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SimonGr

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20/08/19

12:35

Post #: 40055566
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Originally posted by SimonGr: ↑

I was fairly optimistic about CL1 before this morning's webcast, but a disappointing outlook for next 12 months has led me to sell my holdings this morning. Arranging my thoughts ..

The Good
- FY19 Revenue, EBITDA and NOPAT all up for another record half
- FY20 target revenue growth of 10%
- AMP customers signing with CL1 (rather than drifting to AM - see p5)
- Investing in existing products and new products
- Highly sticky customers - as one analyst suggested maybe they could consider increasing some prices (but competitors currently cutting)

The "Not so Good"
- Portfolio uptake is slow
- Super product uptake has slowed substantially and competitors reacting with aggressive discounting

The Ugly
- EBITDA margin guided at 40% (vs 47% in FY19). This isn't in the pack - but was stated by the CEO during his answer to the first question from Wilsons. I checked afterwards with Class and they confirmed the number and that my comparison to FY19 was correct.
- FY20 D&A guided up $2.6M to $7.9M (vs $5.3 M in FY20). This is partly capitalised R&D, partly capitalised sales/marketing and presumably some acquisition amortisation.
- The lower EBITDA %margin will significantly reduce EBITDA (even if the targetted 10% revenue increase is achieved) and the higher D&A will further reduce NOPAT even further. By my calc's these guidance numbers equate to NOPAT and EPS both decreasing by ~25% in FY20.

If the market buys the investment/growth story - the SP could rise. However, with NOPAT being guided lower, an untested executive team who are yet to put runs on the board ... I decided to exit as I think the SP will go lower when this sinks in. I'll continue to watch and may re-enter later if/when they turn the ship around.

Others thoughts? Comments?

Cheers,
Simon

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Forgot to update sentiment.

CL1 Price at posting: $1.30 Sentiment: None Disclosure: Not Held
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Forgot to update sentiment.

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