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NTD - NTAW Holdings

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A positive update to guidance following the last 4 months trading, seems like the acquisition is already bedding down well & adding value.
Remains to be seen how well the new business performs post covid, its priced now as if the present is the new normal, like so many other beneficiaries of the pandemic.

I won't be adding at current prices but may look to increase position size on any decent dips.
 
Don't have much to add..... Happy with the trading update of course, looks like it is going well. Will be waiting for the half yearly to have a closer look at how things are going. Management have indicated that they prefer to hold cash / pay down debt which I am also happy with. Still a happy holder.
 
Yes, @Jackass, I noticed that bit about considering future divvies in the light of debt levels - something I wish more companies considered.
 
Nice announcement made after cob on Friday arvo.

I don't want to speak too soon, but I the board appears honest and straight to the point, I think I'll be a long term holder.
 
mcgrath111 said:
I don't want to speak too soon, but I the board appears honest and straight to the point, I think I'll be a long term holder.
Click to expand...

Yes they seem so, I have been impressed with their communications since I took a position last year. Of course its never going to be an exciting business of have massive growth, but owning these little companies that operate in boring and overlooked sectors can be very rewarding.
 
Yep very good announcement on Friday. Some quick and dirty back of the envelope number crunching suggests that even after the massive run up in the share price, these are not exactly expensive.

With the caveat from the latest announcement about the uncertain business environment noted, I make these to be trading on an annual EV/EBITDA multiple of ~ 4.6 at a share price of $1.05 which is hardly demanding.

Looking at the cash that they have managed to accumulate in the 4 months since the T4U buy, they have managed to accumulate ~ 10.8 mill. Annualising this gives a P/CF multiple of 3.7, once again hardly demanding.

As others have noted management seems to be honest and competent. However for me the question is what do they do with this cash, as the high Aussie $ and low interest rate tail winds may change very quickly. For me I would prefer to see them pay down Debt very aggressively, or at the very least hold the cash and get into a net cash position as quickly as possible.

That said, I still hold these and do like them. They just have to keep doing what they are doing for this to be a good investment. No massive growth assumptions needed.
 
@Jackass management have stated an intention to pay down the debt quickly, its definitely a test of their capital allocation. I will be watching for execution in the HY report, until then I will continue to hold. Its now a double bagger for me in under 6 months which is pretty crazy for a tyre seller!
 
A trading update released late yesterday has NTD guiding for a better than previously expected H2 2021, they are indicating basic EPS this year of 17c. Management appear to be consistently under promising and over delivering - a hallmark of some of the better businesses I have owned.
 
NTD popped by up to 15% today on no news, its pretty tightly held so investors probably have to just pay up if they want to take a position. Obviously something has stirred some interest!
 
As expected, a very strong FY 2021 for NTD, this has been a great investment for me. 8c divvy this year is about a 15% return on my cost price 1 year ago! Up 140%.

 
NTD has added a further business

National Tyre & Wheel Limited acquires Black Rubber for up to $26.3 million in cash and scrip
  • Highly complementary strategic fit, increasing NTAW’s truck tyre customer base and introducing a tyre retreading capability
  • NTAW annualised revenue expected to be more than $520 million
  • EPS Accretive, expected EBITDA contribution of $5.5m and NPATA accretion of 2.5 cps annualised
The purchase price for the acquisition is a combination of cash and scrip and is payable as follows:
▪ a cash payment of $19.9m will be made at completion;
▪ the issue of 1,071,430 fully paid ordinary shares in NTAW at an issue price of $1.12 per share, based on the 10-day volume weighted average price per share in the period ended on 29 October 2021, with a value of $1.2m;
▪ an earn out payment up to $2.6m based on the Black Rubber’s EBITDA result in FY22; and
▪ a further earn out payment up to $2.6m based on Black Rubber’s EBITDA result in the year ending 30 June 2023 with the ability to earn a “catch-up” if the EBITDA target for FY22 is not met in full.

The cash component of the completion payment was funded from NTAW’s existing cash reserves and debt facilities. Pushing higher up to $89M

More than 60% of Black Rubber’s revenue comes from selling truck, bus and agricultural tyres to commercial fleets and other B2B customers. Usually, the products are accompanied by one or more of the value-adding services. Black Rubber operates as a tyre importer and retailer in WA (Perth and Port Hedland), QLD (Brisbane) and NSW (Sydney).

Wrt commercial tyres for trucks and buses; customers in this segment include truck fleet operators who prefer to deal with suppliers capable of an expansive product and service offering covering, amongst other things: pricing based on a cents per kilometre solution; tyre performance monitoring; fitting at customer depots; and retreading capabilities.
 
H1 of 2022 hasn't been good for NTD, I now wonder if their aggressive acquisitions may have been ill timed given the obvious impacts of covid on the business. The debt is my biggest concern, its now grown to the point that I would not invest in the business. The negative FCF is a further worry. I am going to have to have a think about what I do with my position in NTD.
 
Agree. I got out of this one a couple of months ago when shipping costs started to go crazy. I figured that excessive shipping costs would destroy their already razor thin margins. A quick scan of the results this morning and I am not keen to jump back in any time soon.

Am also a little bit disappointed in management. Previous commentary indicated that they were looking to keep the debt levels down, instead it has gone up.
 
And down 15%, touching 90c


Most of these conditions did not exist throughout FY22.
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Unambiguously ambiguous.
 
I should have sold in Febraury when the rising debt was the first red flag for me. Broke one of my key rules which is no or very little leverage. The drop in profit due to short term impacts doesnt worry me, many businesses will have these headwinds over the next couple of years, its the fragility created by the leverage that makes it a high risk investment now. I think earnings/FCF will drop by 50% this year.
 
With the cost of fuel, people are driving less and the last things people want to spend money on when things get tight, is the car.
 
sptrawler said:
With the cost of fuel, people are driving less and the last things people want to spend money on when things get tight, is the car.
Click to expand...

Agreed, but that doesn't worry me, economic cycles will come and go, profits go up and down. Its the capital misallocation and resultant increased risk that I should have sold out on.
 
Dona Ferentes said:
Wheels come off . Down 10%
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And again, dropping on the update Now 55c and way down, a near 70% fall in the year. Not much tread left?

NTD expects 1H23 revenue will be between $290m and $300 ($251m in 1H22) at an estimated gross margin of 26.5% (29.0% in 1H22), delivering Operating EBITDA between $13m to $14m ($20m in 1H22) and Operating NPATA between $1m to $2m ($8m in 1H22). Operating EBITDA will exclude non-recurring and abnormal expenditure of approximately $0.7m. It is pleasing that sales volumes will likely meet previous expectations.

However, gross margins have not
been maintained in some business units following substantial increases in cost of goods over the past 12 months. In response, NTD continues to negotiate lower prices from suppliers and raise selling prices to restore gross margins. The recent significant reduction in inbound freight costs and a continuing and sustained improvement in the AUD:USD exchange rate will assist that effort.
 
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