Sweet dreams, page-9

Insomniac

Do not read anything into the fact that management did not moot an NPAT for FY2016, as it did for FY2015. For reasons explained below, there was a need to assure the market at the beginning of FY2015, which was not necessary, in my view, for FY2016.

If you look at TGA's record since its first full year after listing, you will see stellar growth initially, followed by a flat stint, and a hint of retreat in FY2014.

......... 2008/3 .. 2009/3 .. 2010/3 .. 2011/3 .. 2012/3 ... 2013/3 ... 2014/3 ... 2015/3
EPS ..... 8.3c ..... 9.4c ..... 14.9c ..... 16.7c ..... 19.0c ..... 19.1c ..... 18.9c ..... 21.8c
DPS ..... 4.2c ..... 4.7c …... 6.2c …... 8.4c ....... 9.5c ..... 10.5c ..... 11.0c ..... 11.8c
....... 50.60% .. 50.00% . 41.61% . 50.30% . 50.00% . 54.97% . 58.20% . 54.13%

Management was well aware in FY2013 and FY2014 that various initiatives were working out as planned, and to warn investors not to look at the charts, and conclude that the company had entered a decline phase common to many enterprises, management lifted the dividend payout ratio in FY2013, and John Hughes stated specifically in the presentation of May 2013 (perhaps not in writing) that this was to signify the underlying profitability of TGA, and that things were working to plan. I do not recall that anything was said about the FY2014 payout ratio, but the dividend payout ratio was increased. In that year, management had a good idea of the improvement that would occur, and hence the Outlook Statement stated, “The continued investments in new business opportunities are expected to deliver solid NPAT growth to above $30M.”

The results were better than $30m – underlying NPAT $34.2m, and reported NPAT $30.6m – the differences being $2.2m Cash Resources Australia (CRA) acquisition costs, and the amortisation of NCML's Customer Relations Asset of $1.76K. The $1.76K will cease to be expensed in FY2017. The CRA acquisition cost of $2.2m is a good example why Management may be loath to forecast a future NPAT, because a one-off expense like that could occasion the forecast to be too high, and then the ninnies in the game would complain that they were misled.

I think reported NPAT should be about $37m for YE 31/03/1916, and about $41m in FY2017. I suspect the SP to exceed $3.00 at the end of this calendar year, with reasonable valuations circa $3.25. Post what you think various metrics are going to be, and why, and I'll respond with a view, and my reasons for suggesting any metrics that I forecast. I have being buying in recent weeks. Of course, I could be wrong, and I may rue holding so many TGA shares.