Volex Share Discussion Threads

[dicktrade] 31/8/2021 17:12

A very nice vote of confidence by Mrs Molloy, (COO's wife), a near 250K share purchase.

[ijamlon] 31/8/2021 16:27

The Downing report was indeed an interesting and detailed analysis of short term earning drivers. Had me looking more closely at the Trust (Downing Strategic Micro Cap: DSM). Trades on a 21% discount to the fund NAV of 27th August, since when their largest holding (Volex @ 14%) has risen by 8%. Impressive team and portfolio there too. Definite SIPP candidate for me.

[davebowler] 31/8/2021 14:45

hTTps://twitter.com/SCSWSharewatch/status/1432652469763465217?s=19

[greyingsurfer] 31/8/2021 14:39

This sort of thing is starting to be installed in London, and maybe elsewhere. It's not a complete solution, but it's potentially a useful step forward for charging in inner cities where access to charging points is difficult. https://www.evstreetcharge.co.uk/

[dr biotech] 31/8/2021 14:31

I think that is way off in the future if ever. If EVs take off people will get used to charging their cars at home and will see a garage fill up as an inconvenience. Even with induction you still gave to have the cable from the mains to the car as has been pointed out.

My brother in law lives in a terraced house with no dedicated parking. He won’t get an EV because he can’t guarantee parking close enough. That’s an issue that needs to be resolved.

[mrnumpty] 31/8/2021 14:05

Ijamlon . I fully agree with your scepticism about induction charging for phones . Furthermore , phones and electric toothbrushes only require a very small charge whereas the volt-amperes required to charge a car battery are probably a matter of hundreds of times greater . Would such an immense charge be dangerous for health and how would that work in public spaces such as garage forecourts or on the road outside a row of terrace houses ? The article in today’s Telegraph ( “ Magnetic field breakthrough leads the race for wireless charging “ , page 8 ) , which I presume is what has initiated this conversation mentions the induction charging being done inside “ a room 10’ X 10’ X 6’6” “ with “ two magnetic fields bouncing around inside the space “ . Even with refinements to this system , it would surely be some time before this technology could be commercialised .

[rampmeister] 31/8/2021 12:56

Red Ninja thanks for posting Downings quarterly review. Some good stuff in there particularly rationale of how they might outrun current forecasts.

RM

[charlotte2020] 31/8/2021 12:38

Thanks for posting this. It makes very encouraging reading

[ijamlon] 31/8/2021 11:44

Yes maybe eventually but the infrastructure investment and construction would have to be on an absolutely epic scale. And it would still all have to be linked up to the grids with cables and connectors. Think of induction charging for iPhones, so far it has barely made a dent in cable sales, it lacks flexibility, and most of the "wireless" charging units still have wires. Far from an imminent threat I think.

[grabster] 31/8/2021 11:17

Induction charging for EVs may eventually render the charging cable/connector obsolete - in which case that wing of the business will dwindle, and Volex presumably anticipate that. But there will be HUGE growth in cable charged EVs over the coming few years before that happens.

[disneydonald] 31/8/2021 11:06

Reference earlier comment about VLX "probably being acquired ...". IMHO, once it was clear that VLX was starting to move on from a difficult and extended restructuring (about a couple of years ago the mist started to clear), that is when Nat has accelerated his personal holding just to ensure he calls the shots should anyone try and nip in with a opportunistic bid.

Given his family background, he could idle life away without the hassle of running a FTSE listed business. However, it seems he does want to build wealth in his own right, and I would suggest that he is unlikely to agree to a take over, unless it is at an exceptional price, or on merger terms that retains / increases his control over a larger entity.

Nat has taken VLX from "a serial underperformer", and done the heavy lifting of restructuring and repositioning the business into a higher growth / higher margin business. Its a safe bet that all things being equal he will want to enjoy the fruits of his labour, and ride the tiger ... at least for a few more years.

[its the oxman] 31/8/2021 10:50

Looking like a quick march to 450p

[sooty snipes] 31/8/2021 10:48

VIVA VOLEX!!

[red ninja] 31/8/2021 08:49

Downing Strategic Micro Cap Quarterly new letter on Volex :-

hXXps://assets-us-01.kc-usercontent.com/8c961317-6aee-00a7-e4b6-ae38cd847d2d/28cbb15e-1c16-4777-9292-7d9a2f8148ba/DSM3064_Downing%20Strategic%20Micro-Cap%20Investment%20Trust_Investor%20Letter_Aug%202021.pdf

VOLEX continues to impress us, so much so, that we have been adding modestly to our position on bad days – the market is becoming impatient, and we are more than happy to take advantage of this. The company reported an exceptional set of full year results which highlighted great progress across all divisions,
but particularly within the electric vehicle division which grew revenues by 193% to $53.1 million. The electronics division grew, aided by the acquisition of DE‐KA which added $9.2 million of revenue and $1.8 million of adjusted
operating profit. Had DE‐KA been owned for a full twelve months, the full year contributions would have been $60.7 million and $12.2 million, respectively. Medical was resilient and we are looking forward to a strong recovery
here. Also of note was progress in the industrial division, which includes data centre customers, which enjoyed strong growth and where an upgrade cycle could drive significant upside.

Management have consistently upgraded guidance since we have owned it and we think that there are several avenues for upside to consensus forecasts over the next year with current 2022 and 2023 adjusted operating profit
guidance at $52.0 and $56.9 million, respectively, versus $42.9 million delivered in FY2021. We present some of our upside assumptions below.
Firstly, assuming the full 12 months of DE‐KA performance (rather than just two) would alone generate a small beat on the current $52.0 million forecast at just over $53.0 million. However, management have disclosed two key catalysts here – that they have won a significant new customer, and that they are investing in new manufacturing lines which will expand capacity by around 25%. We believe that most of this capacity expansion will be filled, such is the strength of current demand and that which will be introduced by the new large customer. Napkin maths
suggests that, all else equal, DE‐KA alone could drive upside to the $52.0 million consensus of $2‐4 million of adjusted operating profit on a fully annualised basis, with the capacity not likely to come online until H2 this year.
We keep margins constant in the above, but we would expect operating leverage to come through as more volume is put through facility.
Upside driver number two could lie in the electric vehicle (EV) segment which posted rapid growth this year, from $18.1 million in FY20 to $53.1 million in FY21. Consensus for this year indicates revenue estimates within EV of
around $70 million. Based on reported growth rates, we think this could be conservative. Whilst H1 electric vehicle revenues were not disclosed, we think these were likely $12.0‐15.0 million and we think that H1 exited at around
$5 million per month run rate. To make $53.1 million revenue reported for the full year would mean H2 revenues of $38.1‐41.1 million. Consensus suggests only 30% growth this year, and we just cannot see how the growth in
this division can collapse to such a low level despite well‐known supply side constraints. Looking more closely at the run rates, H2 averaged $6.6 million per month, which would annualise up to $79.2 million per annum. But if we
consider ramping through the half from a H1 $5.0 million exit rate, it seems likely that the H2 exit run rate revenue could be nearer to $8.0 million, annualising to over $95 million of revenue. Assuming electric vehicle operating margins of 10%, in line with the group (in reality, they are currently higher), then there is potentially a further $2.5 million of upside assuming these run‐rates continue. Finally, if management can vertically integrate this business it could be worth a further 200 basis points of operating margin, which ought to generate like‐for‐;like earnings growth, and/ or be offset against more aggressive pricing to generate revenue growth.

We are also bullish on the recovery within healthcare, with management signalling run rates now at or exceeding pre‐Covid levels. Backlog across healthcare systems is significant and as we exit the pandemic it seems likely that
investment will be required to address this. Philips Healthcare recently reported almost 30% growth in order intake in its Diagnosis and Treatment division, and further double‐digit growth in Image‐Guided Therapy, Ultrasound and
Diagnostic Imaging. Philips are a significant customer of Volex’s and this recovery in healthcare demand should benefit the company. Yet Medical revenue consensus to us look to be broadly flat versus last year’s $112.7 million
level which ought to be very beatable this year, considering the prior year was $116.0 million.

Perhaps further out, but another potentially meaningful driver of upside, could be the move to 400Gbs speeds at Volex’s data centre customers. This ought to drive replacement‐like revenues from the current 100Gbs installed base. We also note various comments from management around increasing investment in this division, particularly around headcount and engineering, which is supporting new products here, including on more customised solutions which carry a higher margin.
Finally, and perhaps the most eagerly awaited, is further bolt‐on M&A. We think the most likely scenario here this financial year, if not this calendar year, is an acquisition (or several acquisitions) similar in size to DE‐KA (i.e. around
$60 million of revenues) at around the 10% adjusted operating profit level, with Volex likely to pay in the region of 6‐7x adjusted operating profit, or perhaps slightly more for a higher growth and quality asset. It seems reasonable
to assume therefore that a further $6+ million of annualised operating profit could be brought into the group in short order.

Pulling these upside scenarios together and, cautiously aware of current uncertainty across global supply chains, we see a credible pathway to Volex achieving the targeted $65 million operating profit target on a pro‐forma basis
over the short term. A lot must go right but we think that the direction of travel here is strong. Management have proven themselves so far and we think that the market is still mispricing this compounding growth story.

[its the oxman] 31/8/2021 08:46

Yes feels like its been a while coming. Expecting it to run a bit higher now.

[johndoe23] 31/8/2021 08:18

Nice start!

[charlotte2020] 31/8/2021 00:01

Thanks for clarifying

[dr biotech] 30/8/2021 23:02

I wouldn’t say EV cables are cyclical either. That’s a growth area and will be for some time before it becomes cyclical.

[charlotte2020] 30/8/2021 22:20

Excuse my ignorance but what does.. Mean?

[ijamlon] 30/8/2021 22:09

Insideryou comes from Indonesia according to their profile. Which happens to be the home of the Bakries, whom NR accused of involvement with the corrupt disappearance of about $1bln from Bumi. Coincidence perhaps.