SKL Skellerup Holdings

[Dolcile]

Forbar had SKL at $6.20 prior the earnings forecast upgrade.     Craigs undercooked their estimate.

If SKL reports $60m NPAT (which is looking easily achievable) for FY26 the 10 year cagr is 11.3%

[Fiordland Moose]

Forbar had SKL at $6.20 prior the earnings forecast upgrade.     Craigs undercooked their estimate.

If SKL reports $60m NPAT (which is looking easily achievable) for FY26 the 10 year cagr is 11.3%

listening to conference call - clear (to me) that guidance is undercooked / well conservative.

[Basil]

Forbar had SKL at $6.20 prior the earnings forecast upgrade.     Craigs undercooked their estimate.

If SKL reports $60m NPAT (which is looking easily achievable) for FY26 the 10 year cagr is 11.3%

That's impressive.

[Dolcile]

listening to conference call - clear (to me) that guidance is undercooked / well conservative.

Great to hear - thank you!

[Dolcile]

Forbar have increased their price target to $6.60 (from $6.20).

[winner (n)]

PE ratios are the cheats way of doing DCF valuations.

Better way to value a company is to consider how much economic value they add -- EVA for short

Skellerup adds a lot of economic value. Its Return on Invested Capital is 22% (Invested Capital is Equity + Debt).

That 22% is extremely good and deserves to be reflected in the Market Value of SKL. Market Value essentially is Equity + NPV of future EVA

Skellerup currently generating about $36m of economic profit (EVA). I assess the NPV of EVA into the future as $890M.

Add the Equity of $240m you get a Market Value of $1.14 billion or $5.82 per share

So it seems that it is currently 'fairly valued'

[Dolcile]

Winner, what is the relevance of the book value of equity?   I don't understand what this net book value has to tell us about current fair value.

[Dolcile]

Interestingly Forbar has the DCf valn at $6.7 using a 9% wacc.   This is higher than the $5.9 derived by their peer multiples. 

[Basil]

Forbar had SKL at $6.20 prior the earnings forecast upgrade.    Craigs undercooked their estimate.

If SKL reports $60m NPAT (which is looking easily achievable) for FY26 the 10 year cagr is 11.3%

If they make Forbar's revised target of 31.9 EPS for FY26 that's a backward looking 10 year CAGR of 11.5%.
If they make average broker forecast for FY28 of 37.6 cps using FY18's 14.15 cps earnings as the starting point that gives them a decade long combined 7 year historical and 3 year forecast CAGR of 10.6%  Market a forward looking beast so for my purposes I'll just take the arithmetic average and say CAGR is 11%.  Plugging that into my GARP value screening formula that suggests the stock is very good value up to a forward PE of 19.5 (PE 8.5 no growth + 11 extra PE for the 11% CAGR)

~ 8 months of FY26 almost done and dusted and its always important to look ahead.  Average next years (FY27) PE of Craigs and Forbar is 16.6 so this screens well inside my GARP screener value finding formula and suggests this is a very good example of a very well proven GARP stock so I dipped a paw in the water and bought a few yesterday.  Forbar forecasting gross yield of 6.6% for FY27 and 7.4% for FY28 so you're being paid quite well while you wait to enjoy the growth in the years ahead.  Looks like a very sound long term hold to me.  I appreciate you and others highlighting the opportunity.  Better to arrive late to the party than not at all   

[Soolaimon]

If they make Forbar's revised target of 31.9 EPS for FY26 that's a backward looking 10 year CAGR of 11.5%.
If they make average broker forecast for FY28 of 37.6 cps using FY18's 14.15 cps earnings as the starting point that gives them a decade long combined 7 year historical and 3 year forecast CAGR of 10.6%  Market a forward looking beast so for my purposes I'll just take the arithmetic average and say CAGR is 11%.  Plugging that into my GARP value screening formula that suggests the stock is very good value up to a forward PE of 19.5 (PE 8.5 no growth + 11 extra PE for the 11% CAGR)

~ 8 months of FY26 almost done and dusted and its always important to look ahead.  Average next years (FY27) PE of Craigs and Forbar is 16.6 so this screens well inside my GARP screener value finding formula and suggests this is a very good example of a very well proven GARP stock so I dipped a paw in the water and bought a few yesterday.  Forbar forecasting gross yield of 6.6% for FY27 and 7.4% for FY28 so you're being paid quite well while you wait to enjoy the growth in the years ahead.  Looks like a very sound long term hold to me.  I appreciate you and others highlighting the opportunity.  Better to arrive late to the party than not at all   

Wellcome to the party Basil, the drinks here get better in quality and quantity year by year. I have been enjoying them for a long time. Cheers.

[Dolcile]

Great summary Basil.    This business prints cash.  But shhh stay quiet so we can buy more on the cheap.   

[winner (n)]

Yes docile they are cash machine and most of FCF comes back to shareholders every year

Just to remind all here's a multi year summary of financials -

You cannot view this attachment.

[winner (n)]

One good thing is that NPAT as % Sales is steadily increasing and that ROE is still over 20%

If Ferg put together one of his famous charts I reckon it would look pretty healthy

[winner (n)]

Maybe Chair Strowger just trying to curb the current market excitment towards Skellerup .... shareholders should not expect record results to continue ad infinitum

Seems a strange to say. Why not we will just continue to deliver good results?

[Dolcile]

Yeah that comment struck me as a bit strange.   

SKL is one of the very few nzx listed businesses that has some things I really like. 

1. History of eps and dps growth
2. High profit to cash conversion
3. Healthy ROIC
4. Focus on their niche
5. Large addressable market
6. Low debt / pristine balance sheet 
7. Profit growing faster than revenue