Dialight Share Discussion Threads

[3rd eye] 27/2/2017 16:21

Article from ample on DIA.

Dialight tipped for rapid recovery
By Lee Wild | Mon, 27th February 2017 - 13:25

Dialight tipped for rapid recovery A series of crippling profits warnings blighted chief executive Michael Sutsko's early days in charge at LED lighting specialist Dialight (DIA), but his three-year strategic plan has had early successes and these full-year results are strong. They're so good, in fact, that house broker Investec Securities no longer believes the shares deserve to trade at a discount to peers, triggering a 26% hike in its price target.
"Phase one of the plan, to rebuild our operating model, is largely complete," said a confident Sutsko Monday. "Phase two of the plan - growth initiatives to capture the long-term opportunity in LED lighting - is underway, and on track to deliver against our strategic plan."

These corporate initiatives never come cheap, of course, and Sutsko's masterplan has wiped £16.4 million from Dialight's bottom line. "Operating model changes" include restructuring costs and impairment charges. It also covers over £5 million of redundancy costs as Dialight shifts UK production from Newmarket to US manufacturing partner Sanmina, and scales down its Mexican facility.

The company made a loss before tax of £3.8 million in 2016, similar to the year before. Add back one-offs and it's a different story, however. Dialight doubled underlying operating profit to £13.1 million, giving underlying earnings per share (EPS) of 26.9p.

That's on revenue of £182 million, up 13% which, admittedly, received a significant boost from translation of hefty dollar earnings back into weak pounds - Dialight made 71% of group sales in North America in 2016, up 20% year-on-year. Only 6% of revenue is generated in the UK. Operating profit received a £1.5 million currency boost. Strip out the currency effect and Dialight's top line grew by a more modest 2%.

Dialight said 16 months ago it was targeting annual revenue growth of over 25% by the end of 2018. An operating profit margin at the core lighting division nudging 10% is also well on the way to achieving the 15% target, Sutsko tells Interactive Investor.

Investec analysts Michael Blogg and Chris Dyett is convinced enough with the transformation to restate its earnings recovery profile, although it urges an element of caution given this is still early in the new financial year.

"In view of the excellent execution of the strategy so far, we have eliminated from our valuation the discount (formerly 15%) to peers' average 2017e-19e EV/EBITDA ratios," write the pair. "Our target price rises by 26% [from 850p to 1,070p] on peers' rerating and the increasing cash resources, and we reiterate 'buy'."

Sensible move

That's a sensible move. However, the market has been pricing in better times for a number of months, encouraged by a series of regular confidence-building progress updates.

Indeed, Dialight's share price has already more than doubled to a three-year high since bottoming out at below 400p a year ago, its lowest since summer 2010. The shares now trade on an EV/EBITDA ratio for 2017 of 11.3, dropping to 7.7 for 2018.

And, on Investec's estimates for adjusted EPS of 35.4p this year and 59.7p a year later, the price earnings (PE) ratio is 27 times, dropping to 16 in 2018.

Dialight shares have recently pulled back following a test of technical resistance at around 1,025-1,030p, which is unsurprising. Hit those achievable growth targets and there's good reason to believe in further recovery, though perhaps not at the pace investors have been used to in recent months.

[silverfern] 27/2/2017 12:48

thanks for that bbbbb; it's on my watch list for now.

[bbbbb] 27/2/2017 09:46

Silver, the drivers would be..

1) Restructuring has created a sustainable and lower cost production base.
2) The next step is to drive growth (the market opportunity is out there are DIA are well positioned, howevever we need to see the growth come through in numbers over 2017) - my view is that it will, however time will tell. Mining and oil environments picking up again so this will help.

[3rd eye] 27/2/2017 09:08

Investec re DIA: ..... Our target price rises by 26% on peers’ re rating and the increasing cash resources, and we reiterate Buy.

[silverfern] 27/2/2017 08:47

Current p/e close to 40 then. Without guidance pointing to a significant increase in eps next year what;s the driver for buying in?

[dgbell7] 27/2/2017 08:33

Seem like great results but muted market reaction so far. Not untypical of markets where results are built in to the price. I see this as a long term hold with , hopefully, a decent rise over a 6 month period.

[bbbbb] 27/2/2017 08:10

Results announced..

Underlying EPS of 26.9p FY (++)
FY Revenue circa £182.2m (+)
Cash in bank of £8m (+)
GP looks like 38.2% (+)

No forward looking statement on dividend (-) lets see what they say on the call.

Overall a decent set of results, further £3m of non underlying costs in 2017 as part of restructuring.

Overall my view is a decent set of results, highlight is the GP increase which will hopefully go again in 2017 with a full year of the 2016 implemented efficiencies.

Lets see how the market reacts..

[bbbbb] 25/2/2017 10:05

Yes, I top sliced at 1005p and sold about 20% as a hedge, will top up if results are not received well as I belive this could present a buying opportunity.

Re the results on Monday I'll be looking for...

Underlying EPS of 20p
FY Revenue circa £180m
Cash in bank of £8+m
GP improvements - close to 40%

I alswo want to see a positive statement re the dividend in 2017.

I also think that the FD is overpaid, but cant see that getting fixed.

[beeezzz] 24/2/2017 17:10

Looks like some have decided to take profits and why not or just edging their bets...

NT take
[...]

Hoping for good news on Monday...

[beeezzz] 22/2/2017 17:28

Good volumes down day, blip or just taking a breather before results!!

[bbbbb] 16/2/2017 21:53

They were a nightmare for burning cash, inventory write downs, new factories, etc. New CEO came onboard and has streamlined & modularised the product line, created a visible pipleine and outsourced manufacturing to Sanmina. The Newmarket factory was due to close Sep 2016 and other work was moved from US to Mexico (don't tell The Donald), both these actions have stripped out a lot of cost. The cost hit for 2016 (including these closure activities) was estimated at £13m for the full year, from memory about £5.5m was booked in 1H so the remainder will come in this next report. I think they did this as their revenues tend to be 40/60 in terms of 1H/2H.

My view is that the report on the 27th will see the close out of all the major restructuring costs. I expect to hear that pretty much all the major product lines have now been transferred to Sanmina manufacturing and we are set clear for the year ahead. I think 2017 will be the big year for Dialight. In 2017 it will be reaping the benefits of a lower manufacturing cost base and its more efficient manufacturing setup.

They have also said that they are getting a bit of a currency tailwind, so having moved from a overdraft position to having £7M in the bank in 1H and I expect that trend to continue (closure costs not withstanding).

The other item that may impact positively as someone mentioned earlier is the pick up in the oil sector as the downturn here a couple of years ago was cited as the main driver for some disappointing results. they have been expanding into other sectors so are not so impacted by oil but even so the pick up here will help...if it has happened.

Strategically they have been developing their open source control interface and have several partnerships (rockall? and honeywell) to enable their lighting systems to be managed from existing customers facilities management system's and whilst that won't directly drive much revenue, it helps with the value proposition

IMHO, if they do dip after the results then it could be a buying opportunity.

What I also expect to hear is that in 2017 the dividend will be reinstated

[jeffian] 16/2/2017 17:59

Life's good, beeezzz. 2008 just a distant memory!

The thing to watch is the cash. They're either making it or they're not. If still burning cash, go back into the accounts and see where they're spending it.

[pugugly] 16/2/2017 17:56

jeffian:. 100% same situation - Still holding a rump and will be watching same as you if new management are not sweeping problems under the carpet as now up some 100% from the bottom - If only etc...

[beeezzz] 16/2/2017 17:56

Jeff....Hey hows life, you are right they got themselves into a right pickle, also had huge R&D expenditure. However, the LED market was not going away and if they got there house in order then growth was out there....

I quickly glanced over this report that came out today..not see full report but Dia are mentioned together Toshiba wonder if they will be selling this unit....

[jeffian] 16/2/2017 17:50

Well I never saw that recovery coming! I sold near the former highs but never bought back in. I posted quite a lot here previously about the apparent disparity between their 'profits' and their propensity to burn cash - turning a healthy cash pile from Roxboro days into a significant net debt - and the answer seemed to be their habit of capitalising a lot of their annual expenditure and writing off a lot of stock which seemed to become outdated very quickly. I will be interested to see from the forthcoming results if they've got out of these bad habits and increased GP sufficiently to cover their expenditure and become cash positive.

[bountyhunter] 16/2/2017 17:43

yes tend to agree, so still out for now, may reconsider after results

[beeezzz] 16/2/2017 17:41

Yeah...Managed to close above £10, wonder how much is down to NT, has a big following and made a killing last time, I've been in since 180p may bail this time if it gets above £14 or all time highs...

RSI over 80...still over another week before results..

[tompion] 16/2/2017 17:37

Dia is going to need some very strong results and a good statement on future prospects to hold on to the dramatic rise in share price - otherwise .....

[bbbbb] 16/2/2017 12:21

It's def on a roll...think it may be a short squeeze....through the £10 ceiling this morning.

[robow] 13/2/2017 18:45

from his email update

[jamieb73] 13/2/2017 18:34

where did you get NT comments from?

[beeezzz] 13/2/2017 12:09

Bit profit taking on Friday....looked well over brought on the RSI indicator, hopefully steady for a week before results...

Dia have great products and meet all the regulatory requirements, hopefully they've got their production issues sorted, there must be huge demand for industrial LED lighting, benefits speak for themselves...when you look at the examples on their website!!!

[robow] 09/2/2017 16:28

Naked Trader keen on DIA
I also loved Dialight (DIA) ages ago - bought for 150p and sold for 1200p making well over £100,000. I actually still have a few from the old days left over in the isa..

I am back in with Dialight as they are moving up every day after some decent statements. Results are due on February 27th and could show a company on the way back to its old highs.

Its recent trading statement was excellent, revenues are coming in again and it seems to be back in a good spot with its LED lighting business. So after a flashbulb moment I am in!

[bbbbb] 08/2/2017 11:09

Not sure why results moved..but a moved forward is certainly not a negative, perhaps even a positive.

Interesting pattern each day as the prices rises steadily and buy volumes exceed sells.

Only one shorter remaining the FCA list, I think at one time there were 3 or 4, with an Aug 10th 2015 position. This has cost them £2.4 million by my sums to date so in IMHO I can't see that holding for long (no pun intended). A short squeeze on a fairly illiquid stock could be very interesting.

[beeezzz] 07/2/2017 17:31

Full year results 27th Feb moved from 28th not sure why maybe not on last day.

bbb...You could be right regarding dividend being reinstated