I entered too early a handful of months ago (lesson learnt) but retain my investment thesis that FY22 (ending March 2022) will show an EBITDA profit, which should commence a re-rate in the business (at that point, the business should be valued on 15-20x EBITDA according to comparables in the industry). @meghotcop is spot on - eventually, it all comes back to business performance. If KTD can turn a profit at the EBITDA level, while growing the top line, the share price will follow, regardless of the share overhang.
More than 50 years ago, Benjamin Graham, the Father of Value Investing, observed "In the short run the market is a voting machine, but in the long run, it is a weighing machine". That one quote contains as much wisdom today as it did then. What Graham was referring to were the two forces acting on securities, namely human psychology and business fundamentals. In the short run, human psychology can overwhelm fundamentals. However, over the long term, it's securities earnings that determine returns.
It all comes back to earnings. Whether KTD will start turning an EBITDA profit over a full year cycle is yet to be seen, but all will be revealed in time. If you take a look at revenue, gross profit, EBITDA margin and EBIT margin in the financial table below, the business is trending in the right direction on a yearly view. I might be wrong with my investment thesis on KTD (wouldn't be the first time), but I personally think the risk/reward looks appealing here because the upside is very significant. Certainly, this is a higher risk investment until this business starts generating net cash. But, you've got to be in it to win it.
When you invest in stocks you are investing in the underlying businesses; management prowess, business culture, competitive advantages, re-investment opportunities and the like. Everyone needs to come to their own conclusion as to whether the D&A of the company is strong enough to sail the ship to a destination where it will, in time, generate strong future earnings. Triple Top and I have come to our own conclusion on this, independently, but each and every person needs to make up their own mind. That's the beauty of the share market.
Cheers,
Key Financials
1
For the Fiscal Period Ending
12 months Mar-31-2019A
12 months Mar-31-2020A
12 months Mar-31-2021A
2
Currency
AUD
AUD
AUD
3
4
Total Revenue
2.505
22.533
50.689
5
Growth Over Prior Year
23.90%
799.61%
124.96%
6
7
Gross Profit
0.903
5.081
10.73
8
Margin %
36.05%
22.55%
21.17%
9
10
EBITDA
(2.878)
(4.769)
(5.417)
11
Margin %
(114.92%)
(21.16%)
(10.69%)
12
13
EBIT
(2.924)
(5.529)
(6.948)
14
Margin %
(116.73%)
(24.54%)
(13.71%)
15
16
Earnings from Cont. Ops.
(3.29)
(7.452)
(8.195)
17
Margin %
(131.37%)
(33.07%)
(16.17%)
18
19
Net Income
(3.29)
(7.452)
(8.195)
20
Margin %
(131.37%)
(33.07%)
(16.17%)
21
22
Diluted EPS Excl. Extra Items³
(0.03)
(0.04)
(0.03)
23
Growth Over Prior Year
NA
NM
NM
KTD Price at posting:
11.5¢ Sentiment: Buy Disclosure: Held
(20min delay)