News: RDF Redflex Holdings Updates On Texas Legislation House Bill 1631, page-4

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Morrison6

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20/05/19

20:01

Post #: 38657425
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Originally posted by SimonGr ↑

Hi Morrison ... or is that Six-Mo?

I'm yet to get my head around this, some early thoughts tho ...

Immediate term:
- FY19 revenue won't be affected much (1% revenue max) ... but ...
- there could be non-cash write-downs of equipment or restructuring costs that hit the books in FY19. These could unfortunately mean that RDF goes from reporting a return to profit in 2H19 to reporting a loss.
- And, 13% revenue from Texas is certainly material for FY20. May get some contract cancellation fees or some on-going work sending warnings etc. But I'd factor in losing the full 13% within say 1 month given the wording of the ann.
- Costs will be cut in US and revenue growth from sales elsewhere will help offset ... but momentum will be slowed (or temporarily reversed) in RDF returning to profitability.

Longer term:
- No idea if this may spread to other US states, but some risk. It definitely won't spread to all states in the US tho.
- RDF's strategy of developing European sales becomes more important
- 13% of sales is maybe 12 months of growth at current rates ... but also one big contract out of the $300M pipeline could replace that with an out of the blue announcement.

So overall ... my best guess at this stage is that it puts the recovery back about 12 months. So rather than reaching 80c in Aug19 I think that'll be more like Aug20. IMO 39c is likely a bargain - but I have enough having topped up last time it was sub 40c so just holding.

Others thoughts?

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Thanks very much, really useful.

RDF Price at posting: 39.0¢ Sentiment: None Disclosure: Not Held
1 Upvote

0 Great analysis

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News: RDF Redflex Holdings Updates On Texas Legislation House Bill 1631, page-4

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