The cost reduction was large. It limits the cost opportunity in...

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tdubs

197 Posts.

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29/08/18

10:14

Post #: 35256548
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Originally posted by SimonGr ↑

I'm still digesting, however ...

- $12M 'loss' that you quote is made up of significant non-cash accounting changes that make this year worse ... but future years better, ie.
- extra $4.2M amortisation (one-off to reduce amortisation over 5 years vs previous 7)
- as RDF has tax losses on its balance sheet and Trump has reduced US Corp tax, there is a reduction in the carrying value of these ($3.0M)
- Therefore ... loss is really $4.9M.... driven by heavy investment in the Int Business (as per their business plan at capital raising).

This is a technology business that is investing to grow again. With a market cap of $54M today, this entire business is being priced at just 5 x FY18 EBITDA of its "Americas" division which is sticky annuity type revenue (and assigning zero value to the International business that they're spending all the cash investing in!).

So ... if you have no faith that they'll achieve their goals in the Int Business you should stay away. However, I'm betting that they will be successful in winning contracts over the next 12-36 months and we'll see a significant re-rating of the shares, starting with their first major contract win.... or maybe even earlier with this result!

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The cost reduction was large. It limits the cost opportunity in the future, however it also magnifies operating leverage. If they win a couple of big contracts (and it's an if) the pay-off will be very strong.

Last edited by tdubs: 29/08/18

RDF Price at posting: 34.5¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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The cost reduction was large. It limits the cost opportunity in...

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