Discussion Points on Future Earnings

Writing notes as I think on future earnings.

Management has guided to 2018 earnings of $17-20 million.
On 160 million shares on issue this equates to 10.5c EPS.
1st half EPS of 5.94 cents (excluding write off of intangibles)

Therefore 2nd half low end EPS 4.56c high end 6.56c

Given management has guided that business conditions are still 'subdued', not 'stabilising' but 'subdued'. I believe its safer to use low end EPS guidance. And even then I only have low confidence extrapolating this figure going forward given that they have written off goodwill for their biggest division 'Radio Rental'. Writing off goodwill effectively suggests that management do not believe in the future discounted profit stream from this business, hence the write off.

Anyone buying or holding in the hope of any reasonable dividends for the next year, good luck.

As per their announcement on refunding of the corporate loan facility:
Their corporate loan facility was $145 million in Sept 2017. This needed to be brought down to $90 million by December 31st (achieved, but only through selling its consumer finance division and also by financing a portion of its receivables into its securitisation program).

Now this corporate loan facility needs to be reduced to $70 million by 30 June 2018 and further to $50 million by Sept 2018.

This can't solely be achieved through natural cash flow from operations since their business loan book is increasing.
So to achieve this they will have to continue to finance a portion of its receivables into its securitisation program.

This has a cost (the cost of securitisation) which will reduce profits, and is not a natural cash generative activity (effectively discounting the value of the receivable and converting to cash to pay down the corporate loan facility).

So in conclusion, so far, I hold a small amount of this stock, but to add to it at this point of time is still dangerous in my opinion. FY2018 will not be pretty and nor will 1st half 2019 in my opinion.

Any potential turnaround will not be before 2nd half 2019, and that's only if they can turn around their radio rentals business. Their business lending division is just too small relative to the radio rentals division.

Buying based on historical dividends is very dangerous now.
Buying based on a PE is irrelevant at the moment because we can't accurately get an accurate future E. Historical E is irrelevant in turn around situations. Its the future E that will count.

With installations continuing to drop in the radio rentals division, and with the outlook continuing to be 'subdued' its still very difficult to make an investment case yet, even at these low prices.