Treatt Share Discussion Threads

[edwardt] 04/12/2024 08:49

good to see ROCE improving- i added this morning.

[edwardt] 04/12/2024 08:49

it popped 6 before close yesterday.

[mrbeaky] 04/12/2024 08:35

Ahead of expectations, market reaction - DOWN 7%, ridiculous sometimes

[rimau1] 04/12/2024 08:08

Been on my watchlist and nibbled a starter position at 412, lazy question do TET expect a tarrif impact from Trump or do we have local manufacturing in the US

[74tom] 04/12/2024 07:38

Always pleasing to see PBT, EPS & dividend ahead of expectations. Overall this is an excellent small cap, with genuine potential to develop into something much larger.

[cfro] 04/12/2024 07:29

Solid results and surprised with the increase in the dividend.

Love the q&a to himself - the new CEO - giving reasons why he joined the company and the prospects and growth opportunities going forward.

Very impressive team at the top..

[essentialinvestor] 02/12/2024 12:17

I've now bought everything back I held previously. Hopefully a nice week, but obvs no guarantees, as always.

[simon gordon] 01/12/2024 16:03

IC - 14/5/24

According to Peel Hunt, Treatt’s closest competitors currently trade on around 19 times consensus forward earnings and the sector leaders at 36 times.

-

Consensus forecast for 2025 = 25.8p.

25.8p x 15x = 387p

25.8p x 20x = 516p

25.8p x 25x = 645p

25.8p x 30x = 774p

-

The key will be whether they can ignite an earnings upgrade cycle. It reads like TET could double revenue without heavy capex. They've invested in the sales team and have new products and facilities - it's all to play for.

500p looks like a fair target and 600p if they start beating the 2025 forecast.

[simon gordon] 30/11/2024 22:13

November has had the highest volume and worst candle since August 2022.


free stock charts from uk.advfn.com

[simon gordon] 30/11/2024 13:58

Hi EI,

It would take some truly dire news for it to break hard below 400p.

I think it looks good technically and operationally to re-rate at some point; whether that's in 25 or 26 is an open question.

[essentialinvestor] 30/11/2024 13:06

Simon, I know you like your charts.

I'm guessing we are due a significant and sharp/compressed price move for Treatt, while that's not guaranteed to up upwards! we should have confirmation by next Wednesday.

[essentialinvestor] 30/11/2024 11:40

I had never heard of.. citrus greening..
before this week.

[edwardt] 30/11/2024 09:58

I guess treatt does more with less - so hopefully can expand margins to offset volume decline

[essentialinvestor] 29/11/2024 00:30

loofy, thanks for the above, I had not appreciated the decimation of Florida's production - just read up on this.

[loofyloofy] 29/11/2024 00:04

EI - Florida ´s crop is a complete irrelevance these days, the orange crop having fallen from more than 250M boxes 20-25 years ago to today ´s current 15M boxes. The fact that TET have US production is v positive, as the company could in theory set up two profit centres to help obviate a negative ´ginger nut´ trade policy . Of much more relevance is a recovery in the Braz orange crop, which has had 3 years of decline, unprecedented. Citrus as a category (now called heritage) is app. 50% of the TET business, so it would be wise for the new CEO to get his head around this category sooner rather than later.

[essentialinvestor] 28/11/2024 22:30

Tom, some of the recent move (unless there's something unexpected next week)
is concern around Trump - potential tarrifs
coupled with proposed mass migrant deportations. The later has significant implications for US agriculture, in particular US citrus crops.

I flagged this up following Trump's victory for this reason.

[essentialinvestor] 28/11/2024 20:58

Well hope so as I added today.

Difficult market currently for many UK listed smaller companies.

[74tom] 28/11/2024 20:51

I agree it does provide some context, but I don't think it explains why shares are on a 10% EV/FCF yield...

On the 30/11/21 when TET released their FY21 full year results, shares traded at £11.50. They reported Adjusted EBITDA of £23.1m in FY21 vs this years trading update figure of £24.7m, so they have exceeded the FY21 high, albeit not by much.

Should shares really be trading at 34% of that valuation?!

Part of the reason could be due to the fall in return on capital employed, which has been caused by the addition of significant fixed assets (the CAPEX spend on the new premises / factory).

At H121 Capital Employed was ~£100m & last 12 months operating profit was £19.5m, so a 19.5% ROCE. At H222, with the addition of net debt & fixed assets, Capital Employed had grown to £155m and ROCE had halved to 10.1%.

Since then it has steadily improved, and as net debt is eliminated this will continue. I estimate Wednesday will show ROCE of ~14.5%, so whilst not back to 2021 levels, it justifies a share price well above where it currently sits (in my opinion).

[essentialinvestor] 28/11/2024 18:05

Tom, I take your point on the H2 growth number, however I was referring to multi year strong growth in profitability.

Treatt made £12.9 Million on (adjusted) pre tax in FY '17, and £20.9 Million on pre tax in FY '21.

We are still below FY '21 profitability and this, to an extent, 'explains' the current rating - or at least provides some context

[simon gordon] 28/11/2024 17:27

400p a strong multi-year support zone.

Could be the first time since it listed that it closes with three down years.


free stock charts from uk.advfn.com

[simon gordon] 28/11/2024 16:10

TET becomes particularly compelling when considering three key factors: the robust capacity platform established by the former CEO, the recent hyper-professionalisation of internal operations spearheaded by the newish CFO, and the addition of a new CEO with a strong background in sales and business development, coupled with extensive experience in the American market. Together, these elements create strong potential for the share price.

[74tom] 28/11/2024 15:51

@Loofy, I think the cash flow will do the talking, especially now they aren't needing to invest heavily into the new premises. They could materially up the dividend now they are debt free, as well as stepping up R&D investment to drive new revenue streams. The VOX piece is also useful colour re. the CFO, who sounds like a superstar.

Lot's of retail buying today, but being walked down on the SETS order book, exactly as it was between hitting £5 in late August to 415p in early October. It's just classic LSE right now - the market needs new institutional investors with mandates to invest companies like TET, otherwise they will all be taken private at a pittance to their future fair value.

[74tom] 28/11/2024 15:43

@Essential, you're incorrect on the first point re. growing more quickly.

They were a £110m turnover business in 2017, in the 14 half year periods since there have only been 2 half years where growth has exceeded the 16% recorded in H224 (18.5% in H218 & 16.5% in H222). However, in terms of absolute revenue growth, the ~£11.6m in H224 is a record.

Low interest rates & Covid are relevant, but don't justify the business trading on a current free cash flow yield of nearly 10%...

In today's apathetic UK market, a share like this will only move on results, Wednesday should be interesting.

[loofyloofy] 28/11/2024 14:09

Agree entirely with you, 74T - it will take time for the mkt to realise this company has shifted so far away from commodity items, and into long term good margin based areas. This is more like a mini flavour company, and should be compared and rated alongside its larger peers, who trade at nearer 30x earnings. They have never fallen below 2x divi cover - this conservatively run company unlikely to remain at such a lowly valuation, esp considering its top new factory.

[simon gordon] 28/11/2024 14:03

Interesting discussion on TET at 40-minute mark:

Vox Markets - 28/11/24

The Exchange with Abby Glennie of abrdn