DGL.ASX

[Shareguy]

Good to see a green screen today. Appeared good buying under $.60

Net asset backing at Dec23 $1.19

NTA $.71

Early days but

[Shareguy]

Link to webcast

https://www.dglinvestors.com/investor-centre/?page=Presentations-and-webcasts

[Shareguy]

Bell Potters latest

1H24 result overview
DGL reported 1H24 underlying EBITDA -8% below our expectations at $30.4m (+7% YOY vs. BPe $32.9m). Group revenue of $217.0m was flat YOY and compares to BPe $240.0m. At segment EBITDA level Manufacturing and Warehousing divisions were in line with BPe, however benefitted from $12.6m of acquisitions, whilst capex stepped up materially to $22.7m. E-Solutions was a miss ($4.7m) versus our forecast ($6.5m) with raw material availability challenges resulting in a decline in volumes (we believe in 2Q24). Underlying NPAT missed vs. BPe at $7.6m (vs. BPe $10.5m) due to higher- than-expected D&A in addition to the factors above.
Cashflow: 1H24 lease adjusted OCF of $10.7m compares to inflows of $16.3m in 1H23 and $45.9m in FY23. 1H24 gross OCF conversion of 89% was in line with the notional 80-90% target. Core net debt rose to $117.2m (vs. FY23 $91.0m).
Outlook: FY24e revenue (466.0m) and EBITDA ($64.1m) are now expected to be broadly in line with FY23 (BPe prev. $510.7m and $70.0m). Commentary: (1) FY24 viewed as a "transition" year with DGL now in the late stages of supply disruptions; (2) expecting strong 2H24 bias driven by ag-chem order book, higher battery recycling/AdBlue volumes and stabilising raw material prices; (3) liquid waste plant on schedule for Jul'24; (4) capex to be managed in 2H24 (~$5m has been flagged).
Investment view: Maintain Buy rating
EBITDA downgrades of 9-10% leverage into NPAT declines of c.25% FY24-26e as we extrapolate D&A from new acquisitions and raise interest costs due to higher net debt.
Whilst the extent of operational decline in 1H24 was unanticipated, DGL's top-line result in parts of the business such as Manufacturing would appear consistent with peers (RDX 1H24 crop protection -22.9%). We continue to see seasonal tailwinds emerging for DGL, however, impetus now weighs on the group to resume organic growth in 2H24 and from then show a pathway towards the targeted 10%+ p.a. free cash funded growth. Our revised PT considers the higher risks associated with near- term execution and implies a ~25% premium to estimated liquidation value (~$0.60

[Shareguy]

And 11 months ago from the same shills for context...


DGL Group (ASX: DGL)

Bell Potter has rated DGL a BUY, giving the stock a 12-month price target of $2.15.
This is higher than the previous target of $2.00. Using a close price of $1.80, the new target reflects a total return of 19.4%.

DGL is a specialty chemicals and dangerous business with an interesting backstory. Listing in 2021 at $1.00, the company shot to huge gains in April 2022. However, in September last year, the share price fell nearly 50% in one week.
In short, Bell Potter analysts are bullish on DGL due to the company's impressive 1HFY23 earnings beat. EBITDA was ahead of the broker's expectations at 30% growth YoY.

DGL reported Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) of $29.7m, higher than the broker's expectations for $28.2m.

Analysts also believe DGL's cash position is strong, and the company is paying off its debts faster than analysts predicted.
DGL's debt position exiting 1HFY23 was $79.8m, Bell Potter was expecting a higher $88.3m.

DGL has previously forecasted its FY23 earnings growth to flatten back in September 2022, indicating analysts were caught out by less inflationary impact than forecast by DGL.

The broker noted ongoing seasonal headwinds affecting agricultural chemicals and analysts see room for further upside, especially if DGL boosts its sales portfolio. However, they expect DGL has enough cash to fund an upcoming series of acquisitions.


 

Yes a guide only. All research from the experts needs to be taken with grain of salt. The same crowd saying it's only worth $.70. Currently.

[Shareguy]

Yep - agreed - one more to ponder before you double your money or not
😎

AFR - comment


But one hedge fund that did not have a short position heading into the profit result described it as "all the worst parts of the Bible; a result that showed they were over-earning, soft guidance and horrific cash flow".
"Stories such as DGL are self-reinforcing until they're not," the trader said. "It works like this; a high share price means cheap equity means more acquisitions means a high share price. Unfortunately, this also works in reverse.
"The magnitude of the share price falls this week means the roll up story is over."

Interesting time will tell. Doubled my position again at $.60

[Cookie]

Pre earnings I think Bell Potter had them at $1.20.

I think that AFR story was from 2022. Very much a different time, but the question mark has things changed or are different. I think everyone was blindsided by the results, including the analysts.

I have to admit I am disappointed I got my thesis wrong and thought I bought with a reasonable margin of safety (clearly not lol). Personally I think Bell Potter are being abit harsh this time round. The margins are still ok in spite of increased employee costs and depreciation.

Debt is almost covered by current assets. Debt/income coverage ideally should be less.

I looked into the recent acquisition of Allnex NZ(construction products).

He bought at just above book value of inventory($4m). it generates $12m sales p.a
I don't know what the net profit is perhaps $100K-$200K p.a. Not massive in the overall schemes of the things, but how i see it is he gets this income stream in perpetuity for free.  So it gives me an idea how he approaches acquisitions.

The liquid treatment plant should be up and running later this year. I think they incurred cost over-runs on that. But it is what is, and should provide stable earnings.

I am still trying to figure about the company and the industry as a whole.

[Shareguy]

2 directors ( not Simon ) have purchased on market in the last day according to ASX announcements - that's a plus...

Yes encouraging. But not a lot really. I have gone big on this and hope it's not a bad decision. I can't see much downside at these levels. Only time will tell.

[Shareguy]

Pre earnings I think Bell Potter had them at $1.20.

I think that AFR story was from 2022. Very much a different time, but the question mark has things changed or are different. I think everyone was blindsided by the results, including the analysts.

I have to admit I am disappointed I got my thesis wrong and thought I bought with a reasonable margin of safety (clearly not lol). Personally I think Bell Potter are being abit harsh this time round. The margins are still ok in spite of increased employee costs and depreciation.

Debt is almost covered by current assets. Debt/income coverage ideally should be less.

I looked into the recent acquisition of Allnex NZ(construction products).

He bought at just above book value of inventory($4m). it generates $12m sales p.a
I don't know what the net profit is perhaps $100K-$200K p.a. Not massive in the overall schemes of the things, but how i see it is he gets this income stream in perpetuity for free.  So it gives me an idea how he approaches acquisitions.

The liquid treatment plant should be up and running later this year. I think they incurred cost over-runs on that. But it is what is, and should provide stable earnings.

I am still trying to figure about the company and the industry as a whole.

Anyone who leads a founder started business and still holds over 50 percent gets my attention. I'm a long term holder and think he's on the right track growing the business. I have watched every YouTube video available and love his passion and dedication. In time I'm banking on greatly improved performance and EPS growth. Increased EPS increased SP.

[KW]

Anyone who leads a founder started business and still holds over 50 percent gets my attention. I'm a long term holder and think he's on the right track growing the business. I have watched every YouTube video available and love his passion and dedication. In time I'm banking on greatly improved performance and EPS growth. Increased EPS increased SP.

Its easy to buy businesses, its a lot harder to run them.  Henry is a property guy, not an operations guy. This is now starting to become apparent.  

[Shareguy]

Annualising 1H24 reported EBITDA puts the shares on an EV/EBITDA multiple of 5x FY24 which is a 44% discount to listed competitor Redox on 9x.

[Shareguy]

Latest from Blue Ocean

Today's 40% share price decline on DGL's 1H24 result feels like capitulation and a value opportunity somewhat reminiscent of Toll Holdings in the late 1990's.
 

The company has been suffering from indigestion after having acquired 28 companies in the past three years. The share price reaction might just be the cure.  We spoke with Simon Henry, MD and owner of 54% of the company, after the result. Simon acknowledged that he had gone too hard on acquisitions. He now has eyes on just three potential targets in 2H24 – the smallest number in some time. Additionally, Simon mentioned that 1H24 was a period of planting the seeds for growth in the second half and beyond.  He expects capex of just $5m in 2H24 vs. $21m in 1H24. (NB. Net operating cash flow was $19m in 1H24).

 

The company has had a "rip snorting" start to the second half driven by crop protection which had been a laggard in the first half.  The rally in Elders share price recently is largely attributable to expectations for a good harvest in Australia – which spurs demand for its crop protection products, many of which are formulated by DGL.

[winner (n)]

Jeez ..imagine if DGL became as big as Toll ...WOW

[kiwi2007]

Moving from head office from Auckland to Sydney.
CFO resigns
Positive outlook going forward
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02784741-3A638722

Given the price a bump...

[Ferg]

Normally a CFO resigning is not a good sign.  However, given DGL are shifting head office, and the positive *reference* from Simon, it could be a lifestyle thing of not wanting to move which is understandable.

[Ricky Bobby]

He wasn't there long... 16 months. It's prob the last paragraph that the market is responding to.