CDA - Codan Limited

[Ves]

Good result this year if you ask me - bloated inventory swell has been reversed and revenues steady while margins up.

Hmm, had another look at the balance sheet. Debt up again, and still at worrying levels. They're not generating any cash flow to reduce it after capex and product development. But they are still paying a dividend even though free cash flow is negative!

Also negative net tangible assets again.

P & L statement - why are product development costs capitalised? Makes a massive difference to the bottom line (it's barely profitable if you include them).

Same old story. Spend a heap of money developing a new product, hopefully sell a heap at top price with healthy margins for a few periods, competition comes in, cycle also changes, and margins erode. Back to square one, rinse repeat. It's a tough gig. Cyclical, lumpy earnings.

It's not my type of play.... but if they produce a good result over the next few halves it is possible that some investors may get excited, and there will be a good ramp in there, probably by the same people as last time that are armed with silly valuation formulas that extrapolate growth to the moon.

 

[JTLP]

Been given a fair old whack the last few days. I believe their FY results are due out tomorrow.
Nobody would know anything in advance though

 

[Wyatt]

So is this false breakout the start of a down trend or is there still hope for CDA in the short term?


Opinions please

 

[galumay]

So is this false breakout the start of a down trend or is there still hope for CDA in the short term?


Opinions please

Wyatt, no idea what the squiggly lines tell you about the past, but from a FA point of view Codan is a good little turn around story. I havent crunched the figures from their AR yet, but even a glance tells me that the IV will be significantly higher once I do. On that basis there is likely a gap between value and price at the moment. Will post back when I have finished my analysis for this year.

 

[McLovin]

CDA is an interesting way to play the gold price although it's a bit dirtier than buying a gold producer with product cycles thrown into the mix as well, at least IMHO. When gold is going up, sales of their metal detectors boom, and when it's going down the reverse happens. I've been in it since the start of the year and am happy to let the earnings momentum carry it for the time being. This is a take no prisoners sort of stock though, just look what happened to it in 2013 when the gold price crashed.

 

[galumay]

CDA is an interesting way to play the gold price although it's a bit dirtier than buying a gold producer with product cycles thrown into the mix as well, at least IMHO. When gold is going up, sales of their metal detectors boom, and when it's going down the reverse happens. I've been in it since the start of the year and am happy to let the earnings momentum carry it for the time being. This is a take no prisoners sort of stock though, just look what happened to it in 2013 when the gold price crashed.

2013 there were some other significant issues at play, so you should be able to avoid that sort of fall in the business health going forward. They are also managing to diversify the business with growth in the mining safety division and the defence sector.

I bought in too early, but that is a mistake I am happy to make when I get the overall decision to buy correct.

 

[ROE]

CDA is an interesting way to play the gold price although it's a bit dirtier than buying a gold producer with product cycles thrown into the mix as well, at least IMHO. When gold is going up, sales of their metal detectors boom, and when it's going down the reverse happens. I've been in it since the start of the year and am happy to let the earnings momentum carry it for the time being. This is a take no prisoners sort of stock though, just look what happened to it in 2013 when the gold price crashed.

Counterfeit play some part in that fall but they have since address that problem with security chip
I think it a cheap industrial and people are weary of the repeat of 2013 but I think the chance of that happen again probably less than 50% .

I still hold and momentum is looking good with earning and everything else around it.

 

[McLovin]

Sold out this morning. In the $1.80s it was too good to pass up, and I guess 200% in 11 months was also a nice round number . Nice sugar hit for the first half from GPZ 7000 sales, but the second half will be $8m-$12m, although reading between the lines it looks like they're expecting it to be around $10m.

 

[Boggo]

Just wondering what may have spooked this today, someone offloading ?

(click to expand)

 

[kid hustlr]

Chart doesn't have todays bar.

Bit of a beating

I hold

 

[JTLP]

Just wondering what may have spooked this today, someone offloading ?

(click to expand)

It ran pretty hard and for some reason popped into the 2.10 - 2.20 range? Profit taking perhaps...

 

[galumay]

WOW! Kaboom!! I feel a bit of deja vu, but hopefully the cycle doesnt come around again. Special div is a nice bonus. I bought in too soon but i dont mind errors of timing nearly as much as errors of ommission! Close to another multibagger for me now.

 

[galumay]

Another very bright market outlook upgrade today, target raised to $44m for FY NPAT. Will be interesting to look at the full story come the end of year results, there is plenty of cyclical risk around CDA but I do like how the business is run and I suspect it will be better positioned when next there is a significant downturn in the detector sector of the business.

 

[galumay]

A solid bump in the SP today, up nearly 10%, HY results were in line with expectations, I guess the deal with Catapiller must have attracted some buyers too. Nearly another double bagger for me, I got too early, but averaged down and have ridden it out.

 

[galumay]

Another nice little run up today, nearly 10% and nudging $3. Another positive trading update and a new contract in the mining division. This is now my best performer in the personal portfolio, I just wish I had averaged down more after I bought in a bit early!

 

[finicky]

^^^
Been a surprising recovery hasn't it? Anyone interested in the company could have a browse back over this thread to get sobered up.

Pretty unpredictable business but they're trying to diversify and even out the earnings. I'm a bit excited though by the baby Minetec division which I think it's fair to claim has been advancing in big strides in 2018 - the contract with BHP's Olympic Dam and the alliance with Caterpillar. My vibe is that the Caterpillar deal makes the Minetec arm eligible for the obscure phrase " .. it has a long runway ahead of it". How many underground hard rock mines in tbe world might be forced to follow suit?

Caterpillar and Minetec Shine a Light on Underground Operations

 

[finicky]

CAT Deal

In Feb’18 Minetec entered into an exclusive deal with Caterpillar (NYSE: CAT) to integrate its underground mining technology solution with CAT’s ‘Minestar’ product.

The partnership with CAT provides an opportunity to accelerate the path-to-market of CDA’s UG mining technology, by leveraging CAT’s network of 172 dealers across 190 countries.

UG mining software solutions are strategically important for CAT given it can assist in generating “iron” sales (trucks, machinery) which are more at the core of CAT’s business.

The revenue model for CDA as part of the deal will be structured under a profit-share arrangement, whereby CDA and CAT share in the margin generated by the Minestar product’s sale. CDA is entitled to at least 50% of the profit margin on sale of the Minestar product.

While the deal is exclusive to CAT (i.e. CDA cannot partner with a competitor to integrate its product into theirs), it does not interfere with CDA selling its own Minetec product (i.e. as distinct from the integrated Minestar product) directly to customers, as evidenced by the recently announced BHP deal.

CDA is currently working with CAT to roll out this process and will roll out the integrated Minestar product across a live mine setting in WA (scheduled for 2H FY18), in order to eliminate any bugs/issues before taking the product to market ~1H FY19.

CAT has first right of refusal to acquire Minetec should it be sold.

 

[finicky]

I don't count this as a positive but fwiw the R Montgomery cult is onto Codan and in this clip one of the crew opines that the current valuation is justified by the metal detector and radio divisions alone and Minetec is thrown in for free. Who knows though in a year or so the company might have a setback and Montgomery will be saying they foresaw it and got out early.
https://rogermontgomery.com/?s=Codan

20 August

 

[peter2]

After trading sideways between 2.00 - 2.50 for more than a year, price went to 3.00.
The daily chart shows price jumped up after a profit upgrade in May18. Since then price has drifted sideways with a little profit taking (distribution). The last three days volume has been well above average and this looks bullish. Interesting.

 

[galumay]

Its coming up to reporting time @peter2 they will very likely have a very strong result exceeding guidance so I think the strength is a reflection of the fundamentals at play. Still the best performer in my personal portfolio, a multi bagger that could have been even better if I had averaged down more when it was below $1