see the 6 months to June cash flow being that much better.
Their focus right now should be on using the small amount of free cash flow they are generating to get that 56m of debt down.

[winner69]

The old Friday afternoon announcement trick and hoping nobody would notice. Must have been drinks in the boardroom as they released them at 3.20 - couldn't wait until after 5

I did notice that the results were as bad as they said they would be even though "The Directors note that the $5.8 million tax-paid profit is at the upper end of the revised earnings guidance range of between $5 million and $6 million after tax given to the market in June 2014" Well done guys on noting that and being able to make a pretty good guess to the full year number a few weeks before it ended. Again well done

And zigzag I did notice that NO DIVIDEND this time around so bad luck mate - and it's not good when someone doesn't puts a nice, fat, fully imputed divy into your bank account is it (sorry for quoting you but you set yourself up for that)

And I did notice that they have been making heaps and heaps of carpets to put in the warehouse - $10 million more than a year ago (nearly 20% more) because "..... inventories to support Cavalier's continuing expansion into synthetic and felted carpets" OMG all that extra carpet in the warehouses and it ain't even the expensive stuff. Do I feel a lot of carpet sales coming on in the next 12 months so they have some money to pay zigzags dividend next year.

Not one of CAVs best years and sadly in real terms even worse than 2013

One day blackcap they might become a buy ..... one day

Don't say I didn't warn people of this disaster. Until they stop losing share to Godfrey Hirst things won't get better I fare. Even they think so as the budget for 2015 is for modest gains and we all know what happens to budgets eh, all the good things assumed to happen just don't seem to do they

[zigzag]

Looks like my big fat dividend just went on a crash diet. I bought into this as a deep value / late cyclical play, but the turnaround is a long time coming. Like waiting for a bus that never comes.

[percy]

Looks like my big fat dividend just went on a crash diet. I bought into this as a deep value / late cyclical play, but the turnaround is a long time coming. Like waiting for a bus that never comes.

Must be one of the best posts I have read this year.
Feel for you.!!!!

[blackcap]

Don't worry zigzag, there will be a divi next year and the year after they will go back to 3 divvies per annum. Its a cyclical play :)

[percy]

Don't worry zigzag, there will be a divi next year and the year after they will go back to 3 divvies per annum. Its a cyclical play :)

Blackcap;Don't know which post is funnier,yours, or Zigzag's?????????????????????????????????????????.
Had a good chuckle at both.!!!!! lol.

[blackcap]

Hiya Percy, I hope you are getting a good nights rest as I see (thanks to winner) that you are lining up in the 12.09 at New Plymouth tomorrow afternoon... I have put a lazy fiver on but thanks again to winner it seems he has hoovered up all the good odds :)

[okay]

Oh dear, even worse than anticipated. Net Debt keeps growing, up to 59m from 53m prior year. Couldn't really afford the 4.7m in dividends they paid out eh.

[percy]

Hiya Percy, I hope you are getting a good nights rest as I see (thanks to winner) that you are lining up in the 12.09 at New Plymouth tomorrow afternoon... I have put a lazy fiver on but thanks again to winner it seems he has hoovered up all the good odds :)

Stopped backing myself as I am ahead.!!
However,slept well, had a big feed of Coco-Pops, now ready pull out all stops knowing you and winner69 are backing me.!! lol.

[winner69]

Don't worry zigzag, there will be a divi next year and the year after they will go back to 3 divvies per annum. Its a cyclical play :)

Maybe a cyclical play but heaps of good things have to right before they will return a decent profit

They did OKish at the end of the last building boom. Current building well progressed but still quite a way to go. Maybe there is hope for a couple of decent years of revenue growth

But this time around Godfrey Hirst are a more formidable competitor and are taking share from Cavalier (here and in Australia) and also this time around margins are likely to be continue to be less than before.

There's hope. Maybe CAV can sell $50m more carpet and make $20m profit again ... and the share price go back to Sparky's $3 target. Just maybe. Before I get interested would need to see evidence that this actually happening.

Below update of charts posted previous. No shareprice chart, even though that probably reflects better how bad this company has become.

[Hoop]

Maybe a cyclical play but heaps of good things have to right before they will return a decent profit

No shareprice chart, even though that probably reflects better how bad this company has become.

A share price chart that CAV management wouldn't print ..... and now you know why:mellow:


Don't worry zigzag, there will be a divi next year and the year after they will go back to 3 divvies per annum. Its a cyclical play :)


The shape of this 6 year chart considering we are in a NZ Equity Bull Market boom shows no recent cyclic behaviour...The cycle was halted by a rectangle pattern breakdown..in normal cyclic behaviour one would've expected that rectangle pattern pause to signify an extended bottom event but in CAV case that "bottoming" event broke down into another capitulation phase signifying that the orginal CAV Bear Market cycle hadn't ended but was in a hibernation period...These types of charted cycle breakdowns behaviour indicate the company is perceived by investors as not being able to recover for some time yet..

Winner....I'm wondering, what is the Altman Z score now with the new results??

TA Target price (rectangle break down) 1.40 - (1.95 - 1.40) = $0.85



http://i458.photobucket.com/albums/qq306/Hoop_1/CAV22082014.png (http://s458.photobucket.com/user/Hoop_1/media/CAV22082014.png.html)

[winner69]

Hoop - Altman Z score is 2.43

Z-SCORE BETWEEN 1.8 and 2.7 – Good chances of the company going bankrupt within 2 years of operations from the date of financial figures given

They really do need to something with that huge stockpile of carpet unsold in the warehouses. Really need to start reducing it fast and turn it in to cash. Otherwise no divie for zigzag next year either

But then again they need to start making more money as well so better not give that carpet away

[winner69]

Hoop - if you take a very very long term view of Cavalier you could say it has some cyclical nature to it

Bottoms tend to be about every 9 years .... so zigzag might have to wait until 2017 for his divie

Seems the time the directors seem to be thinking - reading between the lines in their pronouncements

[MAC]

Gee, input costs could have a little to do with it.

6170

[percy]

Hoop - if you take a very very long term view of Cavalier you could say it has some cyclical nature to it

Bottoms tend to be about every 9 years .... so zigzag might have to wait until 2017 for his divie

Seems the time the directors seem to be thinking - reading between the lines in their pronouncements

Looks like a massive head and shoulders to me.!

[winner69]

As part of my morbid fascination with CAV here is a bit.

Shareprice has generally followed earnings but most of the time market sentiment to CAV has been pretty positive and traded above a PE of 12 most of the time. (The scale on the chart below is such that the black EPS line on the chart essentially represents a shareprice at 12 times earnings)

Whether market conditions are cyclical, whether wool prices are hurting margins, whether they are just hopeless or whatever if the shareprice is going to get back to $2 Cavalier need to have a significant improvement in performance and get market sentiment back on their side.

Big challenge as even the directors don't seem to optimistic about this year.

[winner69]

Gee, input costs could have a little to do with it.

6170

Interesting chart MAC

CAV say the budget for 2015 is a slight increase on 2014 earnings

A But hat is tagged with 'Downsides include the impact of continuing increase in wool price on woollen carpet margins'

Bugger

[winner69]

When things go wrong for CAV things really go wrong and in areas where you would least expect it

Yes shrimps in Asia have a disease. Think I have gone Asian shrimps

From the announcement


Wool scouring

The Group’s share of tax-paid earnings of CWH for the current year is $2 million, a 59% drop on the previous year’s record of $5 million.

The drop in CWH profitability can be attributed mainly to the dramatic reduction in wool grease price, which has fallen by almost 61% since the beginning of 2013, and a reduction in the volume of wool available for scouring.

Much of the reduction in wool grease price can be traced to a disease affecting the shrimp industry in Asia, where wool grease is a major ingredient in the manufacturer of shrimp feed. With the disease now under control, demand is anticipated to recover, and we are expecting wool grease price to gradually increase in the next financial year

[Hoop]

Looks like a massive head and shoulders to me.!

It is exactly what it is...a very long term H&S pattern
Look where the neck line is..it provided support for quite a while before it broke ..exactly at the start of this latest captulation event.......Freaky huh?

Thanks Winner for some analysis including the z score...much appreciated..

http://i458.photobucket.com/albums/qq306/Hoop_1/CAVHampS.png (http://s458.photobucket.com/user/Hoop_1/media/CAVHampS.png.html)

[MAC]

One would say though that CAV have weathered the storm quite well given wool prices have increased close to 500% since 1999 and have held up there for two or three years now. There’re probably a lot leaner and meaner than there were, would have to be now just to have survived all that.

A big correction in wool prices might make the company look pretty good on a fundamental basis, just need to get Chinese to eat sheep meat and CAV might get wool as a by-product.

[winner69]

The other owners of that Cavalier Wool Holdings (Cavalier owns 50%) are ACC and Direct Capital both 25%

[Lizard]

Hoop - Altman Z score is 2.43

Z-SCORE BETWEEN 1.8 and 2.7 – Good chances of the company going bankrupt within 2 years of operations from the date of financial figures given

They really do need to something with that huge stockpile of carpet unsold in the warehouses. Really need to start reducing it fast and turn it in to cash. Otherwise no divie for zigzag next year either

But then again they need to start making more money as well so better not give that carpet away

Been expecting them to try raising capital for a few years now, but possibly have left it too late. If they don't extend the debt in the next 6 months, then it may be "current" at the half-yearly. But not sure how easy it will be to extend at an interest rate of 4.6% either?

Dropping inventory was the easy win - they already did that but then needed the new product range and have had to expand it again. Time to start finding some assets to sell?

[winner69]

We been a bit harsh on Cavalier.

We should not overlook a few things that will boost profit in the next year, like -


1 - a full year’s benefit from the consolidation of tufting which we completed in 2014
2- continuing growth in synthetic and felted carpet sales
3 - launch of new products that had been scheduled for 2015
4 - growth in rest of world markets to help our export sales
5 - lift in wool grease prices now the shrimps are all fixed up
6 - sell all the carpets we have in the warehouses to pay off some debt
7 - our forex expert Mr Moose says NZD is collapsing which will add a few million to the bottom line


Must be a buy then -a buck a good entry price

[winner69]

Did my best yesterday to pump up the shareprice but nobody seems to be listening

Low 90's now

Who would have believed it - 50% odd down since Sparky's infamous rave (or was it just ramp to get out before the collapse, sneaky)

Just a cyclical downturn

[The Grinch]

Afternoon,

So I've had CAV on my watchlist for a while now and this weekend finally got round to crunching a few numbers and googling a few googles.

Result: I took the plunge - not till around the end of day and ashamed to say that was me at the $1.10... TA is not my game. Thin sell side in the low 1s area - usual fear of missing out/comfortable that CAV is still cheap at 1.10.

I can't honestly predict if CAV will bounce back in 2015 and gut feel/conservative lethargy tells me it will hover between the 1.05-1.30 mark but I do feel that by the end of 2016 we will see it trending around the $1.80-2.20 range again as our dollar peaks and faces a few years of modest weakness and NZ really starts the housing boom, as CAV sales in synthetics start making up a bigger chuck of the revenue pie.

Plus side
1. Two year restructure plan has seen significant reduction in costs (>30mil reduction in wages)
2. Introduction of Synthetic carpet range now embedded, revamp looks good and sales of there new products should increase (probably not overall sales as wool carpet will maintain its trend). As synthetic carpet sales increase it will help hedge against wool price increase, if wool price decreases CAV increase margins on majority of sales.
3. NZD/AUD should not be as volitile as their 13/14 season and touch wood not trend over the .925 it has averaged for 2014 YTD.





Currency Effect (000's)



AUD Earnings:
$ 100,000






13/14
S1
S2
S3


Exchange:
$ 0.915
$0.925
$0.910
$0.895




-$1,182
$600
$2,442









Bank Forecasts for AUD/NZD 2015




BNZ:
0.91





ANZ:
0.90












Cav 13/14 Ave:
0.915





2014 Profit:
$5,790






2015 Profit Scenerio (000's)






Most likely
Potential
Dream




$6,056
$7,838
$9,680



EPS
0.089
0.115
0.142



Buy price
1.10





Market P/E






S1:
11
S2:
14



Pricing






S1:
$0.98
$1.26
$1.56



S2:
$1.24
$1.61
$1.99




*To explain my graph - I have largely based the variance in potential profits down to the exchange rate between AUD/NZD, assuming that the underlying business will perform well in NZ (approx 10-15% increase to the $105-110mil mark for 2015) as a result of the forecasted increase in housing consents for 2015 and in Aus will continue to perform mediocre - slight decrease (thinking $95-100mil). Assuming Wool prices maintain the same levels they have for the past few years and that most margin increases etc will be driven by by the reduced overheads and sales revamp. I have assumed a P/E band of between 11-14 as over the years CAV has moved between the 8-16 range and this is a healthy/realistic medium.

I hope my thoughts encourage a bit of conversation and would appreciate others thoughts. As highlighted, to me the exchange rate is there biggest concern at this stage but interested if you think CAV has a few more skeletons.

Regards
TG

[macduffy]

Sorry to be negative about CAV, Grinch, but I suspect that they have a bit more pain to get through before recovering. They've been late to the swing to synthetic carpet and others have, and are, dominating the market. We like natural wool carpets but they're more expensive and modern synthetics look good and wear well these days - carpet retailers seem to promote these in their special offers.

I've held CAV on and off since 1995 and have done well with them on the whole. Just wish I'd sold the lot last time and not kept a few "for interest"!

:mellow:

[macduffy]

Sorry to be negative about CAV, Grinch, but I suspect that they have a bit more pain to get through before recovering. They've been late to the swing to synthetic carpet and others have, and are, dominating the market. We like natural wool carpets but they're more expensive and modern synthetics look good and wear well these days - carpet retailers seem to promote these in their special offers.

I've held CAV on and off since 1995 and have done well with them on the whole. Just wish I'd sold the lot last time and not kept a few "for interest"!

:mellow:

Apologies for duplication.

[percy]

Sorry to be negative about CAV, Grinch, but I suspect that they have a bit more pain to get through before recovering. They've been late to the swing to synthetic carpet and others have, and are, dominating the market. We like natural wool carpets but they're more expensive and modern synthetics look good and wear well these days - carpet retailers seem to promote these in their special offers.

I've held CAV on and off since 1995 and have done well with them on the whole. Just wish I'd sold the lot last time and not kept a few "for interest"!

:mellow:

Apologies for duplication.

I am watching from a distance.!!
Craig's are very bullish on them.
If I felt I was getting interested I would do a circuit of local carpet retailers, and ask them their view on CAV before taking any further action.

[The Grinch]

Hey Macduffy,

Completely agree that they were late to the party on synthetics and its cost them but they are in that game now - do you not feel that there reputation/brand will help them claw back some market in this space? It won't happen overnight but it will happen faster than a new entrant and I feel the market has already fully factored this loss into the current price.

Percy! Always appreciate your posts and wisdom - Karen1 has passed on valuable insight/material I understand you previously gave her. I will definitely duck into a few carpet retailers for an opinion or two when I have the opportunity (I live in a remote area). Haven't mortgaged the house for it at this stage so a reasonably light hearted play.

Thanks for the feedback

[The Grinch]

Good to see that even with National getting back in the dollar only spiked to the 91c range. Economists were predicting it to jump in a short blip, lets get past these next few weeks then watch the downward trend begin. Would love it to hold at 88c for a quarter or two. Come on lets see energy and ferrous metal commodities increase! :t_up:

[Hoop]

Doesn't happen all that often with medium term indicators but TA would have got you in very close to the bottom this time.

http://i458.photobucket.com/albums/qq306/Hoop_1/CAV23092014.png (http://s458.photobucket.com/user/Hoop_1/media/CAV23092014.png.html)

[winner69]

Doesn't happen all that often with medium term indicators but TA would have got you in very close to the bottom this time.

http://i458.photobucket.com/albums/qq306/Hoop_1/CAV23092014.png (http://s458.photobucket.com/user/Hoop_1/media/CAV23092014.png.html)

Looking good eh Hoop

Looks like $1.46 next big stop ......that will be a big gain for grinchy then

Nice clean chart

[The Grinch]

ChooChoooooooooo all aboard the $1.46 express next stop explaining to the other half why she still can't have the ring.

[Hoop]

Just weak resistances to 146 but the breakout target price is around a weak resistance (the orange dotted line) of 115...it wouldn't surprise me if CAV wavers around this area with some profit taking...

But who knows....global stocks looking very weak this week and most NZX stocks are so far ignoring this fact due to National victory?...

Oh speaking about National..remember Lose Yourself by Eminem......a bit of the lyrics........"Snap back to reality, oh, there goes gravity".....

[The Grinch]

Might have to start strolling through a few Carpet stores and talking to the sales team about this one. More I read the more I like.

Please throw me an ugly statement... I'm really starting to think the $8-10mil mark likely and a little over that if things keep heading there way :)

FYI (sure this is nothing new to most following this stock).

http://www.indexmundi.com/commodities/?commodity=coarse-wool&months=120&currency=nzd

No excitement there but when you correlate that against profits made over the time period clearly shows how the wool price increase squeezed margins and eroded profits. The better than expected increase in synthetic carpet sales will help and touch wood prices have a least stabilised slash slightly trending down.

See our dollar took a good tumble :t_up: 88c AUD here we come.

http://www.stuff.co.nz/business/money/10557837/RBNZ-in-521m-currency-intervention

Unfortunately wool prices don't want to follow - stubborn wool prices. Thoughts are it will stay pretty stabile in the short term (very short term).

http://www.wool.com/Content/en-GB/mi_wk_13_2014.pdf

http://www.radionz.co.nz/news/rural/249226/wool-exporter-expects-prices-to-hold

[Lizard]

The tie up with Mowhawk in Australia is interesting. I am unsure, even from their website, when that was announced.

[winner69]

Oh dear oh dear ....new year just started and an earnings DOWNGRADE already

Enough said ...hang in their Grinch / Sparky .....one day it will be OK

June 2015 year-end earnings guidance
2:52pm, 24 Oct 2014 | FORECAST
Cavalier Corporation advises that after three months of trading, whilst volumes have been consistent with previous year, margins are under pressure, and the Company is unlikely to achieve – on a normalised basis - the $5.8m profit after tax achieved in the 2014 financial year.

The expectation reflects the current high price of wool on the manufactured cost of carpet and the on-going strength of the NZD:AUD exchange rate on our AUD-denominated sales and receivables.

Australian sales and receivables were somewhat sheltered from the high cross rate in 2014 due to favourable forward cover taken throughout 2012/13, much of which have since been utilised. As a consequence, Cavalier is subject to a much less favourable cross rate in the current 2015 financial year.

[Chaowee88]

Oh dear oh dear ....new year just started and an earnings DOWNGRADE already

Enough said ...hang in their Grinch / Sparky .....one day it will be OK

June 2015 year-end earnings guidance
2:52pm, 24 Oct 2014 | FORECAST
Cavalier Corporation advises that after three months of trading, whilst volumes have been consistent with previous year, margins are under pressure, and the Company is unlikely to achieve – on a normalised basis - the $5.8m profit after tax achieved in the 2014 financial year.

The expectation reflects the current high price of wool on the manufactured cost of carpet and the on-going strength of the NZD:AUD exchange rate on our AUD-denominated sales and receivables.

Australian sales and receivables were somewhat sheltered from the high cross rate in 2014 due to favourable forward cover taken throughout 2012/13, much of which have since been utilised. As a consequence, Cavalier is subject to a much less favourable cross rate in the current 2015 financial year.

No surprises there, good thing I brought and sold. Brought at 92 sold when CAV jumped to 102.

It just a shocking tale of woe, and with their ever burgeoning pile of debt, and declining profit, they're going nowhere.

[percy]

No surprises there, good thing I brought and sold. Brought at 92 sold when CAV jumped to 102.

It just a shocking tale of woe, and with their ever burgeoning pile of debt, and declining profit, they're going nowhere.

As you pointed out "no surprises there"!!

[MAC]

Downstream at some point wool prices must surely come off those three year long highs, but who really knows where commodity prices are going. A leaner meaner CAV at that point might look pretty good, but when is the question, within the next year, or perhaps two ?

http://www.indexmundi.com/commodities/?commodity=coarse-wool&months=120

[The Grinch]

Oh dear oh dear ....new year just started and an earnings DOWNGRADE already

Enough said ...hang in their Grinch / Sparky .....one day it will be OK

June 2015 year-end earnings guidance
2:52pm, 24 Oct 2014 | FORECAST
Cavalier Corporation advises that after three months of trading, whilst volumes have been consistent with previous year, margins are under pressure, and the Company is unlikely to achieve – on a normalised basis - the $5.8m profit after tax achieved in the 2014 financial year.

The expectation reflects the current high price of wool on the manufactured cost of carpet and the on-going strength of the NZD:AUD exchange rate on our AUD-denominated sales and receivables.

Australian sales and receivables were somewhat sheltered from the high cross rate in 2014 due to favourable forward cover taken throughout 2012/13, much of which have since been utilised. As a consequence, Cavalier is subject to a much less favourable cross rate in the current 2015 financial year.

Thanks W69,

Didn't see this one coming - NZD against AUD has averaged 90c since Aug. There last year average was 91c. Wool prices are high but lower than the 2011 year and really hard to see them staying this flamboyant for to long. With the significant cost reductions exercises etc tch tch now its the hard call. Do I back my call and top up? Its now a bargain, trend water or reduce a portion in anticipation that Im wrong?

Cheers
TG

http://www.eldersprimary.co.nz/images/stories/pdfs/ssi_usd_south.pdf
http://www.eldersprimary.co.nz/images/stories/pdfs/ssi_usd.pdf

[The Grinch]

No surprises there, good thing I brought and sold. Brought at 92 sold when CAV jumped to 102.

It just a shocking tale of woe, and with their ever burgeoning pile of debt, and declining profit, they're going nowhere.

Chao, could you share? no Tie's not flash at just over 3 and macro factors (currency, wool etc) mean margins aren't good at the moment... but going nowhere? We are talking about a company thats been on the exchange for almost 30yrs, a boring company thats always ticked along.

They've done significant cost reduction exercises, pushed into the synthetics business and the basics of supply and demand would indicate that its unlikely wool prices can maintain record 30yr highs for to much longer especially 3yrs in with lamb meat prices also being at healthy levels.

Wool prices will come down and then as MAC says we have a leaner, meaner CAV and a solid divvie player again.

TG

Disc: bias, hold CAV.

[winner69]

Thanks W69,

Didn't see this one coming - NZD against AUD has averaged 90c since Aug. There last year average was 91c. Wool prices are high but lower than the 2011 year and really hard to see them staying this flamboyant for to long. With the significant cost reductions exercises etc tch tch now its the hard call. Do I back my call and top up? Its now a bargain, trend water or reduce a portion in anticipation that Im wrong?

Cheers
TG

http://www.eldersprimary.co.nz/images/stories/pdfs/ssi_usd_south.pdf
http://www.eldersprimary.co.nz/images/stories/pdfs/ssi_usd.pdf

If you are so convinced about the good times not being far off 90 cents would have to be a buy wouldn't it? Might be a few more bailers on Tuesday -- you could get 85 cents

The old Friday afternoon before a long weekend to put out the bad news trick, hoping no one will notice.

[winner69]

Meant to say industry talk is that Hirst's still taking share from them, esp in the commercial space

[noodles]

Chao, could you share? no Tie's not flash at just over 3 and macro factors (currency, wool etc) mean margins aren't good at the moment... but going nowhere? We are talking about a company thats been on the exchange for almost 30yrs, a boring company thats always ticked along.

They've done significant cost reduction exercises, pushed into the synthetics business and the basics of supply and demand would indicate that its unlikely wool prices can maintain record 30yr highs for to much longer especially 3yrs in with lamb meat prices also being at healthy levels.

Wool prices will come down and then as MAC says we have a leaner, meaner CAV and a solid divvie player again.

TG

Disc: bias, hold CAV.

They have $68mill net debt.
Last year they had operating cashflows of $615,000

I'm not touching this at any price. I'll wait till a turnaround is evident in the books. Management forecasts can't be trusted.

[The Grinch]

If you are so convinced about the good times not being far off 90 cents would have to be a buy wouldn't it? Might be a few more bailers on Tuesday -- you could get 85 cents

The old Friday afternoon before a long weekend to put out the bad news trick, hoping no one will notice.


Ha, I'm still young at this game - haven't quite been around the merry go round enough yet to significantly overweight myself on a given stock (tend to hold 5-6) i.e. back myself above a certain % of portfolio.

Will just weight it out... mind you 85c would be delicious.

[winner69]

[QUOTE=The Grinch;513410]... but going nowhere? We are talking about a company thats been on the exchange for almost 30yrs, a boring company thats always ticked along.

QUOTE]

Couldn't find a 30 year chart but here's a 19 year one

Over that time they have been restructuring, cutting costs out, going into new products, pushing the premiumness of Bremworth etc etc etc and whoops the shareprice is about the same it was last century.

The only times the shareprice has been been any good is when everything is going right for them and the sharemarkets going ballistic. Otherwise its all down hill.

I think the key words in your synopsis are the 30 years. Cavalier haven't changed with the times, they think and operate like it is still the last century. Until that thinking changes Cavalier will go nowhere, except maybe the way that Feltex went.

ANyway just for you Grinch - maybe 90 cents to $5 is again on the cards - have hope

[The Grinch]

[QUOTE=The Grinch;513410]... but going nowhere? We are talking about a company thats been on the exchange for almost 30yrs, a boring company thats always ticked along.

QUOTE]

Couldn't find a 30 year chart but here's a 19 year one

Over that time they have been restructuring, cutting costs out, going into new products, pushing the premiumness of Bremworth etc etc etc and whoops the shareprice is about the same it was last century.

The only times the shareprice has been been any good is when everything is going right for them and the sharemarkets going ballistic. Otherwise its all down hill.

I think the key words in your synopsis are the 30 years. Cavalier haven't changed with the times, they think and operate like it is still the last century. Until that thinking changes Cavalier will go nowhere, except maybe the way that Feltex went.

ANyway just for you Grinch - maybe 90 cents to $5 is again on the cards - have hope

Ha rough, I said nothing about $5 just that less than a $1 at $1.19 NTA and pushing past the 3rd year of unfavourable macro factors might mean its a good opportunity to buy. They would only need to bounce back to $9-$11mil profit range for the share price to jump up past the the $1.50 mark. Even if that takes two years, 25% per annum is a nice return.

Really do we rate this stock so far below PEB,XRO etc? I would say the risk/reward scenario there is more dubious.

Just my thoughts. Time will tell.

TG

[winner69]

Ha rough, I said nothing about $5 just that less than a $1 at $1.19 NTA and pushing past the 3rd year of unfavourable macro factors might mean its a good opportunity to buy. They would only need to bounce back to $9-$11mil profit range for the share price to jump up past the the $1.50 mark. Even if that takes two years, 25% per annum is a nice return.

Really do we rate this stock so far below PEB,XRO etc? I would say the risk/reward scenario there is more dubious.

Just my thoughts. Time will tell.

TG

Hang in there mate. You be OK as long as they don't go the Feltex way. Just remember Sparky had a value of 2 to 4 bucks on this

[percy]

The Grinch.
Some businesses are in the right sector at the right time.You invest in a well run one, and you get sp growth and increasing dividends.
Investing in one which is heavily debt ridden, going backwards, in a difficult sector,only results in loss of capital and disappointment.

[winner69]

Grinch - numbers must be really bad as they couldn't even wait until the ASM in a months time to say anything.

Nothing been quantified. At FY results all they said was 'Our 2015 budget is showing a modest increase in earnings on the $5.8 million tax-paid for 2014.'. Assume this to be a vague guidance. Today they say 'Company is unlikely to achieve – on a normalised basis - the $5.8m profit after tax achieved in the 2014 financial year.'

Strange set of statements. One only issues a profit warning when earnings are going to be significantly less than previous guidance / consensus.

Thus I assume CAV are heading to something significantly less than $5.8m (normalised of course). A feeling supported by the urgency of todays notice only a month before the ASM

Might score a proxy to go to that. Should be a lot of grumpy people there (assuming they have any sane shareholders left)

The Chairman is up for re=election. Unfortunately nobody opposing him

Maybe he is the problem' Read this and ask yourselve what chance of things changing

[blackcap]

Grinch - numbers must be really bad as they couldn't even wait until the ASM in a months time to say anything.

Nothing been quantified. At FY results all they said was 'Our 2015 budget is showing a modest increase in earnings on the $5.8 million tax-paid for 2014.'. Assume this to be a vague guidance. Today they say 'Company is unlikely to achieve – on a normalised basis - the $5.8m profit after tax achieved in the 2014 financial year.'

Strange set of statements. One only issues a profit warning when earnings are going to be significantly less than previous guidance / consensus.

Thus I assume CAV are heading to something significantly less than $5.8m (normalised of course). A feeling supported by the urgency of todays notice only a month before the ASM

Might score a proxy to go to that. Should be a lot of grumpy people there (assuming they have any sane shareholders left)

The Chairman is up for re=election. Unfortunately nobody opposing him

Maybe he is the problem' Read this and ask yourselve what chance of things changing

Thanks winner.. as they say a picture says a 1000 words or something like that. Your picture really says a lot more than 1000 words. I must remember to look up the definition of independent in the dictionary.

[winner69]

Updated June post

Punters get sucked in by what the Company says .... and the continued hope that this time is different

Last 6 earnings related announcements

16th August 2013
Report a $6.6m (normalised) NPAT and say ‘we believe the Company is now well positioned to lift future profitability.’
Shareprice week after announcement $1.65

19th November 2013
Expecting a better year with NPAT in the $8 to $10 million tax-paid range.
Shareprice $1.90

28th February 2014
(Tales of woe and misery) we are revising our earnings outlook to $6 to $9 million
Shareprice week after announcement $1.65

26th June 2014
(No tales of woes and misery) but guidance is now between $5 million and $6 million NPAT
Shareprice really should be less than $1

22 August 2014
Announced earnings of $5.8m which disappointingly were down 13% on pcp but at the upper end of guidance (good guess in June eh). But not our fault as it was all Cavalier Wool Holdings fault.
The FY15 Budget is a modest increase on the $5.8m - so all is well and we are progressing well, may evn pay a dividend. We will update at the ASM in November.

24 October 2014
Tales of woe and misery and **** things are pretty bad, so bad we it is unlikely we will achieve the $5.8m after all
Shareprice plunges to 90 cents

22 November 2014

At the monthly piss up lunch (sorry Board Meeting) it was decided they really to quantify what unlikely is and drew some numbers out of the hat - and the answer normalised tax-paid earnings for the 2015 year was in the range of $1 million to $4 million

Suppose next guess will be a negative number

My morbid fascination with impending train wrecks continue. At least it keeps me from getting tempted, for now

[Chaowee88]

Chao, could you share? no Tie's not flash at just over 3 and macro factors (currency, wool etc) mean margins aren't good at the moment... but going nowhere? We are talking about a company thats been on the exchange for almost 30yrs, a boring company thats always ticked along.

They've done significant cost reduction exercises, pushed into the synthetics business and the basics of supply and demand would indicate that its unlikely wool prices can maintain record 30yr highs for to much longer especially 3yrs in with lamb meat prices also being at healthy levels.

Wool prices will come down and then as MAC says we have a leaner, meaner CAV and a solid divvie player again.

TG

Disc: bias, hold CAV.

Carful analysis required before posting.

This company has management which has downgraded earnings 5 times recently (correct me if I'm wrong).
Who paid a 3C divie earlier this year which is 2million of cash flow.
Cash flow for operating activities (I say operating and not FCF, Free cash flow) was 615K.
This led to an increase in NET debt of 5.3 million to 58.6 million.
Based on recent forecasts, CAV is expected to achieve less than 5.8 million NPAT. That gives them a debt to profit ratio of over 10X.

I work in a bank and when debt/income is 10X believe me the bank is worried.

Especially when you have management who have failed repeatedly in recent times with forecasts and mismanagement. How can you have any more faith in what they say?

God knows at the rate their going there could be 2, 3 more downgrades or bad news...

History also doesn't mean a company will go on forever, have a look at Boart longyear and Billabong both with long, prestigious histories, now where are they? Climbing out of a massive hole.

That not to say CAV is finished, but at 90C I'll stay put for the time being.

CAV will come back again, I'm pretty sure but when god knows.

[Snoopy]

Carful analysis required before posting.

This company has management which has downgraded earnings 5 times recently (correct me if I'm wrong).
Who paid a 3C divie earlier this year which is 2million of cash flow.
Cash flow for operating activities (I say operating and not FCF, Free cash flow) was 615K.
This led to an increase in NET debt of 5.3 million to 58.6 million.
Based on recent forecasts, CAV is expected to achieve less than 5.8 million NPAT. That gives them a debt to profit ratio of over 10X.

I work in a bank and when debt/income is 10X believe me the bank is worried.


So what is the consensus then? Will 1:1 at 50c fix things? My cash pantechnicon is fired up, and ready to be backed up.

SNOOPY

discl: watcher, not yet a holder

[percy]

So what is the consensus then? Will 1:1 at 50c fix things? My cash pantechnicon is fired up, and ready to be backed up.

SNOOPY

discl: watcher, not yet a holder

You will be safe if you keep watching from a distance [like me] this train wreck unfold.
Keep your wallet in your pocket.This company have no idea how to turn a profit,so why give them more money to loose.?

[winner69]

You will be safe if you keep watching from a distance [like me] this train wreck unfold.
Keep your wallet in your pocket.This company have no idea how to turn a profit,so why give them more money to loose.?

Cav does make a profit (normalised) most of the time, just not very much

And don't forget the humungous stockpile of carpet in their warehouses, $66m at last count - enough to cover half a years sales but bugger they probably made heaps more in their super efficient factories

[Balance]

Updated June post

Punters get sucked in by what the Company says .... and the continued hope that this time is different

Last 6 earnings related announcements

16th August 2013
Report a $6.6m (normalised) NPAT and say ‘we believe the Company is now well positioned to lift future profitability.’
Shareprice week after announcement $1.65

19th November 2013
Expecting a better year with NPAT in the $8 to $10 million tax-paid range.
Shareprice $1.90

28th February 2014
(Tales of woe and misery) we are revising our earnings outlook to $6 to $9 million
Shareprice week after announcement $1.65

26th June 2014
(No tales of woes and misery) but guidance is now between $5 million and $6 million NPAT
Shareprice really should be less than $1

22 August 2014
Announced earnings of $5.8m which disappointingly were down 13% on pcp but at the upper end of guidance (good guess in June eh). But not our fault as it was all Cavalier Wool Holdings fault.
The FY15 Budget is a modest increase on the $5.8m - so all is well and we are progressing well, may evn pay a dividend. We will update at the ASM in November.

24 October 2014
Tales of woe and misery and **** things are pretty bad, so bad we it is unlikely we will achieve the $5.8m after all
Shareprice plunges to 90 cents



My morbid fascination with impending train wrecks continue. At least it keeps me from getting tempted, for now

Thanks, W69 for tracking CAV's tales of woe!

Have not had a look at this stock for a long time even though I used to own a few back in the 1990s. That was when the company was well managed, paid a huge dividend and wool carpets were a must have premium floor covering in NZ and Oz.

Nowadays, imported wooden floorings are huge with imported floor rugs and synthetic carpets are considered just as good if not better.

Hard to see how the company is going to be able to reverse its declining fortunes in a declining industry.

Rather sad really to see this company heading towards the inevitable unless it changes course radically.

[Chaowee88]

So what is the consensus then? Will 1:1 at 50c fix things? My cash pantechnicon is fired up, and ready to be backed up.

SNOOPY

discl: watcher, not yet a holder

They will become investable, but not yet.
If the mining downturn has taught me anything, that downturns can last a long time (man I got burnt by investing in mining but luckily the company had great management and held up) Sadly the same can't be said of CAV's management.
I probably will buy a small lot at 65 - 75, just to see how it goes,
At 65 - 75 that gives CAV an enterprise value of 110M - 120M which is probably worth a punt to see how they go.

[percy]

Cav does make a profit (normalised) most of the time, just not very much

And don't forget the humungous stockpile of carpet in their warehouses, $66m at last count - enough to cover half a years sales but bugger they probably made heaps more in their super efficient factories

$66mil stockpile. 6 months stock.Why?

[Beagle]

Interesting slow motion train wreck and thanks W69 for tracking their tales of woe. Wooden floors, polished concrete, synthetic fibres and carpets seem to be increasingly popular.

[Lizard]

$66mil stockpile. 6 months stock.Why?

Because carpet is not made to order, except for the largest of commercial orders.
Because carpet dye batches are "one-off" and therefore a single area of carpet needs to come from a single run or dye batch, so small lots tend to result in a lot of "end of batch" specials.
Because, when sufficient stock is not available at time of order, the retailer will suggest an alternative product from a competitor that looks very similar.
Because CAV also need to be the company with enough of the product that "looks very similar", when their competitor doesn't have enough product to meet an order...

[percy]

Because carpet is not made to order, except for the largest of commercial orders.
Because carpet dye batches are "one-off" and therefore a single area of carpet needs to come from a single run or dye batch, so small lots tend to result in a lot of "end of batch" specials.
Because, when sufficient stock is not available at time of order, the retailer will suggest an alternative product from a competitor that looks very similar.
Because CAV also need to be the company with enough of the product that "looks very similar", when their competitor doesn't have enough product to meet an order...

Thanks Lizard for taking the time to explain why they need 6 months of stock.
Tough sector.!

[Chaowee88]

And the trickle downwards continue, 85 now though support does look like it there.

[Chaowee88]

Slowly but surely it edging towards "a punt territory again".

[Chaowee88]

Someone stop the rot, the pain is piling up...

[winner69]

Someone stop the rot, the pain is piling up...

Even I would not ave guessed 70 something

Probably Sparky finally bailing out ....when you have heaps hard work with pushing the price down further.

[Chaowee88]

Even I would not ave guessed 70 something

Probably Sparky finally bailing out ....when you have heaps hard work with pushing the price down further.

Hehe, I was a sneaky bugger and just picked up some shares at 77 just to test the waters.
I wonder how low this will sink to?

[Chaowee88]

Uh oh, looks like I was too early, more sellers coming in.

[winner69]

jeez c88 its looking a bit desperate at the moment but surely cant go much lower can it?

Probably depends on how many more sparky has to offload

Getting to the stage where for a buck you can buy 1 pumpkin and 1 cavalier share

[Beagle]

Sounds like buy one Mcdonalds cheeseburger for $1 get one free, you know bloody well neither one is going to be good for you :eek2:

[zigzag]

jeez c88 its looking a bit desperate at the moment but surely cant go much lower can it?

Probably depends on how many more sparky has to offload

Getting to the stage where for a buck you can buy 1 pumpkin and 1 cavalier share

Possibly some of the weakness is caused by people selling their weakest shares to pay for their Orion applications. The AGM is on the 25th, so see what happens then. Unfortunately their meeting is practically the same time as the ABA meeting, and I want to go to both. Would have been a lot better if one was in the morning, and one in the afternoon. ABA is my biggest holding, and CAV is an interesting situation, so I'm wishing these guys would co-ordinate their meetings a bit better.

[Chaowee88]

jeez c88 its looking a bit desperate at the moment but surely cant go much lower can it?

Probably depends on how many more sparky has to offload

Getting to the stage where for a buck you can buy 1 pumpkin and 1 cavalier share

Time to start me averaging down. Yesterday dipped a tiny holding in CAV, now it time to play -_-

[Schrodinger]

Possibly some of the weakness is caused by people selling their weakest shares to pay for their Orion applications. The AGM is on the 25th, so see what happens then. Unfortunately their meeting is practically the same time as the ABA meeting, and I want to go to both. Would have been a lot better if one was in the morning, and one in the afternoon. ABA is my biggest holding, and CAV is an interesting situation, so I'm wishing these guys would co-ordinate their meetings a bit better.

This might explain the PEB fall.

[Hoop]

Time to start me averaging down. Yesterday dipped a tiny holding in CAV, now it time to play -_-

...and lose your remaining fingers..

[Chaowee88]

That always been the case going against the trend -_-

And I've lost count how many times I've gone against the tide

[winner69]

...and lose your remaining fingers..

He be right hoop ....now has to be the bottom, surely

Go for it c88 - maybe never a better time

Sparks valuation was over 3 bucks ....4 bagger coming up for you

[Chaowee88]

He be right hoop ....now has to be the bottom, surely

Go for it c88 - maybe never a better time

Sparks valuation was over 3 bucks ....4 bagger coming up for you

We will never see $3 I'm pretty positive, I have a question mark over Whether CAV can even reach $1.50, having said that with the way numbers stack up and the depth in the market it makes sense for me to ramp up my punt now.

[h2so4]

That always been the case going against the trend -_-

And I've lost count how many times I've gone against the tide

Is that you belg?.......

[Chaowee88]

Is that you belg?.......

Negitive Sir.
And the tide starts it turn.. God damn I missed out 73 ...

[h2so4]

Not from Auckland?.........

[Chaowee88]

Not from Auckland?.........

Yes, I'm from Aucks but currently in China on vacation

[h2so4]

Well if you are not belg then you must be a cousin?..

[Chaowee88]

Well if you are not belg then you must be a cousin?..

?, why do you think I am related? I have no association with him.

[winner69]

Jeez c88, you are getting excited today

Good own for pushing the price back 80 cents, well done

[Chaowee88]

Jeez c88, you are getting excited today

Good own for pushing the price back 80 cents, well done

Not me winner! My order still sitting there, not me pushing CAV up !

[percy]

Must be belg.!

[Lizard]

Must be belg.!

Oh yes, we all remember how much he loves carpet companies!! :D

(Sorry, Belg... it would be kinder to forget that one after nearly a decade...)

[Chaowee88]

Man, this stinks, missed out 73, now it 83... Brought only a tiny parcel at 77...

[winner69]

Man, this stinks, missed out 73, now it 83... Brought only a tiny parcel at 77...

You have to be brave and have faith in your convictions

You told me CAV was worth a punt in the 70's - you should have bought all of what was available. I thought you had.

You have only yourself to blame for this what 'stinks' position

Better buy big now, like today or you be missing out at 93 cents as well

AGM on 25th .... might be good news then

[Chaowee88]

I got in too slow at 73, after I saw the morning orders I put mine in, in hindsight I should have just left an order there overnight at 73 - 75.

unlikely AGM will be anything spectacular, it just that the market punished CAV to the point it was undervalued marginally, I don't see a turnaround anytime soon with margins being squeezed.

[noodles]

I got in too slow at 73, after I saw the morning orders I put mine in, in hindsight I should have just left an order there overnight at 73 - 75.

unlikely AGM will be anything spectacular, it just that the market punished CAV to the point it was undervalued marginally, I don't see a turnaround anytime soon with margins being squeezed.

Now is your chance Chaowee88. The falling knife will gain velocity after this last announcement.
https://www.nzx.com/companies/CAV/announcements/257971

[Beagle]

From past history we know that it'll be towards the bottom end of that range so lets call it $1.5m and on 68.7m shares this gives us EPS of 2.18.
Lets be extremely generous and call this the bottom of the cycle for this cyclical company and therefore ascribe them double the normal PE of about 9 for a cyclical company so on a PE of 18 this gives fair apparent value of about 39 cents.
I think that's being generous with managements appalling track record. When I looked a few minutes ago there was only one minor buyer at 35 cents. I can't say I am surprised. Stock probably deserves to be in the penny dreadful category <20 cents until they can prove otherwise. With all the new building going on at the moment if they can't make serious money now I don't see how without a massive restructuring they'll ever do well in the future. Clean the board and management out and bring in some serious hard nosed cost accountants to dramatically improve the efficiency.

[Xerof]

It was run like a well oiled machine when Tony Timpson was in charge. Shows just how important management is to the success of a company - times were even tougher in his day. He was a director for a company I worked for in the 1990's - highly impressive individual - I fear a lot of our listed companies lack such highly impressive individuals.

We need more highly impressive individuals, to be well positioned - this is not well positioned....

:cool:

[Chaowee88]

Now is your chance Chaowee88. The falling knife will gain velocity after this last announcement.
https://www.nzx.com/companies/CAV/announcements/257971

Oh how I wish I could short this dog.

I have sold my tiny "rubbish" position when it bounced to 84 and profited a couple of hundred, however now looking to re-enter again

[winner69]

So the month ago "unlikely to exceed last year $5.8m)" has become something $1m odd. At least not telling porkies

And nobody standing against current directors

Probably nobody will turn up tomorrow anyway, can't justify any sausage rolls.

Te signature on the notice looks like 'god haven't I stuffed up'

[Beagle]

It was run like a well oiled machine when Tony Timpson was in charge. Shows just how important management is to the success of a company - times were even tougher in his day. He was a director for a company I worked for in the 1990's - highly impressive individual - I fear a lot of our listed companies lack such highly impressive individuals.

We need more highly impressive individuals, to be well positioned - this is not well positioned....

:cool:

Dead right, good management make profits, poor management make excuses. Why anyone would bid for this is beyond my comprehension. If you want a dog buy a real one with fur at least they make a good companion :cool:

[Chaowee88]

Well, the share price got the stuffing knocked out of it...

[klid]

60c! WOW... $41m cap

[winner69]

Late Friday afternoon announcement means a few remaining shareholders possibly didn't catch up with the news until after they got home

Tomorrow could be interesting on the market, maybe even a bloodbath?

Hope sparky still not holding after his rave earlier in the year but he was sometimes rather stubborn at times and refused to give up on the stocks he thought that were really undervalued.

[BFG]

I highly doubt Sparky is holding. He knows when to exit a sinking ship ;)

[Chaowee88]

Late Friday afternoon announcement means a few remaining shareholders possibly didn't catch up with the news until after they got home

Tomorrow could be interesting on the market, maybe even a bloodbath?

Hope sparky still not holding after his rave earlier in the year but he was sometimes rather stubborn at times and refused to give up on the stocks he thought that were really undervalued.

CAV has become harder to value as the forecast range is rather large 1 - 4 million, and with management record, not sure if the forecast can be relied upon. The bank would be getting real itchy now with their 58 million debt left hanging.

I'm still interested but will need to be less than 40 cents now to interest me..

How's Grinch doing?

[winner69]

Updated

Punters get sucked in by what the Company says .... and the continued hope that this time is different

Last 6 earnings related announcements

16th August 2013
Report a $6.6m (normalised) NPAT and say ‘we believe the Company is now well positioned to lift future profitability.’
Shareprice week after announcement $1.65

19th November 2013
Expecting a better year with NPAT in the $8 to $10 million tax-paid range.
Shareprice $1.90

28th February 2014
(Tales of woe and misery) we are revising our earnings outlook to $6 to $9 million
Shareprice week after announcement $1.65

26th June 2014
(No tales of woes and misery) but guidance is now between $5 million and $6 million NPAT
Shareprice really should be less than $1

22 August 2014
Announced earnings of $5.8m which disappointingly were down 13% on pcp but at the upper end of guidance (good guess in June eh). But not our fault as it was all Cavalier Wool Holdings fault.
The FY15 Budget is a modest increase on the $5.8m - so all is well and we are progressing well, may evn pay a dividend. We will update at the ASM in November.

24 October 2014
Tales of woe and misery and **** things are pretty bad, so bad we it is unlikely we will achieve the $5.8m after all
Shareprice plunges to 90 cents

22 November 2014

At the monthly piss up lunch (sorry Board Meeting) it was decided they really to quantify what unlikely is and drew some numbers out of the hat - and the answer is normalised tax-paid earnings for the 2015 year was in the range of $1 million to $4 million and the shareprice plunges to close at 60 cents

Suppose next guess will be a negative number

My morbid fascination with impending train wrecks continue. At least it keeps me from getting tempted, for now


Updated november

[Sgt Pepper]

CAV has become harder to value as the forecast range is rather large 1 - 4 million, and with management record, not sure if the forecast can be relied upon. The bank would be getting real itchy now with their 58 million debt left hanging.

I'm still interested but will need to be less than 40 cents now to interest me..

How's Grinch doing?

wow
as a novice investor I was really interested in CAV, thought, based on its long (and for investors, rewarding) history, that its prospects were good.

[Beagle]

Updated

Punters get sucked in by what the Company says .... and the continued hope that this time is different

Last 6 earnings related announcements

16th August 2013
Report a $6.6m (normalised) NPAT and say ‘we believe the Company is now well positioned to lift future profitability.’
Shareprice week after announcement $1.65

19th November 2013
Expecting a better year with NPAT in the $8 to $10 million tax-paid range.
Shareprice $1.90

28th February 2014
(Tales of woe and misery) we are revising our earnings outlook to $6 to $9 million
Shareprice week after announcement $1.65

26th June 2014
(No tales of woes and misery) but guidance is now between $5 million and $6 million NPAT
Shareprice really should be less than $1

22 August 2014
Announced earnings of $5.8m which disappointingly were down 13% on pcp but at the upper end of guidance (good guess in June eh). But not our fault as it was all Cavalier Wool Holdings fault.
The FY15 Budget is a modest increase on the $5.8m - so all is well and we are progressing well, may evn pay a dividend. We will update at the ASM in November.

24 October 2014
Tales of woe and misery and **** things are pretty bad, so bad we it is unlikely we will achieve the $5.8m after all
Shareprice plunges to 90 cents

22 November 2014

At the monthly piss up lunch (sorry Board Meeting) it was decided they really to quantify what unlikely is and drew some numbers out of the hat - and the answer is normalised tax-paid earnings for the 2015 year was in the range of $1 million to $4 million and the shareprice plunges to close at 60 cents

Suppose next guess will be a negative number

My morbid fascination with impending train wrecks continue. At least it keeps me from getting tempted, for now


Updated november

WOW, what you've posted there is a damming summary on their total inability to forecast anything with even remote accuracy. Really they should just shut the f%*k up about the future and work hard on trying to save what appears to be a Titanic in the making. Honestly I would not invest in this company at any price. Management appears to be almost completely inept. If you can't make good money when there's a building boom underway in Auckland and Christchurch then the banks clearly have A LOT to be worried about. Very happy this is not one of HNZ's loans :) Train wreck in slow motion no question in my mind and reminds me very much of Feltex.

[winner69]

ASM next Tuesday .... the explanation .... maybe another downgrade ha ha

And directors standing again unopposed ... shareholders have only themselves to blame

Bank be happy .... they have carpet in the warehouses to pay that debt

[Chaowee88]

ASM next Tuesday .... the explanation .... maybe another downgrade ha ha

And directors standing again unopposed ... shareholders have only themselves to blame

Bank be happy .... they have carpet in the warehouses to pay that debt

I have a feeling this AGM will turn out to be a riot.. Things will get ugly

[Jim]

wow
as a novice investor I was really interested in CAV, thought, based on its long (and for investors, rewarding) history, that its prospects were good.

Don't touch it with a ten foot pole, it is once again remind me of Feltex which I lost a big amount of hard earned cold hard cash. Never never touch it

[winner69]

Carnage avoided

Awaiting the excuses at the AGM .....probably give 'investors' some hope that this is the bottom

[winner69]

Instos in the main bailed ....only long time investors and bargain hunters left


Top 20 shareholders
Chippendale Holdings Limited
Rural Aviation (1963) Limited
New Zealand Central Securities Depository Limited
Superlife Trustee Nominees Limited (SL NZ A/c)
Warwick Bruce Norman, Averil Rosemary Norman and Norman Trust Limited Masfen Securities Limited
Custodial Services Limited (A/c 3)
Forsyth Barr Custodians Limited (1-33)
Geoffrey Thomas Charles Harnden
Anthony Charles Timpson
Custodial Services Limited (A/c 4)
FNZ Custodians Limited
Graham James Munro and Zita Lillian Munro
Alan Michael James and Ann White James (JWJ Super Fund)
Forsyth Barr Custodians Limited (1-17.5)
Custodial Services Limited (A/c 2)
J & D Sands Limited
Nicolaas Johannes Kaptein
Mary Dorcas Spackman
David Michael Cotton and Susan Lea Cotton

[Beagle]

J & D Sands Limited I think a company name change is in order. Head in the Sand limited :)

[Chaowee88]

On market there is a heck of a lot of buyer depth at the moment.

[winner69]

On market there is a heck of a lot of buyer depth at the moment.
Probably Superlife buying up ...they just love these sort of cheap stocks

[Chaowee88]

Probably Superlife buying up ...they just love these sort of cheap stocks

Well Mr Market didn't like the AGM one bit. Share price down to 60 again and buy depth looking rather sad.

[The Grinch]

CAV has become harder to value as the forecast range is rather large 1 - 4 million, and with management record, not sure if the forecast can be relied upon. The bank would be getting real itchy now with their 58 million debt left hanging.

I'm still interested but will need to be less than 40 cents now to interest me..

How's Grinch doing?

Hey C88,

Just come back from the big smoke and caught the last half of the AGM. As can be imagined she was a reasonably volatile sitting, Brian Gaynor made some good comments. When it came to Alan's re-election it was a tense moment, I would say about 55-60% not in favour via show of hands. Alan had to move to a poll vote of which the results should be posted on their website any minute now.
He did mention that with the proxy votes that he would win it - didn't look like a strong vote of confidence.

As i said I missed the first half so will leave it to another ST member to do a write up justice but to me looking at the demographis of the shareholders at the meeting it seems apparent that a large share base holds this stock for dividend reasons. Their will be no dividends for another 12-18 months easy so would expect a bit more bleeding. Definitely did not time my entry well with $1.08 average buy in but at these prices I will increase my token stake to a more significant holding.

Still confident in my initial assessment, timing might be a little off. CAVs a bargain at present - will wait to see it hit the bottom before I start buying.

GTG will do a more indepth post later.

DISC: young, reckless and playing with chips - please DYOR - I'm on this forum for education purposes not to be an impromptu financial advisor.

Cheers
TG

[Chaowee88]

Well Mr Market didn't like the AGM one bit. Share price down to 60 again and buy depth looking rather sad.

Well today, is a race between Pumpkin Patch and Cavalier to see who can hit rock bottom first..

[Chaowee88]

Hey C88,

Just come back from the big smoke and caught the last half of the AGM. As can be imagined she was a reasonably volatile sitting, Brian Gaynor made some good comments. When it came to Alan's re-election it was a tense moment, I would say about 55-60% not in favour via show of hands. Alan had to move to a poll vote of which the results should be posted on their website any minute now.
He did mention that with the proxy votes that he would win it - didn't look like a strong vote of confidence.

As i said I missed the first half so will leave it to another ST member to do a write up justice but to me looking at the demographis of the shareholders at the meeting it seems apparent that a large share base holds this stock for dividend reasons. Their will be no dividends for another 12-18 months easy so would expect a bit more bleeding. Definitely did not time my entry well with $1.08 average buy in but at these prices I will increase my token stake to a more significant holding.

Still confident in my initial assessment, timing might be a little off. CAVs a bargain at present - will wait to see it hit the bottom before I start buying.

GTG will do a more indepth post later.

DISC: young, reckless and playing with chips - please DYOR - I'm on this forum for education purposes not to be an impromptu financial advisor.

Cheers
TG

Thanks for the update, I feel for you bro, although I agree with you Cav is undervalued but I think there is still room to drop some more, unfortunately I'm not quite ready to hop in again just yet.

[winner69]

Well today, is a race between Pumpkin Patch and Cavalier to see who can hit rock bottom first..+

So you can buy 1 patch and 1 cavalier for a BUCK .... and some change

Belg will be loving this .... dual pyramids

[winner69]

Thanks for the update, I feel for you bro, although I agree with you Cav is undervalued but I think there is still room to drop some more, unfortunately I'm not quite ready to hop in again just yet.

Why do you think Cavalier is undervalued?

Hope not because its heaps less than a year ago, hope a more substantive answer than that

[Chaowee88]

Why do you think Cavalier is undervalued?

Hope not because its heaps less than a year ago, hope a more substantive answer than that

Cavalier currently have a huge stockpile in their warehouse, if Cav can sell out of the inventory @ 80% book value that is sufficient to bring Cav's debt down. Cav is pretty much only an assets play now as it earnings is dry..

[Balance]

Cavalier currently have a huge stockpile in their warehouse, if Cav can sell out of the inventory @ 80% book value that is sufficient to bring Cav's debt down. Cav is pretty much only an assets play now as it earnings is dry..

Feltex shows how quickly things can go pear-shaped in the carpet industry.

Huge stockpile means company has misread the market badly and is going to have to discount to reduce stock.

[okay]

Cavalier Chair:

"So far as my position as chair is concerned, perhaps it could be said that I have been here too long and it's about time that I stepped down," James said according to speech notes lodged with NZX. "Perhaps this is so, but the chairmanship of Cavalier might well be regarded as something of a poisoned chalice at this time, and the board thinks it best that I continue in the role for the time being."

Sheez, I bet that poisoned chalice bit fills holders with confidence.

[winner69]

The Chairman mentioned market share and was 'hopeful' share would be regained / held

That's the crux of their problem, they are being killed by the competition. Godfrey Hirst are outsmarting them on all fronts, particularly in Australia, and laughing all the way to the bank, unlike Cavalier

[Beagle]

Well today, is a race between Pumpkin Patch and Cavalier to see who has a receiver appointed first..

Fixed that for ya. Both in desperate trouble. I'll never forget the way Feltex collapsed, the speed of the decline was breath-taking. I fear Cavalier will follow suit sometime in 2015, likewise Pumpkin patch.
Both examples of companies that simply haven't read the changes in market trends.

[Balance]

The Chairman mentioned market share and was 'hopeful' share would be regained / held

That's the crux of their problem, they are being killed by the competition. Godfrey Hirst are outsmarting them on all fronts, particularly in Australia, and laughing all the way to the bank, unlike Cavalier

Godfrey Hirst moved into other forms of floor coverings like wood, tiles etc as well.

Poor old Cavalier - too slow.

[winner69]

Cavalier currently have a huge stockpile in their warehouse, if Cav can sell out of the inventory @ 80% book value that is sufficient to bring Cav's debt down. Cav is pretty much only an assets play now as it earnings is dry..

But then it would have trouble paying the rest of its bills

Altman-Z score says "Good chances of the company going bankrupt within 2 years of operations from the date of financial figures given. "     ' 
     '    ' '     

[winner69]

Feltex shows how quickly things can go pear-shaped in the carpet industry.

Huge stockpile means company has misread the market badly and is going to have to discount to reduce stock.

Godfrey Hirst got Feltex on the cheap and have done well with the brand since

They would want Cavalier even cheaper. Might get it as not many other options for receivers of a run down carpet manufacturer

[Chaowee88]

But then it would have trouble paying the rest of its bills

Altman-Z score says "Good chances of the company going bankrupt within 2 years of operations from the date of financial figures given. " '
' ' '

CAV will need to utilize inventory more effectively, overseas at the moment otherwise I'll crunch some proper numbers, but from the looks of it they will need to sell inventory at below book value to bring that interest expense down. I think they will be there or there about in breaching their bank convenants especially if they a at the lower end of the forecast. They will also need to improve their cash flow, last year was 615K from operation, awful really..


They probably still have some ways to fall but there is still hope if they can get their **** in order. The same can't be said of Pumpkin Patch, they're pretty much doomed.

[Lizard]

Well I suppose there is still hope - neither the CFO or CEO appear to have resigned yet :eek2:

Still beats me why they didn't raise capital a year or two back when it might have been relatively easy. At least the dividends were still supporting the share price and would have then been justified by the reduced dilution.

[Beagle]

Beats me why these well paid directors can't see the wood for the trees. If "Blind Freddy" can see the shift away from wool carpets why can't they ?
Likewise over a PP, the shift to online is so pronounced why haven't they adapted their business model rather than paying astronomical rents in every mall they can get access too ?
Warning for investors looking for cheap stocks,. don't trust these "managers" with your money, even buying stocks dirt cheap you can still lose 100% of your money.
Why would you entrust your money to managers that quite obviously couldn't organise a p@ss-up in a brewery ?
Go bottom feeding with these two stocks and you're odds-on to get a s#%t sandwich for a feed.

[winner69]

Well well, close sub 50 cents today

Must be cheap as

[winner69]

Originally Posted by SparkyTheClown less than a year ago

I’ve recently finished accumulating a number of Cavalier (CAV) shares. I thought I would post on Sharetrader my thoughts as to why Cavalier Corporation represents deep value and likely to gain more over the next two years.

In a strongly performing sharemarket like the NZX, most NZX listed companies look like they are at full or fair value, without the adequate margin of safety that a value investor would demand.

Cavalier is presently one of the few stocks out there today that offered me sufficient margin of safety in an NZ equity investment.

Here are the reasons why I liked CAV enough to buy in:

1. It’s a cyclical “smokestack” stock, which was punished throughout the GFC, but has pulled itself together and is well primed to take advantage of the improving economy in NZ, and the hopefully improving economy in Australia (still yet to see signs of growth but not getting worse). CAV is “well positioned” to improve as construction and discretionary spending improves.

2. CAV has addressed concerns with its balance sheet by paying back debt. While debt remains high-ish, it has come down from 42 to 36%, which is probably ok for the foreseeable future (I’d prefer under 30%). Inventory has also improved, down from $63m to $57m.

3. CAV has addressed concerns with a deficiency in its business, which was the lack of a synthetic/nylon carpet. Wool used to be the favoured textile, now nylon is more popular. It has recently released to some market interest the “Habitat” range of synthetic carpets, at price points that suit medium to medium-high price buyers. This carpet is made by Cavalier but yarn supplied through a partnership with Invista.

4. CAV earnings are forecast to improve dramatically in 2014 as it pulls out of a difficult trading environment and some significant redundancies and scale-backs. It has mothballed excess production capacity and its workforce is 21% less than in 2011. Operating leverage has dramatically improved as a result. Earnings growth is forecast by brokers to improve from 9.7c actual in 2013 to around 22.5c in 2017 (assuming terminal growth rate of 3% in 2017). This suggests growth of around 18.5% per annum for the next five years, with big growth expected next year, and more normalised earnings growth thereafter.

5. CAV is trading on a dividend of around 3% based on a shareprice of $1.80, but I forecast this to improve to around 5% for next year on the basis of improved profits and cashflow. Its current 2013 dividend is 4cps (100% imputed), and it is forecast to double to 8cps according to broker reports I have seen.

The two favourite metrics I like applying to assess the rationality of a share price is the Ben Graham Intrinsic Value score, and the Peter Lynch YPEG score.

Using the Ben Graham Intrinsic Value formula, I get the following based on current EPS of 9.7c in 2013:

12% growth = $2.40
16% growth = $3.03
18% growth = 3.34

Using the Peter Lynch score of P/E divided by long term growth of 16% plus dividend yield of 3.1%, I get 18.5/(16+3.1), or a final score of 0.97 . Lynch seems to think anything under 1 is good value, anything under 1.2 deserves a sniff. Naturally, if you use the higher growth rate of 18%, then the score looks better, being around 0.87.

So applying my usual 40% margin of safety to an intrinsic price of 3.03, I get a margin of safety buy price of $2.16, which is roughly 34-36c more than the price I’ve been acquiring at. Using the Ben Graham IV calculations, I see around 67% upside on current known earnings and 16% growth.

Negatives:

a) Cavalier is only worth $120m market cap. It is not very liquid, and it took me several days to get the holding size I wanted. Obviously, if I needed to get out quickly, I’ve got a problem. But if someone else wants to get a sizeable holding into CAV in a hurry, then they will drive up the price ferociously.
b) Debt – if the cost of interest rises significantly, then CAV will find the higher debt to be an imposition on future earnings. Reducing the debt may be a bigger priority than reducing the dividend. 1c foregone in dividends equals almost $1m in debt repaid.
c) Carpets are substitutable and subject to competition. People can have wooden floors, tiles, rugs, and polished concrete instead of carpets. And even if they choose carpet, they can then choose a number of brands, and not just Cavalier.
d) Carpets are somewhat elastic in demand compared to other products in the building sector. People can choose to defer carpet replacement, but they can’t defer a leaking roof or perishing weatherboards in the same way.

For all that, I think there is at least almost 70% upside in CAV. Again – this is a value play based on anticipated improvements in the economic cycle, not a secular growth story on a company immune to economic fortunes. If Australia's construction picks up in the next 12-18 months, then CAV will sing.

Disclaimers: I am not an authorized financial advisor. I’ve posted what I have done, not want I want you to do. If you act on the comments of an anonymous poster on the internet called “Sparky the Clown” then you will have some explaining to do to loved ones if the investment goes sour. Do your own research. I am unavailable to enter into discussion on this post, but hope that it spurs on others to consider this company’s merits, or otherwise

One of Sparky's best ramps ever .....he managed to sell out at a good price after this post ....somewhere near $2

[Flugenbear]

Winner, do you mean to say the Clown did this for persoanl gain?
He was my favourite Clown.
Now I have to go back to do McDs

[BFG]

One of Sparky's best ramps ever .....he managed to sell out at a good price after this post ....somewhere near $2

I can tell you for a fact he got out at a loss (not a significant one). He truly believed what he posted. As we all should...

[percy]

Winner, do you mean to say the Clown did this for persoanl gain?
He was my favourite Clown.
Now I have to go back to do McDs

My favourite Clown too.
I really miss his excellent posts, and the help he offered all of us.
Pleased he got out for only a small loss.
I am sure had he still been posting, he would have alerted us to the fact the fundamentals of CAV had changed.
He was a very honest open poster.
To try and discredit him after he has left is unfair in my opinion.

[Schrodinger]

One of Sparky's best ramps ever .....he managed to sell out at a good price after this post ....somewhere near $2

Talk about missing the mark. This is why you DYOR and think for yourself.

[percy]

Talk about missing the mark. This is why you DYOR and think for yourself.

Sage advice.
As Sparky used to say "why take the advice of a Clown on a forum."

[Chaowee88]

Closed today @ 45, a remarkable fall from grace. Once a hot stock, now despised by all and sundry, quite sad really.

Much like my relationships, hot at the start blows cold soon after.

[Chaowee88]

Closed today @ 45, a remarkable fall from grace. Once a hot stock, now despised by all and sundry, quite sad really.

Much like my relationships, hot at the start blows cold soon after.

Up 36% to 60, today on no news, now that is insane

[KiwiGekko]

Up 36% to 60, today on no news, now that is insane

Yep, VWAP of 50.6 too. I guess Santa has come early this year for a few CAV holders. :)

[Lizard]

Up 36% to 60, today on no news, now that is insane

Perhaps they've found an underwriter for a rights issue?

[Flugenbear]

They should be getting a 'please explain' letter from the NZX very soon....

[macduffy]

They should be getting a 'please explain' letter from the NZX very soon....

......... and they'll probably just reply that the stock had been oversold. Which is probably fairly near the mark?

[zigzag]

......... and they'll probably just reply that the stock had been oversold. Which is probably fairly near the mark?

Agree with that macduffy. I've been buying, and I sure don't know anything that's not already out there.

[macduffy]

Up another 11% today. You must be still buying, zigzag!

;)

[Chaowee88]

Up another 11% today. You must be still buying, zigzag!

;)

50% gain for the person who brought in the 40s

[winner69]

No cheap carpets for consumers, at least not just yet

Deflation, or cheaper carpets, not always good for likes of CAV ......constant or lower margins on lower revenues while costs keep going up means less profit, especially as Godfrey Hirst continue to win.

http://www.stuff.co.nz/business/industries/65372054/cheap-oil-not-a-win-for-carpetbuyers

[PSE]

I agree with the most recent comments on here, I think this company is a bargain at recent prices.
When I run the recent figures through the Altman Z score the company is in the grey area due to the depressed share price, certainly not a sick balance sheet though it would be nice if it was stronger.
Went to the AGM in November with Mr Grinch and was impressed by the management, in my view the company is struggling because of stupid free trade agreements hollowing out the NZ economy.
The 'poisoned chalice' comment from the Chairman was silly but should be seen in the context of the stress he is under. In his defence he also said he was embarrassed to provide the latest downgrade, I was sitting next to two employees who rated him highly and the company has described the factors impacting profitability.
The are the high NZ/AU dollar (50% of carpets are exported there), the high wool price, the low wool grease price (due to shrimp farm illness) and the finally the high NZ/US dollar favouring cheap imports. If the news gets less worse on any of these fronts the company will return to a level of profitability, if not as high as previously because of the shift to synthetic still enough to make the company seem very cheap at 55c or so.

[PSE]

Seems like Mr Market will sell the punters 92 million dollars of assets on the balance sheet for only 32 million dollars today (47c per share). Not only assuming that the company has no future but is also worth less than it's scrap value.
This makes no sense to me and is even more rediculous as we are looking at a small profit being reported next week.
Maybe I have to buy some more, its daylight robbery at these prices.

[KiwiGekko]

As I am talking to myself this must be a great investment :)

We're listening - just waiting for CAV to finally turn itself around and start performing again. I don't fancy getting cut catching this falling knife. :scared:

[winner69]

PSE I am listening but didn't really want to interrupt your enthusiastic party.

However ongoing morbid fascination with impending train wrecks made me look at the report at more closely except looking at the profit / cash flow figure which did no more than top up the petty cash tin.

All I hear from CAV is we are getting better
.
However over the last six months there is not much to say things are even close to getting better. Besides having a price rise (not always a good thing in a competitive) all key metrics are worse than before. Look at -

Gross Margin % sales ........DOWN / WORSE
Operational Expenses ........about the same even though they talk about productivity and efficiency gains
Inventory - HIGHER .....good god they have mountains of stock
Debt HIGHER even they acknowledge it is too high but when not generating cash how do you reduce?
Cash Flow - NON EXISTENT. Wow
Employees - HIGHER / MORE PEOPLE

And not shown in the report but talking to industry insiders market share is DOWN. Yes still losing share, Godfrey Hirst killing them esp in commercial sector in Australia.

Not much improving is there .....all those words are just that. I get the feeling they havent really got a plan, just desperately hoping for the best.

So mate that's my view. But don't let me temper your enthusiasm because you might be a winner at these prices and be celebrating big time when share price gets back to 2 bucks again.

Long time to FY announcement but don't be surprised if we hear from them again in June

[winner69]

FY15 Guidance remains at $1m to $4m. Not changing guidance is a miracle in itself and almost unprecedented.

Always got to faith so $4m is it ...they have the 'appropriate strategies in place' to achieve this.

FY15 is $4m so that means second half will be $4m as well

That's nearly double what they made in H2 last year - go you good things, you can do it.

[noodles]

FY15 Guidance remains at $1m to $4m. Not changing guidance is a miracle in itself and almost unprecedented.

Always got to faith so $4m is it ...they have the 'appropriate strategies in place' to achieve this.

FY15 is $4m so that means second half will be $4m as well

That's nearly double what they made in H2 last year - go you good things, you can do it.

If 2h15 is $4mill, then FY16 could be $8mil. CAV now sitting on a FY16 pe=4

I did enjoy that old 70's show called Fantasy Island

[winner69]

If 2h15 is $4mill, then FY16 could be $8mil. CAV now sitting on a FY16 pe=4

I did enjoy that old 70's show called Fantasy Island

No no mate - you forgot about earnings momentum

Zilch and then +4m gives FY15 as $4m .....then $8m and then $12m gives FY16 as $20m and Pze less than 2

And $20m is no pie in the sky stuff .......they been there before

[winner69]

Pse - you talking of graham Biel and his shareholding ......not throwing the baby out with the bath water

[winner69]

Updated

Punters get sucked in by what the Company says .... and the continued hope that this time is different

Last 8 earnings related announcements

16th August 2013
Report a $6.6m (normalised) NPAT and say ‘we believe the Company is now well positioned to lift future profitability.’
Shareprice week after announcement $1.65

19th November 2013
Expecting a better year with NPAT in the $8 to $10 million tax-paid range.
Shareprice $1.90

28th February 2014
(Tales of woe and misery) we are revising our earnings outlook to $6 to $9 million
Shareprice week after announcement $1.65

26th June 2014
(No tales of woes and misery) but guidance is now between $5 million and $6 million NPAT
Shareprice really should be less than $1

22 August 2014
Announced earnings of $5.8m which disappointingly were down 13% on pcp but at the upper end of guidance (good guess in June eh). But not our fault as it was all Cavalier Wool Holdings fault.
The FY15 Budget is a modest increase on the $5.8m - so all is well and we are progressing well, may evn pay a dividend. We will update at the ASM in November.

24 October 2014
Tales of woe and misery and **** things are pretty bad, so bad we it is unlikely we will achieve the $5.8m after all
Shareprice plunges to 90 cents

22 November 2014

At the monthly piss up lunch (sorry Board Meeting) it was decided they really to quantify what unlikely is and drew some numbers out of the hat - and the answer is normalised tax-paid earnings for the 2015 year was in the range of $1 million to $4 million and the shareprice plunges to close at 60 cents


20 February 2015

Tough trading conditions continue and just so many 'adverse macro events' that are out of our control means we report a petty cash size profit. Heaps better than a loss. Board thinks they can't afford to piss off punters anymore (jeez look at what happened last time) so guidance of $1m to $4m remains in place - really saying we have no idea but hoping like hell things get better

Share price 48 cents


Should keep track of the promises - and my morbid fascination with impending train wrecks continue. At least it keeps me from getting tempted, for now


Updated February 2015

[winner69]

sometimes a word cloud of announcements can be interesting. Here is a quick one of the latest CAV announcemet

Some positive words .... but heck pse the biggest word is MILLION .... good omen eh

Passed the buzzsaw test ..... only 2% of the words were buzzword. Not too bad

[Balance]

W69, earnings downgrades usually come in three's as you and I know.

Cavalier must beat some kind of record as the downgrades come regularly and they still have not reached bottom rung yet!

[macduffy]

Independent director Graeme Edmond has resigned. A short spell - appointed February, 2014. Could be any number of reasons but it's not encouraging for a company to lose a director so quickly.

[winner69]

CAV sinks to new all time low of 36 cents

Might be joining PSE as a shareholder if it drops to 30 cents ..... not as an long term investor but as a quick trade for a quick buck (maybe)

Godfrey Hirst must be laughing their heads off ..... seeing the damage that their taking share off an inept competitor is causing

[winner69]

Jeez 35 now with a buy at 32

If it gets to 30 may as well wait until 25 eh. You be really interested then PSE?

My morbid fascination with impending train wrecks continues ......must get it seem to.

[macduffy]

Jeez 35 now with a buy at 32

If it gets to 30 may as well wait until 25 eh. You be really interested then PSE?

My morbid fascination with impending train wrecks continues ......must get it seem to.


The Germans have a word for the condition - schadenfreude.

Better see a trickcyclist.

;)

[noodles]

The sharemarket is valuing CAV as though it has no future. When this happens the market is sometimes correct but often just hormonal.
Yes, the market is treating the stock as if it were a "poison chalice".
The balance sheet makes interesting reading. Is all that stock really worth that much?

[Beagle]

The sharemarket is valuing CAV as though it has no future. When this happens the market is sometimes correct but often just hormonal.
Problem is low shareprice makes it harder to raise capital. I am only interested in the business rather than the noise. Winner, what estimate would you have on the loss of market share to Godfrey hirst on the business besides hyperbole?
My main complaint with management is they haven't really marketed the benefit of wool carpet, I like it much more than synthetic. I understand the wool share of the NZ market continues it's long term decline.
There are some ads now but the synthetic stuff is cheap and pretty good and I think this is a clincher.

Its cheap, feels fine, and is extremely durable. That's the nub of the issue for Cavalier. People, myself included who is currently a Cav user who's carpets are very tired, simply cannot see nor do they understand what the benefits are of paying a substantially higher price and seeing as Cavalier won't tell us why we should, (honestly I cannot remember the last time I saw one of their adds so they're not advertising much or I'm fast forwarding through their adds using my Sky remote or both) then I think its hard to see how they turn their ongoing declines in market share around ?

Welcome back to Winner69 !!

[noodles]

Do you have a view or just asking about the inventory?
Yup call your job a poisoned chalice and watch the stock get pounded.
What we really need in NZ are more bullpoo artists aye noodles. There was a time we called a spade a spade.
The debt levels are a red flags for me. If the inventory was to be written drown, there would not be much in the way of assets. Some property, but no way near the level of debt. Banker is BNZ. I'm not an expert on this stock and don't own it. But it is definitely something shareholder should understand.

[Beagle]

Independent director Graeme Edmond has resigned. A short spell - appointed February, 2014. Could be any number of reasons but it's not encouraging for a company to lose a director so quickly.

Agreed especially one with his experience. In the normal course of business its unusual for a recently appointed director to resign so quickly.

[PSE]

Thanks fair call yup I should understand and you don't need to noodles.

[winner69]

Agreed especially one with his experience. In the normal course of business its unusual for a recently appointed director to resign so quickly.

Announcement said '..... Graeme Edmond resigned from the Board at the conclusion of today’s meeting of the Directors.'

Hmm .....a big argument or something? Unrest in the Board Room?

Reading between the lines Edmonds packed a sad and said stuff it.

[winner69]

Even if they had to sell the inventory at a discount they would reduce the bank debt and make me happy.
Would you question the inventory if the shareprice was $1.5? If not then what has changed? I would like to know if you have an insight on the inventory but I am just hearing nervousness about the share price in your question noodles.
I understand they had to build stocks to support the synthetics and this is a major reason for the debt being too high.

Inventories were a worry in 2012. Were $62m then .....not much different from now, except sales were higher. And shareprice higher as well.

Their reports over the years say they need to reduce inventories .....still trying are they?

[Beagle]

Announcement said '..... Graeme Edmond resigned from the Board at the conclusion of today’s meeting of the Directors.'

Hmm .....a big argument or something? Unrest in the Board Room?

Reading between the lines Edmonds packed a sad and said stuff it.

You're on too it mate, exactly what I was thinking although I'd bet my last dollar he used far more more descriptive words to announce his resignation :)

[Crystal Ball]

Its cheap, feels fine, and is extremely durable. That's the nub of the issue for Cavalier. People, myself included who is currently a Cav user who's carpets are very tired, simply cannot see nor do they understand what the benefits are of paying a substantially higher price and seeing as Cavalier won't tell us why we should, (honestly I cannot remember the last time I saw one of their adds so they're not advertising much or I'm fast forwarding through their adds using my Sky remote or both) then I think its hard to see how they turn their ongoing declines in market share around ?

Welcome back to Winner69 !!
Well, having installed a top of the line wool carpet only 10 years ago and seeing how the sun has basically killed it, along with impossible stains to get out without wrecking the pile, we are about to re carpet and will never ever go back to wool- it's simply y more expensive and less durable.
Unfortunately for Cavalier, the new solution dyed nylons etc feel and look like wool but will withstand the test of time so much better. Also huge benefits in being able to take any stain out easily without wrecking the carpet. IMO wool carpet is going to be a thing of the past.....

[Beagle]

Well, having installed a top of the line wool carpet only 10 years ago and seeing how the sun has basically killed it, along with impossible stains to get out without wrecking the pile, we are about to re carpet and will never ever go back to wool- it's simply y more expensive and less durable.
Unfortunately for Cavalier, the new solution dyed nylons etc feel and look like wool but will withstand the test of time so much better. Also huge benefits in being able to take any stain out easily without wrecking the carpet. IMO wool carpet is going to be a thing of the past.....

Totally agree with you. We have three dogs and trying to get their pee stains out of the carpet the odd time they've gone inside is a real nightmare, thankfully most of our house is eucalyptus hardwood floors.

[macduffy]

Banker is BNZ.

I'm not sure of the relevance of that statement but it's interesting to note that ANZ were main bankers of the company from the founding Timpson/Biel days until.........?

[PSE]

I topped up at .37 - must be the gambler in me. Its alright though because I haven't got too much invested in this one anymore anyway :)

[winner69]

I topped up at .37 - must be the gambler in me. Its alright though because I haven't got too much invested in this one anymore anyway :)

Hey PSE .....CAV top of winners board today.

And a bit of action the last week and over 50 cents now. Somebody know something? Mayes bit of corporate action about to happen. Doubt whether Hirst would be interested - they can beat CAV up without taking them over.

PSE - you must be really rich now.well done

[Brain]

Maybe 95 c is the new normal.It may take a very long time for the Aussie dollar to strengthen against the NZ and US dollar. if this is the case then Cavalier will have a tough time unless they can find other more favourable export markets.

[winner69]

Oh dear another announcement from CAV. What can I say?

Well PSE called .....zilch this year .....a better 15/16 year and then boom times. See they have a new strategy in place ......even Deloittes and the bankers like it. Reading between the lines I think PSE was involved in formulating that strategy going forward. Look forward to hearing about it.

And to start afresh heaps of write offs this year (see PSE that NAV was a load of bollocks eh) ....but they non cash so don't count.

Good news, McKenzie finally seen the light of day and called it quits. Good rave about his performance over the last few years, that's a nice touch.

A definite turnaround here?

All I know they continue to lose share to Godfrey Hirst .....until they can start winning things continue to look bleak

But PSE, a good announcement with bits of good news

[PSE]

Mate if you buy for 30c on the dollar a few writedowns aren't going to make you worry.
Main thing at this point is to generate cash to reduce their gearing ratio so that the market stops worrying that they are going bankrupt.
How much profit has Xero made? That's right they have it in the name (zero) a 90 million dollar loss and a promise they can make profit whenever they choose.
I am in for the long haul, not trying to pick the bottom. Carpets are not exciting but that's the way I like it.
I would take the CEO of Cavalier over a bullpoo artist like Rod Drury any day.

[PSE]

CEO of cavalier says, I am embarrassed to report a failure to meet guidance. Rod says the sharemarket is stupid are loss is 30 million greater than expected but that's not a problem.
Bull manure artist versus someone who cares about the business and it's employees. I don't care at all if they aren't slick.
Re market share you keep repeating that but this relates specifically to cheap synthetics an area in which CAV cannot compete. Probably the writedowns relate to this reality but the company still has a wool scour, a wool carpet and high end synthetic business.
There are still enough healthy parts to this company if they become a retailer for cheap Chinese carpet like Godfrey Hirst have done. Reducing US and AUD are going to help here.

[PSE]

I get offended by the reference to non cash writedowns too.
If the company is written down from $1 to 80c then the people who bought at the present price (30c) will come out ok.

[winner69]

As well as winning in the cheap synthetics segment Godfrey Hirst are winning commercial contracting in Australia as well, especially the top end specification bit where real carpets are specified.

[winner69]

Jeez share rpice down to 31 cents

NTA of $1.22 I see in the last accounts

Where else on the market can you get $1.22 for 31 cents

And a lot of that value is in real stuff, like mountains of carpet

Wonder how the clearance sales are going?

[Lizard]

This is a better effort at marketing wool than the cav website.
http://www.karastan.com/carpet/karastan-wools.aspx

Am I right in thinking CAV are supplying wool carpets to Mohawk under the Karastan brand now?

[TheHunter]

Jeez share rpice down to 31 cents

NTA of $1.22 I see in the last accounts

Where else on the market can you get $1.22 for 31 cents

Don't forget the expected write downs on the carrying value of certain assets.

[Beagle]

Craigs rate it a SELL. Waiting for evidence of turnaround traction and reduction of debt. CEO quitting is basically saying they've run out of idea's.
Big surprise that they are undershooting their recent very broad guidance...the sort of target $1m - $4m that's so wide you'd think a blind man with a cane could easily hit but not for these esteemed operators.
I tell ya, the cartoon character dog Mutley with all his dozens of fleas would make a better proposition to get into bed with than this dog.

[winner69]

Craigs rate it a SELL. Waiting for evidence of turnaround traction and reduction of debt. CEO quitting is basically saying they've run out of idea's.
Big surprise that they are undershooting their recent very broad guidance...the sort of target $1m - $4m that's so wide you'd think a blind man with a cane could easily hit but not for these esteemed operators.
I tell ya, the cartoon character dog Mutley with all his dozens of fleas would make a better proposition to get into bed with than this dog.

What's surprising is that Mckenzie has probably considered calling it quits for ages, and others have even calling for his blood, and they don't appear to even have a succession plan. All they say is
"....the Board has appointed CFO, Paul Alston, as interim CEO"

That puts strategy implementation between the eight ball ...unless Paul is to be the an.

Amazing

[winner69]

Am I right in thinking CAV are supplying wool carpets to Mohawk under the Karastan brand now?


Way forward has this as an initiative ".... is the creation of alliances with key global players in the carpet industry"

Hmm .....maybe one of the partners might see CAV as a dirt cheap acquisition to facilitate entry to ANZ markets.

Old badly run carpet companies under new owners do very well ....the Feltex brand is doing well I understand

[Beagle]

Blind men walking around without a cane...

[silverblizzard888]

Forecasting a loss this year, doesn't seem things are going well considering they estimated profits 1-4 million and with CEO gone its not a good sign, though should they drop any lower I might consider the risky move to buy into them with their asset to cover my investment.

http://www.radionz.co.nz/national/programmes/businessnews/audio/201755208/cavalier-forecasts-loss,-and-changes-ceo

[Gunny]

If you had 31c to spend, would it be better in CAV or TNR?

Gunny

[percy]

If you had 31c to spend, would it be better in CAV or TNR?

Gunny

One is expanding,with turnover and profit increasing,and the company achieving what they are setting out to do,with excellent management making good decisions.
The other is facing ongoing troubles.Directors have had to bring in outside consultants to advise a business plan.[I read that as management do not know how to run the business].It is hard to guess whether the company will survive. Remember turn- arounds take longer and cost more to make work.Often they do not work out in the end.The assets are hard to value.A loss making carpet manufacturer's plant is of little or no value to any one. Manufacturing in NZ is an up hill battle.
Disclosure.I hold TNR and may increase my holding depending on their result which is due any day.

[Beagle]

One is expanding,with turnover and profit increasing,and the company achieving what they are setting out to do,with excellent management making good decisions.
The other is facing ongoing troubles.Directors have had to bring in outside consultants to advise a business plan.[I read that as management do not know how to run the business].It is hard to guess whether the company will survive. Remember turn- arounds take longer and cost more to make work.Often they do not work out in the end.The assets are hard to value.A loss making carpet manufacturer's plant is of little or no value to any one. Manufacturing in NZ is an up hill battle.
Disclosure.I hold TNR and may increase my holding depending on their result which is due any day.

Some very astute observations there my friend. All I would add from my experience on seeing how these things work is that there's the very distinct possibility, I'd suggest probability, this company is for all intents and purposes trading at the behest of its bankers and they're insisting on the major accountancy firms involvement because they've lost confidence and trust in the management and board or because they want a second independent opinion, or for both those reasons. This would probably also explain why the CEO has "resigned".

Pretty good chance this thing is very cheap dog tucker for Godfrey Hirst in the not too distant future and I'm not talking about a takeover here. This is pure speculation my crystal ball suggests they'll wait on the side-lines and nick it off the receivers / administrator really cheaply.

Lately I've seen some of their adds appearing on T.V. again but really the nature of their adds hasn't changed much from previous campaigns and doesn't reflect the seriousness of their over-stocked and over leveraged situation. No payments till 2016 simply doesn't cut the mustard any more with consumers these days when Harvey Norman are advertising on a regular basis 50 months interest free.
Consumers have become attuned to expecting better deals than 12 months interest free and these sort of campaigns simply don't engender a reaction from consumers anymore.
CAV need to do something radical to ring consumers bells to get the tills ringing.

I can't say I'm surprised that the board and management don't realise this fundamental sea change in consumer behaviour, (expecting long periods of interest free). Directors and management asleep at the wheel ? I'm not at all surprised their bankers appear to have lost confidence to be quite frank about it.

[percy]

The old saying of Arthur Lim has saved me loosing money,and helped me make a few dollars.
"Buy into anything China wants,sell out of anything China makes."
If demand for wool carpets was there,we would not be having this conversation.
I am told I do not understand the carpet business,however any business that lets their unsold inventory grow as CAV has done, is asking for trouble.And CAV have trouble.Millions of dollars worth of carpet trouble.It uses up resources being made.Wool and materials have to be paid for.Staff have to be paid to make the carpet.Then the carpet has to be stored.Extra storage cost money.Then extra insurance costs.Then extra handling costs.Then the bank wants interest on the borrowed money.Then management time is spent running around in circles.The business has never been right sized.
I would be careful stating your turnarounds are going to plan,as other than QBE and NWF,the others remain in steady downtrends.Two out of six going to plan means two thirds aren't!

[winner69]

What's Arthur Lim up to these days Percy?

Don't hear too much of him

[Joshuatree]

Some friends have sworn never to buy wool carpet again after beetles damaged theirs and forced them to replace the lot with synthetic.

[percy]

What's Arthur Lim up to these days Percy?

Don't hear too much of him

I don't know.
Googled him and came up with Align Capital.

[Gunny]

Thanks Percy I too hold TNR. Looking forward to the next result.

Was wondering why people would consider CAV at this rate when TNR seems such a better buy for the reasons you have laid out so well.

Gunny

[percy]

Thanks Percy I too hold TNR. Looking forward to the next result.

Was wondering why people would consider CAV at this rate when TNR seems such a better buy for the reasons you have laid out so well.

Gunny

Well here is some fun for you.
1] CAV is a real business producing a real product,employing real NZders.
2] CAV have a valuable "brand" respected by retailers and customers alike.
3] There is still a market for woollen carpets.
4] The huge stockpile of carpet is an asset.
5]Once the business has been right-sized,debt brought under control,the value of the assets [ie manufacturing plant] will again be worth the current book value.
6] The business under wonderful new management,making real profits ,will make the market wake up to the "true value" of CAV.This rerating will see long term CAV shareholders being well rewarded,and the doomsayers proved wrong.
7] Then just when you think it can not get better,Mowhawk make a fantastic takeover offer.

[winner69]

Well here is some fun for you.
1] CAV is a real business producing a real product,employing real NZders.
2] CAV have a valuable "brand" respected by retailers and customers alike.
3] There is still a market for woollen carpets.
4] The huge stockpile of carpet is an asset.
5]Once the business has been right-sized,debt brought under control,the value of the assets [ie manufacturing plant] will again be worth the current book value.
6] The business under wonderful new management,making real profits ,will make the market wake up to the "true value" of CAV.This rerating will see long term CAV shareholders being well rewarded,and the doomsayers proved wrong.
7] Then just when you think it can not get better,Mowhawk make a fantastic takeover offer.

Bang on Percy except 7) will probably come after 4) ....leaving long term punters disappointed but the likes of PSE reasonably happy.

And we will never know how 6) turns out

But then the likes of Roger says somebody will buy what's left from the receivers

[macduffy]

Very good, percy - and that's the worst-case scenario!

;)

[percy]

Only CAV is not going to plan with its unsold inventory and departing managwment. I don't know anything useful about trends I am just talking about the businesses themselves.
They are all troubled and I believe undervalued on the 3-5 year view, don't judge me on 6 months but longer term I have been doing very well.

I hope you are right,and I look forward to you telling me. in three years or so time,how well you have done,and how foolish I was to miss the wonderful buying opportunities these companies gave astute investors.!!!

[winner69]

Share price going up like a rockets

Mohawk finally making a move?

You getting rich now PSE

[macduffy]

I'd like to share your optimism, PSE - I'm a long time CAV shareholder - but I reckon the company has a long hard road to get the SP anywhere near $1 again. The lower NZD will make a difference but the trend against wool carpets seems to be entrenched now and CAV isn't prominent in the synthetic stuff. As for generating cash, last f/y operating cashflow surplus was a modest $650,000.
Good, though, to see one of the company's founders, Grant Biel, buying shares.

[winner69]

Hi Winner,
yes I topped up again a few weeks ago 36c despite all the people telling me I am an idiot for doing so.
The company is still pretty darn cheap but someone with deeper pockets than me is buying and driving the price up I guess.
Alan James has now retired so all the management that impressed me are now gone except for Biel sitting on the board and putting his money where his mouth is, I am not so bothered as I think they have put the elements in place for the recovery. Which for those that haven't noticed is already there with the AUD.
They were honest and they cared about shareholders interests which I think is really rare so well done guys. More marketing of wool would have been great but I can say I would never have done such a good job so I can't criticise.
I will be continuing to hold the company so I am not getting richer/taking profit.
People have said to me that you win some you lose some, but I only win so I was already rich :)
I consider that I make my profit when I buy and in time my judgement is always 'vindicated by the sequel'. Still a long way to go, I reckon this time next year if things go well then we will be looking somewhere north of $1 per share with some outrageously large dividend being re-instated.
Incidently I saw in the annual report that the gearing ratio peaked at 44% in 2011 and with the outlook for cashflow now very strong I am not worried about the debt. The first half included 1.7million of capital expenditure, even in a worst case scenario this business will generate a lot of cash.

You will be duly rewarded when Mohawk eventually front

[winner69]

Hit 50 cents

Wonder when the Mohawk announcement will be made?

[macduffy]

Hit 50 cents

Wonder when the Mohawk announcement will be made?

So, what's this about Mohawk, winner? I'd assumed that it was the weakening NZD that had caused a re-think on CAV.

:confused:

[winner69]

There's been speculation for a while Mohawk will take over Cavalier. Just speculation and pub talk

Mohawk seem to like the Cavalier wool stuff. They are working together / alliances etc so why not control the lot and cheap direct entry into ANZ

Just speculation

[macduffy]

Yes, that would make sense. Convince the Biel and Timpson camps and Mohawk would be half way there!

[macduffy]

CAV sells its Aust carpet tile business and signals asset writedown.

[winner69]

Finally out. Some would say a $26m number is stunning

https://www.nzx.com/files/attachments/219690.pdf

Mountain of carpet unsold still there ($6m ones with th tile business)

Little steps forward PSE ...better than strides backwards

[percy]

Carpet is not like computer chips, I don't think they have a mountain of inventory relative to annual sales.
I think a fair bit is required for the business to operate.

I think the basic problem with this business is the amount of stock they hold, compared to sales.Rough figures look to be approx. $50mil stock on sales of $200mil of sales.Depending on timing only 3 to 4 stock turns.
You compare this to the likes of distributor EBO who are achieving 10 or more stock turns.
I would think they would need to achieve 6 to 8 stock turns to be viable.

[h2so4]

I think the basic problem with this business is the amount of stock they hold, compared to sales.Rough figures look to be approx. $50mil stock on sales of $200mil of sales.Depending on timing only 3 to 4 stock turns.
You compare this to the likes of distributor EBO who are achieving 10 or more stock turns.
I would think they would need to achieve 6 to 8 stock turns to be viable.

1.5 turns if you use cost of sales divided by average y/y inventory.
Oh no:(

[h2so4]

As you were Percy.
3 to 4 is correct .

[winner69]

Finished stock has about 5 to 6 stock turns

Just that they have $20m odd in raw materials and WIP

Once thy make stuff they sellout reasonably quickly

[h2so4]

From memory I don't think it has been that for a while.

[h2so4]

Well it's only a $30m m/c at these prices.
I'd rate it a buy.

[h2so4]

If your facts and reasoning are right you don't have to worry about anybody else.

[Brain]

I think I might wait until I see some buying from Insiders.

[Brain]

I checked on the NZX website. As far as I can see no insiders bought shares in 2015 and 2014.
I would like to see Cavalier successful again. I have profited greatly from Cavalier in the Past.
They used to be a company that paid good dividends and did exactly as they said they would do.

[macduffy]

Grant Biel was one of the two founders of the company. Now, whether that means he knows more about the situation than most or whether he's just putting a few more dollars into an already big shareholding as a morale boosting exercise............?

Disc: Holding a few.

[Brain]

I have checked again and cannot see that Grant Biel has increased his shareholding. I would be happy to be proved wrong.

[macduffy]

According to an article in the DomPost today, Godfrey Hirst, in its submission to the CommComm on the proposed merger of Cavalier Wool Holdings and NZ Wool Services International, is concerned that "all of its business" was exposed to the commission's decision on the scour merger. They claim that a merged business could refuse to scour GH's wool or double its processing fees. The CommComm chairman said its preliminary view was that the proposed merger "would substantially lessen competition in the small, domestic wool-grease market............ however, at this stage the commission is currently satisfied that the public benefits would outweigh the loss of competition."

The market is unmoved!