I agree it's impossible to know what the future value will be. I...

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27/07/23

08:51

Post #: 69004466
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Originally posted by madamswer: ↑

How they got from $6.5m of cash at 31 December 2022 to $32.8m by 30 June 2023 is hard to fathom.

And what the earnings base could be for FY2024 is even harder to figure out.

Starting with the top line: $37m of Revenue is getting disgorged with the Omega sale, but that will only be partly made up by a debut contribution ($10m) from the new Grohe and American Standard. And then there's the pressure from discretionary consumer spending.

And the GP Margin is all over the place:
GP Margin History:
DH20: 40.2%
JH21: 40.8%
DH21: 42.5%
JH22: 38.0%
DH22: 43.1%

With Blanco disgorged a year ago, Omega sold in March 2023, and Grohe & American Standard distribution about to kick off, who knows what the GP Margin will be going forward?

I'm guessing it will not be less than 43%, so maybe 45%? Maybe in the high 40%s?

As for Cost of Doing Business, I'm not even sure if the $17.6m EBITDA for FY2023 includes ERP scoping expenses (which will spill over into FY2024 and culminate in a full ERP system upgrade) and/or the costs of the closure of the Dandenong warehouse.

So the $25m total CoDB Expenses figure of DH2022... will that be lower in FY24 half-years due to removal of overheads? Or higher because of the one-off expenses discussed above?

Based on varying assumptions (none of them outlandish), I can quite easily come up with FY2024 EBITDA forecasts ranging between $10m and $16m (corresponding to EBIT of between $5m and $11m)!

With the EV now a rather diminutive $46m (as someone said to me today, "With such a low valuation, what's the point of it being a listed entity?"), the EV/EBIT multiple is either 9.0x (probably fair value) and 4.6x (very cheap).

But with the high forecast risks due of all the moving parts, the resulting wide valuation splay means that it is hard to form a high conviction investment view.

I don't believe I lose money owning the stock from here, but I don't know how much I could ultimately make.

Which makes it very hard to know what kind of price would be a level to sell.

Thoughts from anyone?

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I agree it's impossible to know what the future value will be. I am mostly holding because of the dividend history which has paid back over half of my investment to date.
Then there is the Casio distribution and it's value. It has to be worth close to the current market cap alone surely.

SHM Price at posting: 81.0¢ Sentiment: None Disclosure: Held
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