Business / Background:
Northgate is a UK based company that specialises in what they call “flexible rental” of smaller delivery vans to small businesses. My main interest in Northgate is not that I am so bullish on the UK and this sector, but that this company is somehow similar at least to the GoGetta part of Silverchef and I was looking for a peer company in order to be able to compare some metrics.
On a stand-alone basis, Northgate looks cheap:
Market cap: 570 mn GBP
Div. Yield 4,1%
Some readers might have noticed that I sold my Lloyd’s banking position (with a loss of -16% in EUR7 -8,4% in GBP) in order to partially fund the new Record Plc position.
So why did I sell Lloyd’s ? For this it makes sense to go back to the original write up in April 2015. At the core, I liked the business and the bank as such and thought that government selling and election uncertainty provided an attractive entry price:
Anyway, to me Lloyd’s banking Group looks like an interesting special situation at this time. The share overhang and selling should clear at some time, profits will most likely increase. Over 3-4 years I look for an upside of around 50% plus dividends or ~15% p.a. if my assumptions turn out to be correct.
DISCLAIMER: THIS IS NOT INVESTMENT ADVICE. DO YOUR OWN RESEARCH !!!!!!
Almost exactly 1 year ago I started my exploration into the Australian stock market with DWS Ltd. and Silver Chef.
As some readers know, I didn’t buy DWS (I only put it on my watch list) and bought Silver Chef instead. Now, 1 year later it seems to be that I backed the “wrong horse”:
DWS is up +42,5%, SIV is down -19% (in AUD). So let’s look at DWS first.
This is something that ran over the ticker today with regard to the Kuka case:
CFIUS Likely to Challenge Midea-Kuka Deal, Height Says
By Kasia Klimasinska
(Bloomberg) — CFIUS will likely challenge this deal “because Kuka has a direct relationship as a primary robotics supplier to Northrop Grumman,” Height analyst Nils Tracy says.
- “At a minimum, we expect the transaction will face an extended CFIUS review timeline and a number of divestures”
Following my previous posts on Australian stocks and Australian leasing companies in particular, it is not a big suprise that my first Australian investment is an Australian leasing/financing company called Silver Chef.
The company / the business
Silver Chef is an Australian company which according to the website “delivers equipment funding solutions that help small businesses reach their full potential.”
The company went public in 2005. Some key figures (at 9,20 AUD/stock)
Market cap: 323 mn AUD
P/E 2014/2015: 15,2,
Div. Yield 5,7%EV/EBIT 20,2
After my post about Australian Leasing companies a few days ago, I decided to start with Silver Chef, a company I found interesting.
Negative Free cash flow at Silver Chef
As many other value investors have, I have incorporated the concept of Free Cash flow into my investment process. A company which produces great earnings but no free cash flow is often a big red flag (see for instance the Globo Plc case)
So a first look at Silver Chef seems to indicate that they have a big problem. Great earnings but negative free cash flows and increasingly so:
One very interesting aspect about Australian stocks is that there are many listed companies whose main activity is some sort of leasing. Those companies are all quite profitable and relatively cheap.
So far I only had looked at one leasing company, AerCap, the US based Aircraft leasing company.
The leasing business simply stated is asset based lending without a banking license. The client, instead of buying something outright and recieveing a loan from a bank, “leases” the good, pays installments and hands over the good after some time back to the lessor.
The leasing company therefore has the following main risks to bear: