TH, can't help being a tad nervous with all the negativity still around from the VGI report and the AFR. But maybe that is what they are trying to achieve? Anything can happen in markets and it is possible we will see a CTD near miss come reporting time or some other unfortunate turn of events. The presentation on 20th March provided forecasts that were if anything slightly modest. Global forecast of TTV FY 19 was $6.5 bill. Last financial year saw Global TTV at $4.958 bill. Add the LOTUS $1 bill we get say $5.95 bill for this FY without organic growth. So CTD have only stacked on around a 10% organ forecast TTV growth for the year. This is pretty modest compared to prior years. CTD should have access to current TTV $$ at any time via their IT system. The TTV conversion to EBITDA for Global is around 2.53% (last FY). This varies considerably between regions with ANZ being the highest at 3.8% and Asia the laggard at 1.3% (LOTUS was 0.5% on acquisition). 6500bill x 2.53% = $164 mill EBITDA but Asia will drag this down as we have 75% of LOTUS and it will take some to build the LOTUS conversion to TTV rate. I guess that CTD believe there is plenty of room to build the Asian TTV conversion rate higher (Ex LOTUS 1.3%, LOTUS itself 0.5%). So allowing for Asia $150 mill forecast by CTD seems conservative. My estimate was around $152 - $155 mill. CTD would be able to perform better than bulls roar EBITDA estimates on a daily basis with their current IT and knowledge of the business. CTD challenge - to boost Asia TTV conversion rate from 1.3% closer to the Global average. Plenty of scope for this but local conditions will come into play here. The US has the 2nd lowest conversion rate at 2.9% so Asia lags big time. I have outlined in previous posts some of the methods CTD uses to achieve returns that no one believes anyone can get without some sort of skullduggary. There are plenty more. Here is another. CTD as we know buys high TTV good sales businesses with very inefficient TTV conversion. CTD then goes about getting the business online to reduce costs and lift the conversion rate. LOTUS for example has scope to improve its EBITDA by around 300% over the next 3 years just to reach the very low Asian rate of 1.3%. Everyone assumes that an acquisition by CTD is like the Trump tax cuts, ie gives a one year boost. CTD gets up to 3 year boost to EBITA before even taking into account any organic growth it will have during that time. It takes 2 or 3 years to get TTV conversion up to target. US is getting there but still way behind (up until last FY anyway). So CTD says it will get 15% organic growth YOY for a while anyway plus a very big kick along from acquisitions every year or two. You can also see from the overall tiny 1.3% Asian TTV conversion rate the potential there is for big EBITDA growth over the next 3 to 5 years. I have to have a laugh when Joe (AFR) says CTD acquire to cover up its lack of cash. Anyone who spends 5 minutes looking at the reports can see its to maintain exceptional returns. Joe says CTD aspirational TTV is $10bill. At a 2.53% TTV conversion rate that is $253mill EBITDA - yes please!!!! Joe's assertion that businesses are valued at a function of TTV is incorrect. It is the conversion rate that is important, ie EBITDA. In relation to the previous CFO I would think it was a simple case that the business outgrew him. That is common when a small start up grows to a fairly big business. Who knows CTD may have a stumble, maybe business travel has fallen off a cliff?, Morgans have/had some close ties with CTD and markets are tough. Its wait and see and it will all be known in due course. In the meantime as I said earlier JP is well aware of closer than bulls roar EBITDA progress at all times.
CTD Price at posting:
$23.20 Sentiment: Buy Disclosure: Held
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