CDA - Codan Limited

[finicky]

@Dona Ferentes yeah, if I changed it that would be a giant sell signal if that's your meaning.
Still going with the @DaveHcontrarian prophesy but know now his dates are wobbly. Latest phrasing is melt up going into the election for potus.
Still like wearing a ballistic vest in the hood feeling with some cash in the bank

 

[finicky]

@galumay I will be fully reinvested in CDA if there's a crash. Selling CDA was purely a matter of it being my largest position and I wanted defensive cash. Otherwise it was a sort of forever hold, great little company as you know.

 

[frugal.rock]

Otherwise it was a sort of forever hold, great little company as you know.

I love the romantic attachment.
So sweet! lol.

What codan needs is a guv military contract or 2... USA.
That would be a catalyst for a
push to $20, in my opinion only.
Not holding.

 

[over9k]

alright finicky you've convinced me to put it on the watch list. what's your next move?

 

[finicky]

@over9k
Mine? Wait .. it might be months before I buy seriously again.. the bent is to more selling. Not CDA though, lol
I have put in a bid for 20,000 Venus Metals (VMC) @21c though fwiw. Punt on recent drilling results and very close nearology to Ramelius's Penny West.
I'm no trader though mate, best look to flighty promiscuous types like @frugal.rock for that, he took a well timed chomp out of CDA around where I sold. I hold onto stocks for like decades.

 

[frugal.rock]

I'm no trader though mate, best look to flighty promiscuous types like @frugal.rock

Flighty and promiscuous?
Flighty yes, it preserves profit and reduces losses.
Promiscuous?
You should be flogged with a cat o 9 tails for the offence and consider yourself let off lightly....

 

[galumay]

Otherwise it was a sort of forever hold, great little company as you know.

Yup, I am hearing ya. The parcel I sold was to release some cash for a project, I sold at $6.73, but in hindsight I should have borrowed the money and kept the CDA shares! Thankfully I still have a substantial holding which is certainly in the forever hold category.

 

[Dona Ferentes]

Strong demand for metal detectors has encouraged Codan to raise guidance for its first half profit by 33 per cent. The company had guided to a half year profit of $30 million at its annual general meeting in October but now expects $40 million despite its tactical communications business being "significantly" down on a record first half in the 2020 financial year.

The company said there is strong market anticipation about the launch of its new feature-packed detector in the third quarter and its communications business will enter the second half with an order book in excess of $30 million. Both will contribute to a "strong" full year result.

 

[finicky]

Behind @Dona Ferentes but I won't waste my post. Metal detectors going great, tactical communications (radios) not so good - not this HY anyway.
Up 5% today with a bullish engulfing candle on the daily chart, if it holds, but I am sceptical that CDA will soon regain the ground above $10.50 support/resistance - still richly valued imo.
One of the best four stocks I have invested in - I sold ~2/3rds of my holding months ago @ ~8.50 to cash up for a crash but will hold the rest come what may.

Daily

 

[galumay]

It will be interesting to see how much of the revenue is the result of Covid once things return to normal. Like you @finicky I think its significantly over priced now, but I have no intention of selling any more.

 

[finicky]

Misread the momentum of CDA as it blew through 10.50 without delay. Seems to be coming out of a pennant today, albeit on small volume, and might be heading for its recent ATH. I assume its is benefitting from moves in the gold price (gold detectors) but that's just a guess obviously. I sure wouldn't be buying it at these prices but its an incautious market

1 Year daily, 50/200 dma

 

[Dona Ferentes]

mid 13's

Codan has entered into an agreement to acquire Domo Tactical Communications from a private equity company. DTC is an established technology provider for high bandwidth wireless communications with specialist capabilities in MIMO Mesh networks. The company will pay US$88 million (A$114 million) upfront.

 

[frugal.rock]

mid 13's

Watch it gap up and go for a run tomorrow.... just because I missed an order around $13.20 this afternoon.

 

[galumay]

Just such a great business, so well managed. An $88m USD acquisition, immediately accretive, no debt/no cash deal, paid in full with cash so no dilution for holders.

 

[Dona Ferentes]

Codan Limited (ASX: CDA) has entered into an agreement to acquire 100% of the shares in US-based company, Zetron, Inc., from JVCKENWOOD Corporation. Established 40 years ago, Zetron is a leading US based company providing mission critical communications and interoperability solutions for public safety, transportation, utilities, healthcare and natural resources customers. Zetron operates from locations in the US, Australia and the UK, with more than 200 employees.

The acquisition comprises an upfront cash payment of USD45 million (approximately AUD59 million), which will be funded through a combination of existing cash and a recently approved banking facility of AUD100 million. The acquisition is on a cash free, debt free basis and is expected to complete by 30 April 2021, subject to obtaining change of control consents and other conditions precedent standard for transactions of this nature.

Zetron is expected to contribute approximately AUD67 million of sales and AUD8 million in EBITDA under Codan’s ownership in FY22 and therefore it will be earnings per share accretive.

Zetron - A Public Safety Communications Company

CDA long term chart

 

[galumay]

Here we go again, another sensible acquisition, looks to be a very good fit, paid about 6x EBITDA, so not expensive. Will require a bit of debt to pay, but again no dilution for holders and with the cash CDA spews out the debt wont be an issue.

 

[Dona Ferentes]

Here we go again, another sensible acquisition, looks to be a very good fit, paid about 6x EBITDA, so not expensive. Will require a bit of debt to pay, but again no dilution for holders and with the cash CDA spews out the debt wont be an issue.

was waiting for your sensible views .... it seems an appropriate acquisition, specialists but/ and going for lower intensity Addressable Market (= less competition?), based on the US sectors they operate

• Motorola and AT&T are dominant
• Only Zetron and Motorola offer full suite of applications
• Zetron focused on rural and suburban market
• Zetron opportunity approximately 1/3 of total market
• Targeting EBITDA of AUD $8m in FY22

 

[galumay]

I am screenshotting that compliment to wave in my wife's face!

It will be interesting to see if they have any other targets, maybe not now they have had to use a bit of debt? They have obviously being doing some pretty intense research, finding a private company like this in the US.

The acquisitions do add risk to the business, we all know how poor the track record is for Aus companies acquiring US ones, but at least they appear to be sticking to their knitting, and while SH's remain undiluted, I am reasonably comfortable.

For me it probably means scrutinising the business a bit more closely over the next 1-2 years, rather than just leaving it on autopilot!

 

[darien44]

I purchased Codan several months ago. I have used their detectors for years and always knew how highly regarded Minelab is among prospectors. Unfortunately, it never occurred to me to look closely at the company. When I did I realised what good fundamentals it had.

The share price might be a bit ahead of itself having benefited from Covid, but being a long term investor looking to buy quality and hold hopefully forever I really don't care.

 

[finicky]

Not all their acquisitions work out all that well. The Daniels Electronics one hasn't fulfilled its promise yet that I can see. They've discontinued Minetec which they once acquired - sunk a fair chunk of money and effort into that. They got rid of some satellite business.

I have no great complaints about Codan, i think the worst one would be that they allowed the Chinese into their data base because a roving Codan manager hooked up to the house wifi in his Beijing hotel room. Also they were not able to wall off their Minelab detector tech from hackers and counterfeiters which meant that Codan was competing against knock-offs of their own devices in the Africa market. The equity market lost all confidence in the company around that time and I think CDA got down to 50c. I didn't add any and felt I'd possibly lost my investment.

How can it be worth what it is priced at today? Its earnings per share growth over the last 9 years has been ok but it is not high growth, not stellar. 2020 was a record year for eps and the Return on Equity was 28%. I am a bit arbitrarily going to use ROE of 22% as a more normal recent performance. Ok what's that worth as a multiple of book value in a low bond yield context? If you're foreseeing the same historical growth rate of earnings maybe 7x the bv? It has cash, no net debt and a low rate of share inflation. You choose, or apply your own method, that's just what I would rate it at if feeling generous and if I reckoned it would continue its mild rate of growth. Book value fy20 was 1.37. So fair value might be 7 x 1.37 = $9.60. And then there's a need to buy it cheaper than its value or what's the point? Codan currently trading at 11.5 x book value. In a heated market, I suspect its being rated on its most recent year (fy20) performance rather than its long term performance.