February 2019 Reporting Season Highlights (Part 1)

In the midst of reporting season we have already seen and met dozens of companies that have reported their interim or full year reports. In this week’s newsletter we bring to you  some of the standout results for the TAMIM All Cap Portfolios.

Altium (ALU.ASX), the leading global electronic design software company, delivered what can be categorised as the standout result so far. Revenues up 24% to USD78.5M with continued EBITDA margin expansion to 36% which led to NPAT growing 58% to USD23.4M. Its parts catalogue software, Octopart, is gaining strong traction growing 80% and subscription sales in China have accelerated over 50%. The opportunity in China is massive, with a reported 100k install base of Altium Designer users that are currently not subscribed. Post results, the stock rose 20% and is now valued at over $4B. 

What has excited investors the most is management highlighting a new strategic target of USD500M revenues and over 40% margins by 2025. This could see the company possibly earn AUD250M NPAT by then, which on industry multiples could see the business worth over $7.5B or $60 per share. So far management has exceeded all expectations it has set out for itself. ALU is in the TAMIM All Cap Portfolios.

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CIMIC Group (CIM.ASX), the largest engineering contracting business in the country, delivered its 5th consecutive year of realising the top end of guidance at $781M NPAT. Cash flow conversion of 110% was a standout and the balance sheet ended CY2018 with net cash of $1.6B. Management indicated that there is $37B of outstanding order book and significant industry tailwinds in the infrastructure and resources sectors. We consider CIM a best of breed contractor and value the stock at over $52. We own CIM in TAMIM All Cap Portfolios.

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CityChic (CCX.ASX), the leading Australian retailer for plus size women with an estimated 10% market share of a billion dollar market, reported an impressive set of half year numbers. Sales were up 7% to $76M, with comparative sales up 10%, EBITDA up 22% to $16M and an impressive margin of 21%. NPAT came in at $10M or 5 cents EPS with a maiden dividend declared of 5 cents. We estimate FY19 EPS of 8 cents. 

What’s more impressive is that the group’s rapidly growing online sales currently make up 40% of total revenue. This is best of class globally. Management has flagged a thirty store roll-out opportunity and a further twenty stores to be upgraded to a larger format. In the US, the company is continuing to develop its brand awareness and drive customers directly to its website. The balance sheet has over $30M in net cash and we value the stock at over $1.50. CCX is a holding in the TAMIM All Cap Portfolios.

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​CountPlus (CUP.ASX), an accounting and financial advice national network of 18 firms and growing, continued its 2 year turnaround progress with pleasing results. EBITA came in at $4.7M of which 78% converted to free cash flows. NPATA result was for the first time clean with no adjustments, at $3.44M. Partner firms EBIT margin, a key metric to watch out for, improved to 18% from 15% last year and 12% when the turnaround strategy was announced. 

Well managed accounting firms can earn up to 25% margins. Balance sheet ended the period with over $10M of net cash and a 1 cent dividend was declared. In addition, another financial advice firm acquisition was announced and further more deals flagged. We estimate the company will earn $6M NPATA this year which places it on an undemanding PE of 9.5x excluding net cash. We value CUP at 90 cents and is a core holding in the TAMIM All Cap Portfolios.

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CML Group (CGR.ASX) delivered strong growth in 1H19 with finance revenues up 26% on 46% growth in invoices purchased and financed to $838M. Along with the reduction in its cost of funding reducing from 9.3% to 6.1%, this led to EBITDA growth of 22% and more importantly NPATA growth of 72% to $4.4M or 2.2 cents. Management has guided to full year EBITDA and NPATA to exceed $21M and $9M respectively.

In addition, the company has invested $400k in their new invoice discounting products in the first half. This should turn profitable in 2H and quadruples CGR's addressable market as it can now target larger clientele.

We estimate CGR will earn $9.5M NPATA and 4.7 cents EPS this year. This should grow by a further 20% next year. We value CGR at 72 cents and it is a core holding in TAMIM All Cap Portfolios.

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