is financially strong, consistent earnings grower, diversified
leader in several cyclical and non cyclical niche markets paying a consistent
dividend down 77% for the past year.
Luck or in this case bad
luck (over reaction) is mean reverting. Multiple years of high ROIC reported in
excess of 15% is not luck. Hence it logical to expect Codan will reverse the
negative 77% 52 week change. Intrinsic value did not dramatically change over several
months for this successful company founded in 1954.
Rare combination of deep value, quality and mean reversion opportunity.
Codan Limited (CODAF): CDA :(AU) founded in
1954 designs, manufactures, and markets communications equipment, metal
detection products, and mining technologies. Their core products are radio
communications and metal detectors/mining technology. Also they provide multilayer
printed circuit boards through IMP Electronics Solutions subsidiary. Codan
markets include government, business, humanitarian, security, military and
consumers in more than 150 countries.
Codan has manufacturing and
corporate offices in Australia with representation in the United States,
England, Germany, India, and China. Additionally a manufacturing facility and
representative office is located in Ireland.
So how does Codan (CODAF) (CDA.AU) offers a unique combination of value, quality and mean reversion opportunities.
Market Cap = 121.20M Enterprise value = 184.08M
Current price = .68 USD or 0.7050 AUD
52-Week Range in AUD = 0.5925 - 3.1600
06/10/14 1 Australian Dollar equals 0.94 US Dollar
Trailing P/E (ttm): 5.52 , Price/Sales (ttm):0.08,
Enterprise Value/Revenue(ttm): 1.18
Enterprise Value/EBITDA (ttm):5.08
Profit Margin (ttm): 14.22% ,Operating Margin (ttm): 18.74%
Return on Assets (ttm): 9.10% ,Return on Equity (ttm):
20.43%
Revenue (ttm):155.63M , Revenue Per Share (ttm): 0.88
EBITDA (ttm): 36.24M ,Net Income Avl to Common (ttm): 22.32M
Total Cash (mrq): 6.04M , Total Cash Per Share (mrq):0.03
Current Ratio (mrq):3.37
Book Value Per Share (mrq): 0.63
52-Week Change: -77.90%
52-Week High (Jun 13, 2013): 3.10
Shares Outstanding: 176.94M ,Float: 82.02M
Dividend Indicated Gross Yield 17.22%
Cash Dividend (AUD) 0.0150 ,Dividend Ex-Date 03/07/2014
5 Year Div Growth 5.51% ,Next Earnings Announcement 08/22/20
Exceptional historical growth in BV,revenue,and EBITDA (see table below for 12 month, 5 year and 10 year periods).
Annualized Growth Rate
Mean reversion candidate with an unjustified 1-Yr negative stock price change of -76.00%
High quality indicated by a Piotroski F-Score score of 7 (0 to 9).
Pitroski
F- Score is calculated by reviewing and identifying positive or negative CHANGES in ROA, cash flow return on assets,
net assets, quality of earnings by reviewing accruals, leverage and working
capital, share count, gross margin and asset turnover.
Quality metrics, Gross Margins and exceptional ROIC
Revenue annual growth % for the periods 5,10 Year and 12 months 11.00%, 6.30% and -24.60% respectively
EBITDA annual growth % for the periods 5,10 Year and 12 months 13.20%, 29.40% and -51.30% respectively
Book Value annual growth % for the periods 5,10 Year and 12 months 4.90%, 17.60% and 4.60% respectively
Deep Discount to intrinsic value based on dividend yield, growing book value supported by years of positive free cash flow.
A review of half-year results reported February 2014 for the period ended December 2013 provides valuable insight. Less than expected YOY results contributed to a dramatically lower stock price, -77% 52 week change. But management continue to see long-term growth opportunities in all three segments. Furthermore, management was proactive to the lower sales performance.The expense base was reduced by 10M per annum. Yet, despite this restructure, Codan will maintain investment levels in new product development. This will ensure new product platforms are market available as needed.
Managment's Outlook
"Although sales have been softer during the past nine months, our baseline metal detection business remains strong, and we remain confident of future growth as we continue to develop new market-leading products and extend our global reach, all supplemented by the upside of future gold rushes.
Radio Communications continues to broaden its business by leveraging off the new
Envoy product platform, expanding into new growth markets and offering an integrated solution incorporating our land mobile radio capability. Although history shows our sales can sometimes be volatile due to the nature of our gold detector markets, where gold discoveries can occur at any time and anywhere, we have a solid baseline business from which to grow and are supplementing this with heavy investment in new product development and entry into adjacent markets."
Long CODAF
Long CODAF
