Hi Roleyman, the 3 month vs 12 month post DC change/effect is implicitly recognised in my numbers. 08/09 EPS = 4.87cps, whereas on my numbers 09/10 EPS = approx 30cps. Thats a +500% increase in EPS and is a result of the DC windfall (I say windfall but CUS's whole model was built on this change being introduced) hitting the bottom line directly with costs staying the same (or decreasing in some instances).
I dont think CUS is on the same growth trajectory that JBH has been on in recent years. The big change in revenue and impressive short term expected growth is driven by a regulatory change (basically doubling revenue but keeping costs the same) although other growth will be driving by company initiatives such as branding advertising, they will at some point all be linked to ATM numbers. The ATM business before the DC introduction was otherwise quite a mature business, and there is not a huge room for expansion in ATM numbers. I think a few analysts are factoring in growth in ATM numbers in the order of about 1 to 2% a year.
JBH growth has been stellar as it started on the ground floor with its impressive model and had heaps or room for growth by extensive store roll out across the country (using its differnt model to other electronic retailers). Thats why JBH commands such a high PER as in recent years its had very impressive growth rates in revenue and profit and looks like such is set to continue.
I still think in the next 3 or so years CUS should have pretty solid growth path driven by the factors I outlined in my last post, however it will reach a point, or a "steady state" where growth will only be nominal (say in line with GDP), although at that point growth wont be stellar you will still have a very stable high cash flow converting business paying very solid fully franked dividends. Good news for us is that is still a few years away and the price doesnt fully relfect the potential.
Another thing to think about also is the use of earnings. With a dividend payout ratio of say 55% (although this will ratched up in later years) there is still a lot of room to fund growth through other inititives (i.e. expansion elsewhere, new business lines, or even acquisitions). As an example, on my numbers at the end of 30 June 2011, even after dividend payments and the cap return, CUS is looking at a CASH amount of close to $50 to $60million. Thats a LOT of money sitting on your balance sheet and can be used to fund growth. To make my point: I have factored in revenue on this amount as interest at just below the presumed RBA cash rate, but given the ROE rates that CUS will be generating, you would assume if they can find the right home for all that cash, they will be generating much better returns than a return based on a discount to the cash rate. If they can't, they will probably buy back shares, pay even better dividends or pay capital returns, and im happy with any of those.
As for market interest, there are allready some pretty heavy hitters on the register (although I recognise some like HHL are more nich mid cap players) and being in the ASX 300 the profile is probably not that bad (although the bigger the profile the better). I think the market is currently waiting for confirmation as to trans numbers and figures for this half year before solid and improved projections can be made about future cashflows and values. I suspect leading up to the half yearlies in Feb 10 the CUS SP will look at taking off again if it hasnt already (provided earnings are in line with assumptions or larger due to CUS growth initiatives). This is a continuation of the theme of SP drivers this year. I think the market was originally waiting for DC to be introduced in March without any hicups and when that occured the SP benefited and following that the market was looking for comfort as to post DC tran volumes and when the company reported on that positively and the result were shown in the full year financials, the SP benefited.
As for share price increases, well I am a big believer that in the long run the share price is simply a function of earnings and expected earnings growth. So figures of 200% or 300% etc should in a sustainable world be a reflection of growth in earnings. I think whats holding us back is the markets expectations for earnings. CS is talking about low to mid 20's in the next few years. OM is talking about 31cps this year but reducing to high 20s in the following years. These forecasts are widely available and the market is probably taking this on board somewhat. I think 30cps is achievable this year, but where I differ is that rather than forecasting earnings in a few years in the mid to high 20's I think its realistic to think, provided the growth meausres are properly executed that earnings will be high 30's if not higher. I think if and when that occurs or looks like a more certain bet, then the SP will re-rate. Again if you look at EPS of 40 on a PER of 13 your looking at a quite attractive return given the current price, and also when you put those sort of earnings through other val methods such as DCF etc you get a warm fuzzy feeling....
Again, just my uneducation thoughts, and they could be widely incorrect so suggest you DYOR and consult a financial advisor...
CUS Price at posting:
$3.05 Sentiment: LT Buy Disclosure: Held
