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CDA - Codan Limited

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So it's the gloomy Garpal t/a school of paranoia against the finicky school of bouncy bouncy (recently somewhat tarnished by CHN due to dark pool intervention). I think it's fairly obvious who will prevail.
A quick lesson out of sheer good will since notion of divergence was raised - hidden divergence on the daily rsi from June - Aug?

 
Gloomy Garpal school of t/a has gained the upper hand but I am still digging my hole deeper on perceived valuation grounds and added 1,000 @ 6.78; price immediately drops to 6.73.
Maybe it's something to do with a reaction to lower cash conversion in the fy22 result due higher inventory and higher receivables? They do offer an explanation for the higher inventory which is acceptable - to me anyway.
Price still hasn't taken out June low at which point I will concede (but probably still add)



 
Very tempted to add some more at sub $7's, such a large MoS at that price.
 
What do you get for a value galumay? To me, overlooking the poorer cashflow fy22, I used the median ROE over 9 years which was fy18 of 22% which to me is worth > 4X book value of $2. Noting the recent 3 years have well exceeded FY18 ROE. Adding nothing for potential growth. So at least $8 of value I would have thought. Assumes no problem with debt level which I can't assess but looks moderate.
 
Interesting @finicky, I use a different process, also largely normalising for the FCF in FY22. I use my own shorthand, reverse engineered DCF and basically end up with a similar range of value around $8.

That is a very conservative calculation though, in light of the debt, inventory build and assumes very low growth.

Realistically its not going to stay at these levels if there are no black swan events, the yield alone provides a floor.
 
Almost 4m shares dumped in the first hour of trading - enough to place today with the highest volume days over the last year - in 1 hour. In fact there has only been one day in the last 5 years to significantly out-volume today's early trading. The June low isn't looking looking great. I still wonder why McGurk left; did he see something distant coming down the pike.

I Year Daily
 
As you are @finicky , I am surprised by the fall in price.

McGurk started the business a long time ago so entities associated with him all the way down to the as yet unborn would have an interest in CDA and it may be just family "stuff" cashing out.

OR

There is something chronically wrong with CDA, as yet unannounced.

I'll not be back in until it becomes more clear as to what is up.

gg
 
Not really, the market clearly holds a different view to me about valuation. What might I be missing that they are seeing? Perhaps normalised earnings/FCF look more like 2019? If I reverse engineer a share price of $6 i get an implied FCF of round 40c which would sit between 2019 and 2020. (when CDA was last round $6 I note!) Also concerns about the inventory? The continued, if lessened, reliance on detector business?

If that is the case I think the quality of the business is being misunderstood and some of the other metrics like re-investment rate and ROIIC as well as the lack of debt and cash hoard mean its probably more likely than not to continue to reward patient shareholders.
 
Now that Codan has sold Minetec to Caterpillar. July 2021 around the time of the peak value on the chart posted below.

Caterpillar buys Minetec for underground tracking and data - Australian Mining

Caterpillar has agreed to purchase mining data and communications company Minetec for approximately $US14 million ($18.07 million) from Codan.
www.australianmining.com.au

Are Codan back to just being a metal detector company? If so could the negative outlook be due to the elevated fuel prices dampening outback travel, the opening of the borders reducing the prospector traffic and the possible excess stock on the second hand market post covid? Also add to the previous issues, the fact increasing interest rates will reduce disposable income, especially for luxury items.

 
No, @sptrawler, the opposite really, the other sectors have grown strongly, comms is now 50% of revs. But I think its possible that concern about the excess inventory and potentially lower sales of detectors for the reasons you stated, are driving investor sentiment about CDA.
 
Yes, was taking off as I was posting and didn't look back so my bid didn't fill - that would be like winning, haha. Leaving it sit. Do the opposite.
 
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