1.25 a great buy in price, gives you 40% margin of safety (which you absolutely need in this case) on fair value / graham number.
but its not 1.25 anymore is it
Printable View
2014: ($29.202-$0.093-$8.458+$1.6)m/ 192.806m = 11.5cps
2015: ($30.956-$0.558-$9.023)m/ 192.806m = 11.1cps
2016: ($29.099+$0.800+$1.275-$8.429+0.28*$0.145)m /192.806m = 11.8cps
2017: ($31.435-$2.507-$9.300+0.28*$0.025)m /192.806m = 10.2cps
2018: ($37.918-$1.123-$10.641)m /192.806m = 13.7cps
Notes:
a/ Results for all years have had foreign exchange currency gains removed. Foreign currency gains (or losses) are not a measure of operational business performance.
b/ Result for FY2014 adds back a $1.6m long standing warranty dispute adjustment.
c/ Result for FY2016 adds back $800,000 in restructuring costs.
d/ Result for FY2017/FY2016 adjusts for not including a $25,000/$145,000 cost from relocation expenses respectively, by adding back the 'after tax' effect of not having incurred these costs.
Conclusion: Fail test
SNOOPY
2014: $22.251m /$196.606m= 11.3%
2015: $21.375m /$203.011m = 10.7%
2016: $22.786m /$211.415m= 10.8%
2017: $19.635m /$210.232m= 9.3%
2018: $26.154m/$240.408m= 10.9%
I see a 'steady margin' picture with a low year of FY2017 offset by a higher year in FY2014
Conclusion: Fail test
SNOOPY
I open this post with a couple of quotes from the Panda which I think are both poignant and sobering.
The historic PE at 30-09-2015 was 11.6. Three years later and it is 15.6 (both with my adjustments).
One good result does not a trend make. The result was good but, as an investor, the likes of Buffett must always consider the multi year perspective. The performance of Skellerup isn't consistent enough to apply the Buffett multi year growth model reliably. This doesn't mean it isn't a good investment. It just means we can't use a technique like Buffett might use to value it.
SNOOPY
I have updated my valuation using the latest five years of 'rolling data'. Since we know the first dividend to be paid in FY2019 (which is the FY2018 final dividend) I have used that 'latest information' and dropped the first dividend paid in FY2014 from my five years of rolling data. However that dividend will for the first time not be fully imputed (55% imputed only). So the equivalent gross figure can be worked out as follows:
7.0c (55% imputed) = 3.85c (FI) + 3.15c (NI) = 3.85c/0.72 +3.15c = 5.35c +3.15c = 8.50c (gross dividend) (A)
Year Dividends Dividend Total 2014 5.0c+3.5c 3.5c 2015 5.0c+3.5c 8.5c 2016 5.5c+3.5c 9.0c 2017 5.5c+3.5c 9.0c 2018 6.0c+4.0c 10.0c 2019 7.0c+?.?c Total 40.0c
This gives a cumulative gross dividend of 40.0c/0.72 = 55.6c
We need to add to this the first dividend to be paid in FY2019 (A), expressed as a gross dividend:
55.6c + 8.5c = 64.1c
Averaged over 5 years, the dividend works out at 64.1/5 = 12.8c (fully imputed).
So based on a 7.5% gross yield, 'fair value' for SKL is:
12.8 / (0.075) = $1.71
Now using my plus and minus 20% range to get a feel how the SKL share price might behave at the top and bottom of its business cycle.
Top of Busines Cycle Valuation: $1.71 x 1.2 = $2.05
Bottom of Busines Cycle Valuation: $1.59 x 0.8 = $1.37
At this part of the investment cycle, with conditions very favourable towards shares, I would argue that for SKL shares to be trading at $2.05 (the upper end of my expected range) would not be unusual. The fact they are trading above this at $2.15, suggests to me there is a growth premium built into the share price. What we have here is investors willing to pay a growth premium which from an historical perspective is not justified. Of course if the growth targets the company has set itself materialise, SKL could well be worth $2.15. I am a shareholder and have done very nicely out of SKL over the last few years. But I won't be topping up at $2.15. Good company. But for me the risk/reward equation does not stack up to be 'market outperforming' from here. Nevertheless I will be sticking with all my shares for now. Although I see them as 'overvalued', they are no more overvalued in my judgement than many shares in the market today.
SNOOPY
Thanks Snoopy
Some good news. I hope these guys do really really well with their options.
In fact I hope they are worth $1,000,000 to DM.
SKL
24/10/2018 12:44
MKTUPDTE
PRICE SENSITIVE
REL: 1244 HRS Skellerup Holdings Limited
MKTUPDTE: SKL: Skellerup reports strong start to FY19
Speaking ahead of today's Annual Shareholders' Meeting, Skellerup Chair Liz
Coutts said trading for Q1 of the current year generated EBIT in excess of
10% ahead of the comparable quarter in the prior year.
Mrs Coutts said "We expect an improvement in profitability in FY19 with
increased earnings in our Industrial Division offsetting the recent softening
in international dairy markets and the uncertainty surrounding international
trade."
Skellerup also announced the introduction of a long-term incentive plan under
which share options will initially be issued to David Mair and Graham Leaming
(CFO) on 26 October 2018. Share options will be priced at the 20-day volume
weighted market price for the period 27 September to 25 October 2018. One
million (1,000,000) share options will be granted to Mair; Six hundred
thousand (600,000) share options will be granted to Leaming. The share
options will have a 2-year vesting period.
For further information please contact:
David Mair
Chief Executive Officer
021 708 021