Flowtech Fluidpower Share Discussion Threads

[creditcrunchies] 16/4/2019 22:55

The acquisitions have calmed down a bit in the past year so hopefully it's a consolidation phase now. This just how aggressive it has been in the past 4 to 5 years:
Strategic acquisitions to date:
Primary Fluid Power (2014)
Albroco (2015)
Nelson Hydraulics (2015)
Indequip (2016)
Hydravalve (2016)
Triplesix (2016)
HTL (2017)
Hi-Power Limited (2017)
Orange County Ltd (2017)
Hydroflex Hydraulics (2017)
Group HES (2017)
Balu Limited - Beaumanor & Derek Lane (2018)

[edmundshaw] 16/4/2019 22:20

Thorpe, good comments. In the video interview the debt rise was explained very clearly. rise of £5.1 was used to meet £2m of increased working capital (due to organic growth of 6%), and £3.5m of deferred consideration payments (or was it t'other way round? no matter...). That satisfies me on the debt front.

The current performance of Balu seems to support the price paid, though yes there was a rather high intangible element, and that is reflected in the high tax rate which I am ascribing mostly to the large amortisation (in which case the tax rate will remain pretty high for the foreseeable), and is also why I am cautious about broker estimates for 2019 (I worry they might have overlooked this).

Nevertheless I do feel that synergies are not just wishful thinking - management is very strongly saying they are going to extract some serious ones, so 220p seems very fair to me - at least in a couple of years time.

[thorpematt] 16/4/2019 22:03

Paul's review is remarkably insightful for such a quick review into a stock he has limited prior knowledge of (as is usuall for Paul). Hats off.

Paul reckons companies raising debt and equity should not raise divis. (good point) He reckons it aint safe.

He reckons exceptionals can be used to enhance earnings figures very easily (not wrong there is he).

He recognises that the Chairman has a track record of succefully building a business by acquisition (and therefore by inferrence is not known for the above). Not wrong there either.

He is too scared to buy because he is worried about GFRD profit warning and something called Brexit.

thorpey says:-
The divi yield here is more than twice covered on forward projections. It's only THAT high because the share price is so low. This thing spins cash off remarkably well.

I am trusting the management NOT to do the exceptionals thing. I have faith in Mr Diamond's stewardship.

Jim O'Neill once told me that equities facing investors should focus on...equities. I will be letting everyone else time the markets.

I would concur that there are challenges ahead but the LFL growth and resillience of earnings throughout periods of economic weakness give confidence.

I reckon this to be worth about 225p share so I am a buyer at this point. We don't buy stocks because there is no risk. Equally the potential upside here is not often available at such discount (IMO).

[creditcrunchies] 16/4/2019 21:18

OK he's cautious about it saying it has potential but is looking at it from the sidelines for now. Concerns around paying a high divi out to shareholders when still in a growth phase, there is generally an element of risk in how profit can be boosted within acquisitive groups, the debt level is under control but elevated, the higher than you'd like intangible assets (Being an acquisitive group, intangible assets (mainly goodwill) are high, at £70.6m. That leaves NTAV at £16.8m - still positive), working capital is good with a current ratio of 1.4, the potential risk of a profit warning if the macro economic conditions deteriorate but on the other hand the share price could perform well if they continue to trade inline with expectations. In summary it's more to wait and see at this stage but has potential to perform well

[petewy] 16/4/2019 20:42

Yes Monty share it.

[edmundshaw] 16/4/2019 19:17

Monty I am not a member. The gist would be interesting if you feel like sharing that...

[montyville2] 16/4/2019 18:22

Paul Scott gives a balanced view of FLO in the SCVR, link below

hxxps://www.stockopedia.com/content/small-cap-value-report-tue-16-apr-2019-jd-card-flo-knos-tcm-dscv-469661/

[lord gnome] 16/4/2019 16:12

Stockopedia has 16.2p EPS estimate for 2019. They had 14.5p down for 2018.

[edmundshaw] 16/4/2019 14:17

Is that before tax podgy? Because I am not expecting the tax rate to come down that much below 25% for 2019, given the large amortisation from the Balu acquisition.

15.8p seems a big ask given the single figure organic growth we've had of late... but I'd love it to be true!

[podgyted] 16/4/2019 13:18

Zeus have a underlying EPS of 15.8 for 2019 - so at 118p at present that is a PER of 7.5 which seems very good value.

[hammonkp] 16/4/2019 13:13

Results and Trading Update video:

[edmundshaw] 16/4/2019 13:07

Dividend rise is in line with the 5% expected. Yield now a comfortable 5% at £1.20.

Tax rate has leapt up, from 17% to 27.6%, presumably due to the large amortisation component of the Balu acquisition (and perhaps a "tidying up" of tax accounting?). So I estimate underlying EPS is around 11p. This can be upped a bit for the extra 3 months of Balu earnings to give a truer idea of a comparative for next year.

Management are making good noises about the next year or three, with synergies in focus and future acquisitions to be paid from own resources (so no dilution effect). So I guess we shall have to wait a year or two to judge the new management better and guage the potential. But I feel this is a decent hold with good prospects, and a forward PER of probably under 10 on an underlying basis.

[podgyted] 16/4/2019 13:03

Seems good to me. They have work to do integration, working capital management and synergies but these seem to be in hand and in the meantime there's a very attractive dividend while waiting.

Impressed by their videos:-

[welsheagle] 16/4/2019 12:09

Revenue, profit and dividend up - looks better than expected.

[creditcrunchies] 16/4/2019 10:53

Looks like a consolidation phase after all of those acquisitions to me it'll impact net profit short term but longer term this could be a good investment. Depends on your outlook

[paulfred1] 16/4/2019 10:20

Weird looking statement. The coloured nonsense makes the growth column in red all look like losses. Unhelpful and misguiding.

[petewy] 16/4/2019 08:57

Look good to me. Dividend up

[pugugly] 16/4/2019 08:34

Results out - Initial market reaction Not very happy!

[edmundshaw] 15/4/2019 09:32

Tomorrow! Fingers crossed...

[edmundshaw] 13/4/2019 14:16

16th April. When did you last visit the optometrist?! :-)

[mfhmfh] 13/4/2019 13:12

I thought results were on 18th April.

[petewy] 13/4/2019 09:27

results Tuesday says IC

[edmundshaw] 10/4/2019 15:54

Them again! They seem to be selling several smaller companies...

[mammyoko] 09/4/2019 16:22

Miton the seller