Two tech small-caps to watch

Clime Asset Management

With reporting season now behind us we have gained a more complete picture of how all of our portfolio holdings have performed for the first half of 2018. While some have disappointed relative to expectations, there were two standout small-caps within the technology space that comfortably exceeded forecasts. Here we... Show More

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The best investing strategy now normal volatility has resumed

Clime Asset Management

Volatility is the value investor’s best friend and weeks like last week are welcome opportunities, not reasons to panic. For so long quality companies with growth traded above the prices we wanted to pay but last week’s indiscriminate selling knocked their prices down to levels sufficiently below valuations for us... Show More

Smaller companies going global

Clime Asset Management

It’s often said that Australians are a nation of travellers. One could stretch to almost any corner of the globe and stumble across an Aussie. Given the increasingly global context of business and economics, we would suggest that the intrepid nature present in individual Australian travellers is increasingly prevalent in... Show More

Where to find opportunities in large companies

Clime Asset Management

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

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CBA becoming compelling value as the stock falls out of favour

Clime Asset Management

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

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

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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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 -