Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Outlook - most companies are sensibly sounding cautious in their outlook statements, given all the macro trouble, and risk.
Volex sound pretty upbeat to me, and I trust what management say here, as their track record is good. Also, well-chosen acquisitions can be a nice way to mop up any shortfalls in performance elsewhere - so rising debt needs to be considered against rising earnings.
I like that Volex has a good spread of sector exposure too, which seems to smooth out peaks and troughs. It’s all sounding encouraging to me -
Volex delivered a robust performance during the first half of the year, despite the challenging backdrop, whilst executing its most significant acquisition to date.
The Board remains optimistic of a number of potential near-term sales opportunities to make further progress in the second half of the year, and remains on track to deliver full-year results in line with market expectations.
That’s very good actually, given tough macro.
Paul’s opinion - I hold a small position currently. I really must buy some more.
The forward PER of 10.3x seems modest, considering the excellent track record here, and no signs of any impact from macro problems. Could it warn on profit in future? Possibly, I don’t know. Hopefully the nice exposure to growing sectors could continue to mop up softness in other areas, who knows?
This is hard to argue with, and a forward PER of 10x seems distinctly undemanding -
https://app.stockopedia.com/content/small-cap-value-report-thu-26-oct-2023-scs-vlx-978494?order=createdAt&sort=desc&mode=threaded
This is one of many small-mid caps that tends to drift down between announcements, as people worry about macro impact on its trading. Then we get in line updates each time. It’s the same this week, we’re reassured -
The Group continues to maintain strong financial momentum and is well positioned to achieve full-year results in line with market expectations1,2…
2. The Company has compiled forecasts from four analysts with current market forecasts for the 52 weeks ending 31 March 2024 for revenue to be in the range of $849.8 million to $891.0 million, with a consensus of $864.6 million, and for underlying operating profit to be in the range of $82.3 million to $87.0 million, with a consensus of $84.3 million.
Excellent, very clear reporting there. Hats off to owner/manager Nat Rothschild for building a significant sized, and decently profitable group here.
Remember that Volex was quite a mess years ago. I can remember being initially sceptical about its turnaround, but then turning positive on it possibly around 2019 from memory, when the figures really began to strongly improve.
Since then, Volex has been absolutely transformed through a turnaround, and it seems an effective, value-building, disciplined (not over-paying) bolt-on acquisitions strategy.
Revenue growth in H1 of 4% is quite modest, but that’s organic, and against a strong comparative.
Customer de-stocking is mentioned, an important point of general read-across that I’ve spotted other companies mention too - higher interest rates mean that companies generally want to reduce cash tied up in receivables and inventories. Improving supply chains also mean that companies feel safer to run down inventories back to more normal levels.
I’m impressed that Volex seems to have been able to ride out and offset this destocking -
This has been more than offset by strong demand in Medical and Complex Industrial Technology supported by better availability of key components. There is evidence of de-stocking slowing in some channels, as order patterns are starting to normalise, particularly in Electric Vehicles.
Major recent acquisition $195m - of Murat Ticaret - positive-sounding comments on this. It will contribute 7 months to the P&L for FY 3/2024.
Debt - “covenant leverage” of 1.3x looks fine to me, and would only become an issue if trading fell off a cliff. Also I cannot imagine that the owner/manager called Rothschild would have a lot of trouble arranging bank facilities!
Cyber incident - we have to trust management on these things, but I don’t see (or even hear) any alarm bells ringing here -
… there is not expected to be any material adverse impact to revenue or underlying operating profit as a result of the incident. Costs for the recovery and remediation of systems are anticipated to be approximately $2 million, which will be reported as an exceptional item in the second half of the year.
Hopefully they’ll now have bulletproof IT protecti
Sorry ... Finger Trouble and no edit facility or delete I could find
What ever is the point in re-posting (twice!) almost the entire contents of the LIve RNS update?
Extracts of Update
Revenues for the first half of the year were 4% higher than last year on an organic, constant currency basis, against a strong comparative period.
$195 million acquisition of Murat Ticaret completed during the first half of the year. Integration activities are well underway and initial customer engagement has been very encouraging.
Costs for the recovery and remediation of Cyber systems are anticipated to be approximately $2 million, which will be reported as an exceptional item in the second half of the year.
Remains on track to deliver full-year results in line with market expectations. Delivered a robust performance during the first half of the year. Notice of results expects interim results on 23 November 2023.
Extracts of Update
Revenues for the first half of the year were 4% higher than last year on an
organic, constant currency basis, against a strong comparative period.
$195 million acquisition of Murat Ticaret completed during the first half of the year. Integration activities are well underway and initial customer engagement has been very encouraging.
Costs for the recovery and remediation of Cyber systems are anticipated to be approximately $2 million, which will be reported as an exceptional item in the second half of the year.
Remains on track to deliver full-year results in line with market expectations. Delivered a robust performance during the first half of the year. Notice of results expects interim results on 23 November 2023.
Good to see John Wilson aboard, part of the team that helped drive value for Elektron Tech., when they owned Bulgin Connectors, delivering a 10 fold exit valve for many ET shareholders, not that I’m expecting quite the same here.
Perhaps of little surprise VLX have been targeted given our involvement in critical Defence, Space and Aerospace applications .No doubt a full review will now be undertaken which should ensure more robust protections are in place going forward. Hopefully this was a lucky escape !
I nearly bought some more on Friday, but ran out of time.
4% more today - pure luck.
"The actions taken to date have ensured that all sites remain operational, with
minimal disruption to global production levels, and the Group continues to
trade with its customers and suppliers.
At this stage, any financial impact resulting from the incident is not
expected to be material."
I do hope so......
With the acquisition of Murat, Volex have taken over a well-known cable supplier within the industry and it will give them access / engagement to a wide range of off-highway OEMs, which I expect they will leverage to set up sales meetings and promote other products in their portfolio.
Yes Murat Ticaret looks a great acquisition being highly cash generative and should add at least $180m annual revenue to top line with impressive EBITDA returns. Being involved with four of the five largest agricultural equipment manufacturers in the world, is a good start !
Volex's strategic acquisition of Murat Ticaret provides immediate entry to a
new growth market, with established operations supporting the attractive
off-highway sector across three continents and eight manufacturing sites.
Prerfect timing with new TESLA marketing and pricing annoucements today
52 week high must be just around the corner.
Best share on market currently end of
Volex seem to be "in a good place" now and the sp a very conservative valuation.
More Detail on Tesla Charger extracts from Press
Tesla's charging technology has been gathering momentum for weeks. Volvo Car (VOLCARb.ST) on Tuesday joined General Motors (GM.N), Ford (F.N) and Rivian (RIVN.O) in embracing Tesla's charging design, shunning earlier efforts by the Biden administration to make the Combined Charging System (CCS) the dominant charging standard in the United States.
SAE International aims to make an industry standard configuration of Tesla's charging connector in six months or less, an official at the standards organization said on Tuesday.
He added that the association is holding conversations with Tesla, Ford, GM and other automakers as well as the federal government about NACS standardization.
"The important thing to understand about this process is that it's no longer controlled by one company. It's really all companies coming together to write a standard about how to develop for this plug."
Tesla calls its technology "the North American Charging Standard (NACS)," but it has yet to be approved as a standard by SAE International.
The United States is on track to install a network of 1.2 million electric-vehicle public chargers, including 1 million Level 2 chargers, by 2030, according to a study by the National Renewable Energy Laboratory (NREL), a federally funded research center. The study provided no breakdown of NACS and other types of connectors.
The North American Charging Standard (NACS) is how Tesla have charged their cars for many years but it was opened to other companies in 2022. In recent weeks several major manufacturers (Mercedes, GM, Ford) have announced they are taking it on as well for their cars from 2025. It’s going to be the preferred system for the US and significant expansion will be required.
Great news, this confirmation should keep the momentum going on the share price direction.
Fonzey.
Good to see we’re finally recognised as a supplier , and on the ball in being Stocked and Ready to supply the NA Standard Charging couplers.
All time high was somewhere in the region of £20,I don't see that being surpassed any time soon ,if ever.
Can see the ATH being surpassed in the not too distant future. This latest Acquisition is a bit of a game changer.
310p paid
with far more to go.
There was never any serious doubt about this - management indicated previously that competition authorities approval was a formality. However, as the acquisition of Murat Ticaret (based mainly in Turkey) is a significant-sized deal (described as “transformational” in today’s RNS), it’s reassuring to have confirmation that the deal can go ahead, expected to complete at the end of August.
Look at how the growth story at Volex is developing - impressive I'd say, especially as it's continuing to do well, despite tough macro at present -
Paul’s opinion - clearly the acquisitions strategy is adding value, as the EPS has dramatically improved over the years, so I don’t mind the associated dilution from part-funding acquisitions with placings.
As a refresher, I reviewed the most recent trading update here on 27 July 2023, which said trading is in line with expectations, accompanied with a confident-sounding outlook.
Volex strikes me as an excellent GARP share - really a growth business, from reasonably-priced acquisitions, executing very well, yet on a value share rating. That’s an opportunity to me, and for full disclosure I should say that I increased my personal position size after the last, reassuring update.
Many of us are traditionally sceptical about groups which grow by acquisition. However, when executed well, it can be one of the best methods of creating a multibagger - as Judges Scientific (LON:JDG) and others have shown. The lustre has come off SDI (LON:SDI) recently, but it’s still got a great long-term track record of value creation through sensible acquisitions. This type of share can attract a high PER in a bull market, so I see Volex as a potential double gainer from increased earnings, more acquisitions, and probably a higher PER multiple in the next bull market, whenever that occurs.
A 3-bagger over 5-years, and that’s fully supported by EPS growth of a similar percentage - chart also looking quite nice now (looks like it's formed a base, and now above the 200-day MA) - start of another bull run perhaps?
https://app.stockopedia.com/content/small-cap-value-report-mon-7-aug-2023-card-vlx-ctg-ckn-973254?order=createdAt&sort=desc&mode=threaded
subscription only hence full printout
Positive AGM statement, even managed to nip in reference to growing data centre demand due to artificial intelligence applications, no doubt thinking any reference to AI these days can “blow the doors off” . Irrespective still looks good valve at current levels.