Glennon Small Companies Ltd · ASX:GC1
Glennon Small Companies — Investor Presentation (February 2020)
33 slides from Glennon Small Companies's investor presentation, Feb 12, 2020
Slide 1: Quarterly Webinar ASX Announcement
For personal use only Wednesday, 12 February 2020 Company Announcements Australian Securities Exchange Level 4, 20 Bridge Street Sydney NSW 2000 Glennon Small Companies Limited (ASX: GC1) – Quarterly Webinar Please find attached a copy of the Company’s Quarterly Webinar Presentation that Michael Gle
Slide 2: Glennon Capital Quarterly Webinar February 2020
For personal use only Glennon Capital Quarterly Webinar February 2020 1
Slide 3: What happened in market in last quarter?
WHAT HAPPENED IN MARKET IN LAST QUARTER? For personal use only • Large caps v. small caps: positive return of 0.68% and 0.76% Quarterly Return: ASX Small Ords v. ASX 200 4.00% 3.00% ASX 200 2.00% 1.00% 0.00% -1.00% ASX Small Ords -2.00% -3.00% -4.00% 30/09/2019 15/10/2019 30/10/2019 14/11/2019 29/11
Slide 4: 2019 Portfolio Strategy
2019 PORTFOLIO STRATEGY For personal use only • Held high level of cash • Waited for values • Exited high PE stocks • Tried to play a conservative game and hit singles, rather than trying to hit the ball out of the Park 3
Slide 5: GC1 Performance in the Last Quarter
GC1 PERFORMANCE IN THE LAST QUARTER For personal use only October November December Quarter GC1 -1.22% +2.46% -0.03% +1.18% ASX Small Ords -0.50% +1.56% -0.29% +0.76% Outperformance -0.72% +0.91% +0.25% +0.43% 4
Slide 6: Cash Level Over the Last Year
CASH LEVEL OVER THE LAST YEAR For personal use only • Reduction in cash level: deploy cash into overlooked undervalued stocks Cash Level in CY19 60% 50% 40% 30% 20% 10% 0% Jan 2019 Feb 2019 Mar 2019 Apr 2019 May 2019 Jun 2019 Jul 2019 Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 2019 5
Slide 7: GC1 Performance in the Last Quarter
GC1 PERFORMANCE IN THE LAST QUARTER For personal use only Resimac Group Limited Wagners Holding Co. Ltd. Hills Limited QMS Media Limited Australian Finance Group Ltd. Enero Group Limited Eclipx Group Ltd. Thorn Group Limited Althea Group Holdings Ltd. Mosaic Brands Limited -1.5% -1.0% -0.5% 0.0% 0.5
Slide 8: Resimac
Resimac (M.Cap: $579 m) For personal use only • Non-bank residential mortgage lender: benefit from the Royal Commission • Non-bank market share is rising: up from c.6% in 2016 to c.8.5% in 2019 • Quality loan book: portfolio outperforming the industry benchmark in delinquencies and write-offs • Attr
Slide 9: Resimac (M.Cap: $579m)
Resimac (M.Cap: $579 m) For personal use only 8
Slide 10: Wagners
Wagners (M.Cap: $356 m) For personal use only • Growth from contracts momentum: contract wins expected to deliver significant earning contribution in FY21 • Offshore growth opportunities: sale of bridges and pedestrian infrastructure in international markets • Strong balance sheet: sufficient capita
Slide 11: Wagners (M.Cap: $356m)
Wagners (M.Cap: $356 m) For personal use only 10
Slide 12: Hills
Hills (M.Cap: $99 m) For personal use only • Sale of communication business: clear unprofitable capital intense business • Leading nurse call system: installed in 43% of all public hospital beds • Highly profitable health division: return on capital employed is 48.7% • Focus on health division: prov
Slide 13: Hills (M.Cap: $99m)
Hills (M.Cap: $99 m) For personal use only 12
Slide 14: What We Bought
WHAT WE BOUGHT For personal use only 1. Probiotec 2. Brickworks 3. Johns Lyng Group 13
Slide 15: Probiotec
Probiotec (M.Cap: $181 m) For personal use only • Leading pharmaceutical manufacturers: sales from some of the world largest blue chip consumers • Strong customer relationship: no major contract losses in past 5 years • Underutilised facility: expansion of warehousing capacity in FY18 improves effic
Slide 16: Probiotec (M.Cap: $181m)
Probiotec (M.Cap: $181 m) For personal use only 15
Slide 17: Brickworks
Brickworks (M.Cap: $3,017 m) For personal use only • Stable domestic operations: 45% share of clay brick manufacturing market • US market consolidation opportunity: 37 players in US vs 5 in AUS • US housing market recovery: permits expected to rise • Strong dividend payer: no dividend cut in past 20
Slide 18: Brickworks (M.Cap: $3,017m)
Brickworks (M.Cap: $3,017 m) For personal use only 17
Slide 19: Johns Lyng Group
Johns Lyng Group (M.Cap: $602 m) For personal use only • Upside opportunity from conservative guidance: guidance remains unchanged in AGM despite growth in potential market • Growth from vertical acquisition: expand into strata market and cross-sell JLG building services • Organic growth from new co
Slide 20: Johns Lyng Group (M.Cap: $602m)
Johns Lyng Group (M.Cap: $602 m) For personal use only 19
Slide 21: What We Sold
WHAT WE SOLD For personal use only 1. QMS Media 2. Collins Foods 3. InvoCare 20
Slide 22: QMS Media
QMS Media (M.Cap: $426 m) For personal use only • Received takeover offer from Quadrant: Quadrant offered $1.22 per share • Market fully priced in a takeover success: share price jumped to $1.22 • Sold position: sold to deploy cash elsewhere 21
Slide 23: QMS Media (M.Cap: $426m)
QMS Media (M.Cap: $426 m) For personal use only 22
Slide 24: Collins Foods
Collins Foods (M.Cap: $1,095 m) For personal use only • Poor performance from Europe: EBITDA down by 33.8% due to underperformance in Netherlands • Valuation risk: CKF is selling at 28.6x PE and 8.3x EV/EBITDA • Priced for perfection: upside is limited ($m) FY19 FY20E FY21E FY22E Sales 901.2 981.9 1
Slide 25: Collins Foods (M.Cap: $1,095m)
Collins Foods (M.Cap: $1,095 m) For personal use only 24
Slide 26: InvoCare
InvoCare (M.Cap: $1,554 m) For personal use only • Potential threat of acquisition strategy: ACCC investigates acquisitions and consolidation in funeral industry • Catchup capex required: renovation requires significant capital • Elevated gearing: capex is funded by debt which adversely affected com
Slide 27: InvoCare (M.Cap: $1,554m)
InvoCare (M.Cap: $1,554 m) For personal use only 26
Slide 28: What We Got Wrong
WHAT WE GOT WRONG For personal use only 1. Mosaic Brands 2. Althea 3. Thorn 27
Slide 29: Mosaic Brands
Mosaic Brands (M.Cap: $157 m) For personal use only • Large regional exposure: c32% of stores are located in regional areas • Impact of bushfires: same store sales growth down to -8% • Weak consumer confidence: expect recovery in FY21 ($m) FY19 FY20E FY21E FY22E Sales 864.5 837.1 870.0 907.0 Underly
Slide 30: Althea
Althea (M.Cap: $61 m) For personal use only • Exit of large shareholder and supplier: Aphria, supplying medicinal cannabis to Althea, sold 15.7% of the issued capital at a 25% discount • Supply contract risk: Althea is approved to grow cannabis in South-East Melbourne. Althea needs to manage the rel
Slide 31: Thorn Group
Thorn Group (M.Cap: $69 m) For personal use only • Downward price pressure from class action uncertainty • Move on from class action settlement: since the settlement amount is approved, the company can focus on its core operation • Significant cost reduction in radio rental business: achieved by sto
Slide 32: Questions
For personal use only QUESTIONS 31
Slide 33: Important Information
IMPORTANT INFORMATION For personal use only This presentation is prepared by Glennon Capital Pty Ltd (AFSL 338567, ABN 84 137 219 866) Nothing in this presentation is or is to be taken to be a solicitation, offer, invitation or other (Glennon Capital) for general information purposes only and has be
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