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25/02/16
00:23
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Originally posted by dadingoman
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My thoughts...
- good but not great
- So if going by all the other results in this crazy market - the price will go down tomorrow...as good just doesn't cut it in this market. I hope i am wrong and it surges past 0.80.
- I'm a little underwhelmed and was expecting more....particularly a capital management announcement regarding initiation of a dividend or buy back. In fact i would have liked them to have been continuing their previous buy back on any fall below 0.70 over the last coup[le of months.
- I would say the results are a slight miss on forecasts if anything.
- growth is ok...but nothing out of the ball park.
- I was expecting them to smash through the $60m full year profit and not have to fall back on that clause in the Star Vegas acquisition. They will probablly do north of $70 after a stronger second half but it shouldn't even need to be mentioned.
- Heng Sheng is a downer. Didn't last long. At least they recouped costs. Hopefully a new partner is close by.
- good to see win rates increasing....particularly at Aristo, although Aristo is pretty much not really relevant (<10% NPAT) in the overall scheme of things now after the Star Vegas acquisition....everything hinges on that.
- Cash flow from operations of $43 for the half is good, but as expected. That is $86 for the year (conservatively assuming 2nd half is the same) which is about the $7m per month that Bell Potter anticipated. I would be hoping for closer to $100 at the full year results.
- Current liabilities of $170m are of concern to me. Just taking cash and equivalents of $83m leaves $77m of debt payable in the next 6 months which is basically 100% of op cash flow. Of course they will probably pay down some and refinance but i don't like that the Mega bank financing is all current...would have been nice to know.
- The restrictions on dividends and capital management are disappointing. Once again would have been nice to know.
- "restrictions will be reduced once more than 50% of the outstanding loan is repaid"...once again don't like restrictions, and it would have been nice if there was more disclosure about this stuff, but at least they could pay down 50% of the loan today if they really wanted to from cash.
- The professional and consulting fees are high ($12m) in the P&L...and represent more than employee costs as the largest expense item. A note would be nice to explain it. I assume it includes the $11m of M&A costs on P17 of the presentation...but who knows.
Basically i can't see the share price going anywhere much till at least the next 6 monthly announcement and maybe for 12 months. Most likely trigger for a re rate to $1 is still initiation of a dividend which i now see as doubtful in 2016.
I think $1.50 is fanciful in the short/medium term...but with a small free float anything is possible if an insto decides they want in.
My thoughts at present are the stock will be range bound in the 0.68-0.80 range, unfortunately, so i will probably sell half my holding above 0.75 with the intent of trading that range, and with the intent of being fully invested again in 9 months for the 12 next half yearly this time next year when they should have paid down the majority of debt, improved the EPS and look at paying a dividend to force a re rate.
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Excellent analysis, Dadingoman.
Definitely some key info was not mentioned previously (even to brokers), and the strong results during initial months of HY16 fizzled somewhat. Positive is that DNA has good cash flow (but needs it to pay debt!) and dealt with the Heng sheng problem quickly. Potentially positive future results, but most of us have now adopted the "show me" Missouri attitude (rather than rely on beliefs).
As for sp, I expect it will get slammed tomorrow (already evident in weak buy-side register) because (a) results were below expectations, (b) no divvy or buyback, and (c) someone (plural?) has been pushing this stock around over the past year and tomorrow looks like an ideal day for them to continue that game.