Tasty growth lures big brokers
The real highlight, however, was the strong momentum in the GoGetta division, which boosted its revenues by 57 per cent during the year to $38 million. The growth of this segment (catering to small businesses across a wider footprint of industries) is such that it now makes up a third of the group's business.
Outlook With an eight-year compound annual revenue and profit growth rate of almost 40 per cent, we have few concerns regarding the demand side of the equation. We are now more focused on the downside risks associated with this growth profile. Even here, however, the company is managing the situation well, with the balance sheet in reasonable shape and bad debt firmly under control.
Price The stock has enjoyed a stellar rise, more than doubling in the past 12 months.
Worth buying? The strong operating performance, together with a disciplined focus on funding mix and bad debts, is starting to draw increasing attention from institutional investors and major broking houses. We see this dynamic continuing and remain comfortable with the stock. However, trading at 18 times consensus fiscal 2014 earnings per share estimates, and 15 times the year after, the stock is certainly no bargain at current prices. Consequently, we believe it is prudent for those without exposure to wait for a pull back in price before buying into shares of Silver Chef.
Brian Han is senior research analyst at Fat Prophets sharemarket research. To receive a recent Fat Prophets Report, call 1300 881 177 or email info@fatprophets.com.au.
Frequently Asked Questions about this Article…
Silver Chef reported FY2013 sales revenue of $114 million, up 36% year‑on‑year. Net profit rose 28% to $12 million. Earnings per share expanded by 11% to 41.5 cents, with EPS growth somewhat tempered by capital raising during the year.
The core hospitality division grew revenues 28% to $77 million, helped by organic growth, new franchising and pubs/clubs customers and expansion into New Zealand. The GoGetta division was the standout, with revenues up 57% to $38 million and now accounting for about one‑third of the group.
The board declared a final dividend of 14.5 cents per share, fully franked, which was unchanged from the prior year.
GoGetta delivered strong momentum — a 57% revenue increase to $38 million — and now makes up roughly one‑third of group revenue. Its growth across a wider footprint of small business industries is a key driver of the company’s overall expansion.
Demand looks robust — the company has posted an almost 40% compound annual revenue and profit growth rate over eight years — but downside risks come with that rapid growth. Management appears to be managing risks well, with a reasonable balance sheet and bad debt under control. Everyday investors should still be mindful of valuation and potential pullbacks.
The stock has more than doubled over the past 12 months and is attracting institutional attention. It was trading at about 18 times consensus fiscal 2014 earnings per share estimates and about 15 times the following year, which suggests it is not a bargain at current prices.
The article's analyst view is positive about the operating performance and funding discipline, but given the strong recent run and current valuation, it recommends that investors without exposure consider waiting for a price pullback before buying.
The commentary was provided by Brian Han, senior research analyst at Fat Prophets sharemarket research, who noted the strong operating performance and the growing attention from institutional investors and brokers.
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