Of course, it is well-established fact that when it comes to the...

Of course, it is well-established fact that when it comes to the making of predictions, no one can do it accurately on any sustainable basis.

So any forecasts like these need to be treated as being merely indicative, and certainly not prescriptive.

Also, I've omitted to make mention of the execution risk, which is not zero.

It's easy for us armchair critics to sit at our computers and build spreadsheet financial models which spit out nice attractive numbers, but these do not reflect the actual real-world path that needs to be traveled for those attractive spreadsheet figures to become manifest.

In the case of the business that NTD acquired in late FY2020, namely Tyres4U (T4U), I had an occasion just before Christmas to learn more about that business, and especially about its previous owners and their probable motives for selling it to NTD.

In summary, my key takeaway from that occasion was that the previous owners of T4U were not died-in-the-wool tyre people; nor even distribution specialists. As such, they were not very engaged with that business; quite the opposite - they were property investors first and foremost. So effectively, landlords who, it occurs to me, happened to own a tyre distribution business which was a tenant in some of their properties.

The positive aspect of that is it suggests the T4U business was not run with any great focus and attention and that there are therefore inefficiencies and cost redundancy aplenty, which represent significant low-hanging synergy benefits.

The the flipside to this is that T4U's systems and processes are likely to have been under-invested during the previous ownership, meaning that NTD management might have to cut a few meaningfully-sized cheques for CRM and ERP upgrades at T4U.

Not just that, but for anyone who has been around long enough to follow major IT upgrades, there is a long litany of botched upgrades, and the significant operational disruptions and costs that get incurred, when things go wrong.

So this is the key risk for me: the extent to which management can execute on integrating T4U.

I suspect it might end up being harder a task that we casual observers might believe.


But if my forecasts prove to be only remotely accurate, and even if the T4U integration isn't perfectly seamless, the potential valuation upside is so substantial that it affords investors a very wide margin for error.

.