From Under the Radar report in April: CODAN (CDA) TECHNOLOGY...

From Under the Radar report in April:

CODAN (CDA)
TECHNOLOGY PRODUCER
The metal detector manufacturer’s half year result didn’t contain anything earthshattering.
That had happened in December when it downgraded its numbers owing to a collapse in
demand for gold detectors from the key African markets in Sudan, Mali and Guinea due to
civil war and wet weather.
The company recorded revenues of $61.1m for the first half FY14, which were less
than half the $136m achieved in the first half of fiscal 2013. This generated a profit of
$4.8m, which was in line with the reduced guidance (and down from $26.5m in the same
period a year earlier).
In the current year we expect it to generate $140m in revenues (versus FY13 $244m)
and produce $47m in EBITDA (FY13 $76m) and an NPAT of $9m (FY13 45.4m) to generate
5 cents in EPS. This should bounce back, as we will outline below.
You can see how much of a fall from grace has occurred. But the point we made in
December is that its earnings have been re-based lower, and importantly the business
model has not been broken.
A sign of confidence is that it announced an interim dividend of 1.5 cents.
We do not expect the situation in Africa to improve any time soon. The second hand
market for metal detectors is too strong.
The positive for investors is the group’s diversified earnings base, which is supported
by the roll out of new products.
The company produced almost $250m in revenues last year, but its base revenues
over the past five years have been $150m. The extra earnings came from the gold rush
in Africa

RADAR RATING:
The market for this company was too optimistic owing to
We thought that much of that optimism had come
out of the stock, but were blindsided by a downgrade so soon after positive
announcements at its AGM. We think it is too late to sell and that you are in it
for earnings which should grow as they revert to their normal run-rate.
The company is trading on a PE of the current year’s earnings of 15.5 times,
but this declines to just over 4 times in fiscal 2015. Hold.