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Clime Asset Management

Clime Asset Management is an absolute return value asset manager. We are run by a team of experienced investors, for investors. Through our two main trading entities, Clime Asset Management, our funds management business, and StocksInValue, which provides company valuation and research to 1,800 members across Australia, Clime offers a range of services and products for retail and wholesale investors.

Where to find opportunities in large companies

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

There is so much confusion about the stocks in the ASX’s large-caps index, the ASX 50. Some investors see them as ‘blue-chips’ by virtue of their size and longevity, and thus see them as long-term portfolio holds. Others think the ASX 50 is largely useless: a motley, concentrated index of... Show More

What's driving markets right now?

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

In this article we look at some of the more topical subjects influencing financial markets and analyse a few interesting charts. We start with rising rates – the message being delivered by the Federal Reserve’s Janet Yellen in uncharacteristic straightforward terms. Then we cast an eye over President Trump’s tax... Show More

CBA becoming compelling value as the stock falls out of favour

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

The central argument of our thesis on CBA has been the stock would lose most of its premium to its major bank peers as ANZ and National Australia Bank derisked and improved their profitability by correcting their strategic mistakes (eg. divesting non-core businesses), managing their capital more efficiently and resuming... Show More

Economic Warfare

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

North Korean leader, Kim Jong-Un, has confirmed that the Democratic People's Republic now has thermonuclear capabilities after testing it's newly developed hydrogen bomb at the country's nuclear test site. Aside from obvious political, military and environmental implications, this could have considerable economic ramifications, especially for Australia should it get caught... Show More

SDA potentially a great opportunity for patient investors

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

The market is littered with the corpses of over-geared, would-be consolidators that grew too fast and didn’t fully integrate acquisitions along the way. You needn’t even stray outside of the telco sector to find a recent and very public example in Vocus Group (ASX:VOC). You would therefore be forgiven for... Show More

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Is Citadel a buy at current prices?

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

Citadel Group (ASX: CGL) is a leader in the development and delivery of managed service solutions to a range of government departments and private sector businesses. We believe CGL’s competitive edge is their expertise and deep experience in ‘managing knowledge in complex environments through integrating know-how, systems and people to... Show More

Smaller Companies: A guide to bargain hunting

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

Small-caps offer opportunities for outsized returns, however it’s also an area in which to be especially cautious. Simply buying a basket of smaller companies in recent years probably wouldn’t have yielded good results, as the chart below starkly reminds. You have to be selective. Show More

Is CBA symptomatic of a perverse cycle?

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

The revelations that the Commonwealth Bank of Australia (CBA) is being taken to court over alleged AUSTRAC reporting and compliance breaches will overshadow its annual result this week. The action is a civil one and a massive penalty is likely. However the monetary penalty is unlikely to affect the CBA... Show More

Three small-caps generating income

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

Investors can be drawn to small-caps because the segment often houses companies with unappreciated growth prospects. The challenge of course is to avoid the numerous failures and investment speculation from creeping into portfolios. Show More

Is it time to sell the bond proxies?

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

One of the strongest and most predictable relationships in global equity markets over the last few years is that of bond yields and so-called ‘bond proxies’. As the name suggests, a bond proxy is a stock that is held in place of fixed interest securities, primarily for yield. They are... Show More

Raising capital without destroying shareholder value

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

When it comes to raising capital, one aspect that requires more attention than it generally receives is how the structure can significantly affect the outcome. We believe management should seek to minimise the dilution of existing shareholders to preserve the share price and maintain control over the share register. Raisings... Show More

Traversing an environment of persistent low interest

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

In a world post-2000, we find ourselves operating in the ‘new economy’ following the tech bubble and the GFC. Accordingly, the rules of the game have changed. Investors need to consider persistent low interest rates and low inflation, employment and labour participation shifts, and technological advancements, as well as ageing... Show More

Australian media must consolidate to survive

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

The media market is rapidly evolving, as traditional media makes way for new digital formats. Unfortunately, industry regulation is slow to catch up, with outdated ownership laws that predate the advent of the internet. The ACCC's raised concerns of the proposed merger between APN Outdoor and oOh! Media sets a... Show More

Australian banks: little to get excited about but the derating is probably done

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

Major bank equities have derated significantly over the last few weeks with a selloff in response to interim earnings results and the Federal Budget’s new major bank liabilities levy. In this report we present the main themes from the bank reporting season and explain what the new budget levy means... Show More

Taxing Observations for the Budget

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

Ahead of what is likely to be a controversial budget, anticipation is further stimulated by the plethora of policy suggestions and thought bubbles that have been leaked by the Treasury Department. The task set for the Government and Treasurer encapsulates a range of serious problems far greater than simply balancing... Show More

Three ultimate value-compounding machines

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

In April 2007, coincidentally around the same time that I joined Clime, markets were rollicking and the pricing of risk seemed a forgotten investment principle. What a time to raise capital. In a sign of the times, one of the largest public offers of shares that Australia had ever seen... Show More

The great unwind comes... slowly

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

When the US Federal Reserve (“the Fed”) Chair announced the much anticipated increase in the Federal Funds or cash rate on 15 March, she noted that the Fed intended to maintain the size of its balance sheet through this calender year. In other words the Fed would, for at least... Show More

Regulators late to the debt party

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

The declaration two weeks ago by the Australian Prudential Regulation Authority (“APRA”) that it was taking further steps to slow the growth of bank provided “interest only” loans in residential property is to be welcomed. However, it represents a reactionary policy that does not target either an appropriate pricing framework... Show More

The automation of everything

Clime Asset Management
Clime Asset Management Funds Management & Stock Research

Labour automation is the next major disruptor to industry. While it is predicted to trigger insidious job loss across developed and developing nations, it creates an incredible opportunity for investors. By understanding which industries both spend heavily on staff and are most vulnerable to robots, investors can gain from the... Show More

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Hi James, Thanks for engaging with the article – we will try to address your points as best we can. We don’t typically look at businesses from a lens of relative value but taking this approach, we see FY18 EBITDA - including UltiSat – as being >$150m without organic growth. D&A will be much higher than 6% of revenues (you may be thinking of depreciation alone, which is typically 5-6% of revenues). Net debt (gross drawn debt less cash) was $333.2m and management’s guidance implies it will cap out around $340-350m. EV/EBITDA therefore comes in around 7.5x (EV of $1170m vs. our FY18e EBITDA of $157m). We see EV/EBIT as being less relevant for this type of business, given EBIT is not a good proxy for operating cash flow but on that basis, obviously a high depreciation business will look more expensive. As for organic growth, the CAGR we calculate ex-acquisition since CY14 is around 8% (revenue) and from CY16-CY18, 0% assuming CY18 revenue is c. $650m. Regards, Clime Team

On SDA potentially a great opportunity for patient investors -

Hi Daniel, thanks for your question. The ‘fair value’ we refer to simply reflects our view on the aggregate intrinsic value of the market. As the note discusses, the methodology we use to derive intrinsic value largely focuses on return on equity (ROE) and an appropriate required return (discount rate). Regards, Clime team

On Why the Australian stock market is now back to fair value -