DGL.ASX

[Left Field]

House of cards..... companies acquired for DGL shares in lieu of cash will be hurting.

[arekaywhy]

And that's before you get to straight out fraud like Intueri......

Is that related to DGL?  One of their subsidiaries?  I can't find anything on that.

[KW]

If they can't grow earnings, they can't keep borrowing money.  If they can't keep borrowing money they cant keep buying companies.  If they cant keep buying companies, they cant sustain the high p/e attributable to a growth company.  So the jig is up - just another company priced for perfection on a high p/e being rerated to reflect reality. 

[Hectorplains]

Is that related to DGL?  One of their subsidiaries?  I can't find anything on that.

I think the reference is only to a possible nth point in this particular dance. 

[Basil]

If they can't grow earnings, they can't keep borrowing money.  If they can't keep borrowing money they cant keep buying companies.  If they cant keep buying companies, they cant sustain the high p/e attributable to a growth company.  So the jig is up - just another company priced for perfection on a high p/e being rerated to reflect reality. 

No growth companies should really be on high single digit metrics so there could be more room for downside here.

[KW]

https://www.afr.com/markets/equity-markets/dgl-group-ceo-defiant-after-market-rout-20220902-p5beup

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."

[Basil]

CEO Defiant... (I wish I could say I was surprised LOL) 
Sure the whole clevage comment thing regarding Nadia Lim was both completely inappropriate and blown up out of all reasonable proportion BUT the arrogant way he swiftly went about giving the bird to investors on the NZX and delisting the company here showed his true character and gave investors all the insight I feel they really need into his arrogant approach.  I believe everyone needs checks and balances and its clear he hasn't got any. 

I note it was floated at N.Z$1 in May last year on 24 times earnings.
If I was into shorting stocks I would short this on the basis it deserves to go back to about that level or possibly even lower.

[winner (n)]

Simon bought $500k worth of shares on market last Friday

See - the share are cheap

Always good sign when insiders buy

Skin in the game and all that

[KW]

CEO Defiant... (I wish I could say I was surprised LOL) 
Sure the whole clevage comment thing regarding Nadia Lim was both completely inappropriate and blown up out of all reasonable proportion BUT the arrogant way he swiftly went about giving the bird to investors on the NZX and delisting the company here showed his true character and gave investors all the insight I feel they really need into his arrogant approach.  I believe everyone needs checks and balances and its clear he hasn't got any. 

I note it was floated at N.Z$1 in May last year on 24 times earnings.
If I was into shorting stocks I would short this on the basis it deserves to go back to about that level or possibly even lower.

"Analysts at Blue Ocean Equities have a $2.70 price target and said after the market cap slide that there might be an "urge for management to retreat in silence back to operational matters".

"Our suggestion is to resist that urge and engage constructively with investors," the analysts said. "The market likes consistency, transparency and delivering on promises."

When you have to make the point via the AFR because management won't take your calls LOL

[Basil]

LOL - Maybe he should just do the decent thing and give investors their money back from the IPO and take ownership back.  Oh wait, hang on a minute...that would require him to be a decent person LOL

[Ferg]

Interesting to see their annual report:
https://www.dglinvestors.com/DownloadFile.axd?file=/Report/ComNews/20220902/02563490.pdf
{warning: auto downloads for some reason)

A couple of things:
 1) the $54m debit in reserves titled "Merger Acquisition Reserve".  It must have been a  good party! That will bite at some point in the future.

 2) The statement that they do not intend paying dividends....under a dividend valuation model that gives the company a valuation of zero.  They likely have insufficient imputation/franking credits so there is no point paying a dividend anyway.

"Per our existing policy, we have not declared a dividend for the 2022 financial year. Our current dividend policy is to reinvest all cashflows into growing the business."

 3) There were 8 acquisitions in FY22 and another 6 have been announced post balance date.  That is hard going.  Is someone addicted to "making deals"?  This has the effect of adding shares which makes EPS growth a bit harder.  I also have no idea what forward EPS will be without investing a lot of time .... for what?

 4) I said this on another forum: "At a forward PE of 24.6 this is a slow burn unless they can come up with some meaty acquisitions". This was based on an issue price of A$1.  Current price is A$1.48. DGL issued 22m shares last year for acquisitions, and total shares on issue at year end was 279m - so dilution was <10% and it seems the acquisitions are relatively minor compared to the entire entity.

SP is currently in freefall plus Simon Henry has his issues as others have noted.  This is on my watchlist and I'm curious to see how low it goes and what other acquisitions they come up.  As KW touched on, the aggregation strategy is great...while it works.

[kiwi2007]

Happy to pick a few up at $1.50 - let the kiwi saver and other funds take their moral stance (with someone elses money of course lol).

[lorraina]

DGL's current PE ratio is 14.85 based on eps of 10 cents per share.
Market Screener have their 2023 eps rising to 12 cents per share,a 20% increase.
Therefore their PEG [PE divided by Grrowth ] is well under one at .7175.
Sort of interesting.?

[Shareguy]

Have had this on my watch list for a while. At current price looks good buying to me.  All going well some decent upside once the dust settles. CEO needs to choose his words carefully.

Have taken a position today.

[Fiordland Moose]

DGL's current PE ratio is 14.85 based on eps of 10 cents per share.
Market Screener have their 2023 eps rising to 12 cents per share,a 20% increase.
Therefore their PEG [PE divided by Grrowth ] is well under one at .7175.
Sort of interesting.?

I dunno.

I think as I age (and hopefully mature a little bit) I am increasingly focused on high quality companies and high conviction ideas. Ones that I understand and appreciate the way they operate, and don't get overly surprised by.  My core listed equities portfolio is built on that basis, but I do reserve around 20% for emerging or relatively more speculative opportunities, which I'd put DGL into.  I suppose I see some caution signs at DGL...it's a roll up, over earnt possibly this last year, simon henry himself, depends a bit on future acquisitions per KW, poor cashflow, some lingering questions around opening balance sheets and margins, etc. Could well settle and this is a good buying opportunity, especially if with the benifit of time and a proven track record show it has some stable/very quasi storage infrastructure capabilities (IE in the same way that bulk liquid storage and terminals went from trading at 5x EBITDA to being re rerated to near infrastructure multiples over the last 20 years, or allied healthcare being re rated to near healthcare multiples) but I am increasingly trying not to catch every fish, not worry about the small but fast ones that get away, and focus on and take satisfaction in catching the handful I run at.