Strix Share Discussion Threads

[brucie5] 03/12/2022 11:28

Impressive forensic analysis, Thorpematt, thanks; and encouraged by your conclusion!

[thorpematt] 02/12/2022 19:37

KETL has always had a second half weighting to earnings. On accassion where that gets restricted then it's FY is always going to look bad.
To add perspective, we are talking of a rolling ave. of around H1 X 180% = H2
(I did a spreadsheet earlier in the year out of curiosity, so I know).

I read the ED note early this morning. The adjusted estimates give some clarity for future earnings including the acquisistion. My FV calculations always adjust for debt and interest payments. And IF KETL hit ED's numbers those valuations are thus:

2022 103.3p;
2023 161.0p;
2024 177.8p

However, yesterday I gave a lot of consideration to: base case; worst case; best case.I considered the 3 year horizon - since these next 3 years may well prove the most significant in the company's history and by 2024 things should be more settled fot the company and the global economy.

The best case scenario (which I gave a pretty low probability rating to of <10% I discarded as neglible in importance and an upside).

The worse case scenario, included risk relating to China (which for reasons I won't go into here I believe KETL are tied to), but mostly relate to execution risk for acquisition-integration.
I gave this a pretty high probability 40%

The base case scenario pretty much follows EDs numbers.
I reckoned this to be about 50% likely.

Now I should add that these scenario outomes are sliding scales and without going into the maths it lead me give a balance of probailty FV for 2024 of 140p.

FWIW I reckon they should cut the divi. because the loan terms reduce interest rates at lower volumes. I reckon they won't reduce much if any, because the policy dictates they won't.

On Paul Scott's comments from yesterday. I liked his observation on tax.

WHY? Because companies who tend not to pay tax usually aren't REALLY making any money. HOWEVER in this case there are legitmate reasons which realte to lowered taxation in Italy , China due to local investments made and of course the IoM corporation. I think neither of these were explained fully by his readers on his thread.

Additionally he obsereved that the cap-ex was high and that divi was paid from debt. Again, good observation. The explanation is the new factory plus 2 acquistions is where the cap-ex went (it is not historically high nor will it be ongoing).

So anyway I added (as you prbably guessed). But now it is a wating game. Likely to get a bit choppy for a couple of years I'd guess.

[brucie5] 02/12/2022 13:25

I think these targets are silly, frankly, though expected. For me the question is about inherent value, generally manifested through a sustainable and growing dividend. If this is in case, all else follows, to whatever eventual price.
I'm thankfully not far off my 85p buying price now, so not at a worried: and continue to think this is good and potentially excellent long term value at current levels.

[chrisdgb] 02/12/2022 12:55

188p feels a world away........

[brucie5] 02/12/2022 09:36

Ah, well done, I tried to paste a link myself but doesn't let me.
Looks good, but let's see what others say. When RC Turner changes his mind we'll all know we made the right call.
😉

[edmonda] 02/12/2022 09:35

Trading update / Completion of Billi acquisition (new research report)


Full note with audio summary:

Ongoing lockdowns in South China have impacted two of the Group’s largest OEM customers during the busiest period of the year, delaying the shipment of products. Associated costs have increased as an additional warehouse has been retained to deal with future lockdowns. Uncertainty created by the war in Ukraine and its implications have also impacted wider demand across several key markets. Little improvement is anticipated ahead of H2 ’23. The good news is that the completed acquisition of Billi strengthens the group’s product portfolio, pushing it into new products, geographies, and commercial markets. We expect Billi to be modestly earnings accretive during FY23, with wide-ranging synergy benefits improving its impact further into FY24.

We have reduced our financial estimates across the board for FY22 and FY23, although we continue to feel that the shares remain modestly priced relative to both our cash flow expectations and its peers. The yield remains the highest of its listed peers, at 8.2% for FY22.

We have adjusted estimates to reflect the inclusion of Billi and the softer than anticipated trading within Kettle Controls, with revenues declining 5% in FY22 and adj. EPS -16.6%. Nevertheless, we anticipate that revenues and adj. EBITDA should increase by 19.9% and 9.7% on a three-year CAGR to FY24. We have also adjusted our dividend expectation, although at the current share price level this still implies a sector leading yield of 8.2% in the current year.

The share price currently stands at an all-time low. We have updated our DCF and various peer group comparison valuation models, which give a fair value of 188p/share. Our fair value represents a significant premium to the existing share price.

[brucie5] 02/12/2022 09:23

Disappointing not to see anything in the i/C, maybe Scsw will mention. At these levels it's surely one of the recovery baggers of the future, assuming we have one.

[brucie5] 02/12/2022 07:08

Thanks very much, sharw, if this is indeed the case Ketl will have become a very attractive dividend with capital growth proposition. I imagine the I/C will have something to say.

[sharw] 02/12/2022 01:27

Brucie5 - Equity Development have cut the forecast dividend to 8.35p this year and 8.6 next covered 1.6 then 1.8 x and so at tonight's closing mid of 80.05 that is a yield of 10.4% then 10.7%.

(I don't have access to the other 6 brokers who make up Stocko's consensus)

[brucie5] 01/12/2022 19:33

Yes, that was clumsily put, apologies. A lot of shares changing hands, no? Buyers and sellers. Part presumably of the greater shakeout.
But wdik.

[rcturner2] 01/12/2022 18:01

The UT is just the summary of all orders completed in the final auction. It's not a single trade.

[brucie5] 01/12/2022 17:18

Another large (uncrossing) trade reported just after close.


Date Time Trade Prc Volume Buy/Sell Bid Ask Value
01-Dec-22 16:36:20 80.091 1,249 Unknown* 79.70 80.40 1,000 O
01-Dec-22 16:35:08 79.50 384,275 Buy* 79.70 80.40 305.50k UT

[brucie5] 01/12/2022 14:00

Yes, hopefully. I notice that on Stocko this is now given a yielding a whopping 11.6%, which is surely misleading. But there may well be dividend attractions here with the underlying business quite cash generative - if they don't decide to stop it altogether! Which would be a blow to their stated strategy. So mainly just a question of how adeptly they manage their China sourcing and debt. Both of which can also turn into positive leveraging factors, once they manage to explain clearly to the market and the economic tide turns.

[smithless] 01/12/2022 08:05

Looks like Aegon NV dumped approx 9m shares on the market yesterday, so may see more stability today

[brucie5] 30/11/2022 22:25

Thanks Yield Monkey, that's interesting. Please let us know as/if you decide to get back in.

[yieldmonkey] 30/11/2022 21:39

Oh and a final thought...

....kettle controls are pretty much non-discretionary but Billi's range are very much so!

When times are tough...Australia tap water is perfectly good - fill a bottle and stick it in the fridge. And as for expensive instant boiling water systems - just buy a kettle!

My wife wanted one of those - have you seen the price of the bloody things? I told her we could have a 14-day break in St Kitts for the same price!

[yieldmonkey] 30/11/2022 21:29

Well I took a bullet to the leg selling last week, but appear to have luckily avoided and incoming Chinese missile.

IMHO this company has transformed itself to the extent that it will appeal to a completely different set of investors.

It has gone from being a very profitable niche market leader with considerable barriers to entry to being a high risk/reward, leveraged multinational operator.

I cannot see the situation in China changing for the better until Xi has secured another term (March 2023) and as I have previously posted I am not a fan of UK/Aus or Aus/UK acquisitions - especially for medium sized companies.

However for those with a much bigger risk appetite than me there is a good opportunity from todays price. As an ex investment banker, the fact that their RCF providers are happy with all the numbers is a good sign and if Billi is as cash generative as they claim, then they should be able to get on top of that debt pretty quick - derisking in itself would give a good share price kick.

[rbewes] 30/11/2022 21:27

Adjusted profit for year £23m, year end December, so only 1 month of billi contribution as it was bought today.

Billi doing 10m ebitda p.a and growing.

adjusted profit will be >£30m next year will it not?

[bogman1] 30/11/2022 18:26

I do t want not buy U.K. shares anymore but this is crying out to me to average down..

[brucie5] 30/11/2022 16:46

Yes, I also saw this reported on LSE. Poster TWIB reports at 15.34:

"4x 215,000 buys have just gone through at 81p. That's £700,000. Eyes on."

We shall see; and whether any instis have moved their positions.

[pugugly] 30/11/2022 16:42

UT - 74.7P - Large volumes but possibly late marks at 74.7. Tomorrow will be interesting.

[pugugly] 30/11/2022 16:00

A lot of sellers in the area of 77p-76p. Taken a first nibble - next stop if it ever gets there 70p. Lowest L2 bid now 71,

[brucie5] 30/11/2022 15:47

Good points, Elsa and I suspect the market over next couple of weeks will be happy to tell us what the price should be. I may well have jumped the gun in which case I will happily hold up my hands and say so! This has been on my watchlist along with LUCE, as potential baggers on any recovery; so far I have not yet bought any LUCE as I considered the IP here to offer more of a moat and it has a progressive dividend policy as part of its strategy. That said, the latter naturally comes as a percentage of earnings, which may well now feel cramped and even get abandoned altogether if their creditors get difficult. This happened to me with SYNT, which I sold, only to see it recover from the lows on the cancellation of the dividend! However, I think on balance this a good niche company which knows a lot about its market, which is international. The (BILLI) water boiler, as it happens, also strikes me as a good growth market, as they seem to have advantages over kettles for larger use. And the company is a good cash generator, to which STRIX will now give international heft.

[pugugly] 30/11/2022 15:41

Paul Scott needs to some research re Corporation tax in IOM
"No corporation tax payable - why? Are the profits real?"
Corporation tax in IOM zero yes zero for many corporate activities.

[elsa7878] 30/11/2022 15:37

Hi Bruce, Yes and that was why I once held this (assumed it was relatively low risk and paid a dividend and so holding was like an annuity - sadly now not). CEO said in recessions demand for switches drops by 20% but bounces back. We haven't hit a recession yet that I know of, though it does feel like it in the UK. Recent acquisitions including Laica, for which a further £6 million payment is now due are middle class product companies. Many will put off buying their £200 water filter machine etc.
I would add that the patent expiry is interesting. Is that why they are so busy diversifying? Adds an extra layer of concern.