Following on from his popular webinar last week, Ron Shamgar provides an update on a number of the companies held in TAMIM's Australian equities portfolios.
This is an excerpt from the latest updates for the Australian equity strategies in the TAMIM Fund, you can access the full reports here:
TAMIM Fund: Australia All Cap
TAMIM Fund: Australia Small Cap Income
Empired was a highlight this month as it received a $1.35 cash takeover from French giant Capgemini (CAP.EPA). The deal values EPD at 16.7x EV/EBIT and has been endorsed by the board.
We initially took our position in EPD at 44 cents as we saw an undervalued and unloved IT player that was showing strong signs of turnaround and profitability. We made 3x our money or 200% profit here! We expect more takeover offers to emerge for some of our other holdings in time.
RPM Group (RPM.ASX)
RPM Group provided record results for Q4 FY21. Revenue came in at $15.24m, up 48.5% on the previous corresponding period (pcp). Revenue growth was underpinned by continued demand for commercial tyres, with the Wheels and Tyres division reaching a new quarterly record of $7.46m, up 41.8% on pcp. The Repairs and Roadside division also made a strong contribution to Q4 revenue of $5.15m due to strong retail numbers being reported.
The group is now annualising $80m of revenue and around $8m of EBITDA as we enter FY22. At an EV of $30m and with no debt, we believe the business is undervalued and we think the stock will re-rate higher as it achieves further scale and wider recognition from the market.
Spirit Technology (ST1.ASX)
Spirit Technology provided an update with revenue growing by 200% to $104.5m. Spirit grew revenues by 37% from H1 FY21 ($44.0m) to H2 FY21 ($60.5m). The company has continued to grow profits in H2 FY21 with underlying EBITDA of $11.5m, up 208% from FY20. Their recurring revenue base continues to strengthen, up 33% on H1 FY21 to $27.2m. Sales Total Contract Value for Q4 FY21 was a record $31.8m, demonstrating organic growth and demand for the Spirit products.
Finally, the balance sheet is strong with $24.2m of cash and available debt or net debt at only $1.5m. Management also gave FY22 guidance for the first time which we see as conservative considering the current lockdown environment. The forecast is for $155m in revenues and $20m of EBITDA. This places the stock on 9.5x EBITDA. The key catalyst going forward is acquisitions which we anticipate will be transformational in FY22.
National Tyre & Wheel (NTD.ASX)
National Tyre & Wheel provided FY21 estimates for earnings per share of 18 cents and operating EBITDA of $35.9m. The group’s balance sheet remains strong, with net debt of $15.7m. The upgraded FY21 guidance benefited from high consumer demand for some products and favourable conditions in rural markets.
In addition, management gave a cautious FY22 outlook and guidance based on uncertain trading conditions brought about by the current covid-related lockdowns. NTD expects FY22 EBITDA to be in the range of $31-33m. We believe further acquisitions are on management‘s agenda. The stock looks cheap at current levels.
COG Financial Services (COG.ASX)
COG Financial Services reported a 132% increase in NPATA to $19.5m. The result implies strong momentum heading into FY22, underpinned by government stimulus and increasing lead times on new equipment. The FY21 result implies a 5-10% upgrade to consensus forecasts for FY22.
COG continued its strong trading performance during Q4 and the Finance Broker and Aggregation segment achieved over $5.1bn of Net Assets Financed for the full year, a 13% increase on pcp. Having bought the stock in the 85-90 cent range, we decided to take some profits at $1.35- 1.40 levels.
SRG Global (SRG.ASX)
SRG Global guided for FY21 EBITDA to be at the top end of their previous $47m guidance. Strong FY21 operating cashflow with net cash of $12.2m from FY20 and net debt of $8.4m. They displayed strong margin performance with increased overall margins in the second half and minimal impact of labour and Covid-19 challenges in FY21 due to the specialist nature of their business.
SRG is well diversified across sectors and geography. The current Work in Hand of $1bn is a record. Management gave guidance that FY22 EBITDA is expected to be 15% higher than FY21. Overall a strong result and the group now has two thirds of its revenues as recurring.
Disclaimer: EPD, RPM, ST1, NTD, COG and SRG are all currently held in TAMIM portfolios.
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.