EBO-Ebos

[entrep]

cpanel got hacked which is a control panel for millions of websites worldwide.

[Shareguy]

Ebos is my largest NZX position by a long way after doubling down today. I just think it's great buying for long term holders.

Craigs thought the investor day had no real surprises and

Overnight Stephen Ridgewell has reiterated the Overweight recommendation on EBOS following its Investor Day in Sydney last week – the stock is simply "Too cheap to ignore" and we don't disagree – EBO has morphed from a defensive growth stock trading on a 23x PE to a yield stock trading on a 14x PE and 6% net yield following a +50% share price decline from its peak of $46.50 in March 2023 to its close yesterday at $21.80

[Basil]

10 year EPS CAGR of only 5% is not that impressive.  Consensus FY26 PE is 14.8 which seems about right for a company growing at such a modest rate, (noting from my earlier analysis and post their most recent 5 year EPS CAGR is only 3.3%).  I think it was egregiously overpriced at $40+ and has now come down to about fair value, mind you I thought that at $26 but did caution about buying more in the downtrend at that time.  Its not what I would call bargain / compelling value now but it may have bottomed looking at the chart so its better from a TA point of view now, that's for sure..  Quite frankly I think Craigs and others are probably pretty busy trying to cover their backside on why they got it so wrong calling it a BUY at $40+.  Referencing back to an egregiously overpriced point and saying its really cheap now compared to before, doesn't carry any objective weight with me and speaks to probable confirmation bias.  That's how I see it but good luck mate.  https://www.marketscreener.com/quote/stock/EBOS-GROUP-LIMITED-6494459/

[Shareguy]

 Last night's Australian Federal budget is for PBS spending of A$22.2bn in fiscal year 2027, up 9% on budget projections from a year ago. This is positive for EBOS and other pharmaceutical wholesalers, whose revenues are linked to PBS spend (though more closely linked to volume than value). While the budget projects only a 0.6% CAGR for PBS spending for the following three years, this is largely political gamesmanship so that the Government can announce "new" funding for new drugs which will be added to the PBS down the track. The more revealing projection is that, even despite this game playing, PBS funding growth is projected to be higher than previously (i.e. +0.6% pa next three years vs -0.1% in last year's budget

[Crackity]

Last night's Australian Federal budget is for PBS spending of A$22.2bn in fiscal year 2027, up 9% on budget projections from a year ago. This is positive for EBOS and other pharmaceutical wholesalers, whose revenues are linked to PBS spend (though more closely linked to volume than value). While the budget projects only a 0.6% CAGR for PBS spending for the following three years, this is largely political gamesmanship so that the Government can announce "new" funding for new drugs which will be added to the PBS down the track. The more revealing projection is that, even despite this game playing, PBS funding growth is projected to be higher than previously (i.e. +0.6% pa next three years vs -0.1% in last year's budget

But is it going to balance the loss ( maybe ) of the Chem Warehouse distribution in NZ? 🤔

[Shareguy]

But is it going to balance the loss ( maybe ) of the Chem Warehouse distribution in NZ? 🤔

Maybe. FB estimate that the CW NZ contract is a mid to high single-digit EBITDA contributor. I think that is the worry reflecting the weak sp.

[Left Field]

Ebos is my largest NZX position by a long way after doubling down today. I just think it's great buying for long term holders.

[Shareguy]

What's your point?

[BlackPeter]

Ebos is my largest NZX position by a long way after doubling down today. I just think it's great buying for long term holders.

Not so sure. I guess, clearly there are still more expensive shares and stocks around, but based on the current PE rating and EPS CAGR are they at best at a "fair" price. 10 yr PE is 19.4 .. and EPS CAGR was 3.5.

You must assume either a significant larger future earnings increase (than the current 3.5%) or alternative you expect the hype part of the share valuation to rise.

Can't comment on what hype might do, but if we talk about annual earnings increases - how far do you expect it to go up - and why?

Ah yes - and if you just look at the chart ... if you expect hype to bring up your SP, than it might be safer to wait for SP to at least show some indicators of price rises. Currently the chart looks like a textbook example for a downtrend.

[lorraina]

Current PEG PE dividend by growth using BP's figures.
PE 19.4 divided by 3.5 growth gives a PEG of 5.54.
Any PEG under 1 is good....5.54 is extremely poor.
However using Forbar's 1st May projections for the next 3 years we have;
Average PE 14.3 divided  by average growth 8.72%, giving a PEG of 1.64. which is a lot better than the 5.54 above,but still well above the desired PEG of 1 or under 1..
However I very much doubt EBO will achieve any thing over 5% or 6%  average growth PA for the next 3 years.

[Basil]

I remember when you used to be very enthusiastic about Ebos Lorriana.  Do you think their best days are behind them ?

[lorraina]

I remember when you used to be very enthusiastic about Ebos Lorriana.  Do you think their best days are behind them ?

Yes I started to follow EBO in 1988.
Market cap then was just over $2.5 mil....Yes that figure is correct.
EPS growth was 15% or more PA.PE varied between 12 and 16.
PE at 12 you knew they were under valued,and at 16 over valued.
I held for approx 27 years,and sold when their PE ratio [21] went to 3 times their eps growth [7%].
However my late friend's family trust has a very small holding still, after selling down a large holding.
Brierly Investments owned EBO before I bought in and it was Ron who appointment Mark Waller as CEO.
Ron told Mark he thought EBO had the potential to reach $40mil in sales.Mark had other thoughts.lol.
At the first agm I attended with about 6 other shareholders,in EBO's boardroom were served afternoon tea by then Chairman Jamie Maddern.
Mark Waller said EBO was a logistics company that dealt in Medical Supplies.
The best part of EBO is their approx 10 stock turns and strong cash flow.

[Basil]

Nicely done Lorriana and thanks for the background.  I'd wager you made very good coin indeed while holding over those 27 years of high growth. Well done.
The fact that you no longer like them (with you long history with them), at their current valuation holds a lot of weight in my opinion.

[Shareguy]

Appreciate all your comments and thought It deserves more input as to why I like it.

I purchased an investment property (our neighbour) to free hold our property and sold down virtually all my shares last year including Ebos that I had for over 15 odd years. It's been a good share to me which is part of the reason why I'm back in.

They lost the CW Australian contract and Yes will most likely loose the NZ contract. I note that NZ is described by the company as "not material" to its overall financial performance. We will soon find out.
As I see it Ebos is still a great business with market leading positions and has done well with bolt on acquisitions. It's also a much more diversified business than 10 years ago.

It's been treated in the past as a high quality blue chip growth stock which has resulted in share holders paying higher than normal prices based on the level of risk and the growth profile. I'm betting that the growth will continue once they have sorted the effects to the business after loosing the CW contract.

The shares are currently trading at a large discount to history. Between 2012 and 2026f Ebos traded at an average PE of 19.2. Craigs current research note is a pe of 16.2 for 2026F and 13.8 for 2028f, That's a 28 percent discount. It's also trading at a large discount to its NZX and global peers

Craigs have earnings as

2028 eps$1.45 which is a pe of 13.8

Now I might be wrong but I see no reason for Ebos to not start growing again with 2028 hopefully over 10 percent according to Craig's. Unless they have some acquisitions low growth till then.

Im picking greed will return and higher PE blue chip stocks will once again be flavour of the month.  According to thier recent presentation Ebos had EBITDA growth of 10% p.a. over the last 10 years, with similar organic and inorganic contribution. I'm betting on growth continuing but yes I may well be wrong. In the meantime I'm enjoying a good dividend over bank deposit rates with little risk.

[Ferg]

According to thier recent presentation Ebos had EBITDA growth of 10% p.a. over the last 10 years, with similar organic and inorganic contribution. I'm betting on growth continuing but yes I may well be wrong. In the meantime I'm enjoying a good dividend over bank deposit rates with little risk.

Nice write up but one thing I don't 100% agree with is using EBITDA.  This ignores the growth in issued shares.  You mentioned "bolt on acquisitions" but this was not free for shareholders given there was a dilution impact on EPS for the new share issues.  The share count grew by ~3% per annum over the past 10 years which tempers the 10% EBITDA growth slightly....plus debts have almost tripled over that timeframe (and interest expense will have increased) - hence the reason I prefer NPAT rather than EBITDA which is an "all in" number.