Has anyone Considered Tracsis - Could be a strong COVID recovery story a couple of years from now.
Sells Traffic & Data hardware & software mainly to train providers.
High ROCE 18% 5 year average
Zero debt
Moat -Sticky Product - High exit costs - Products become integrated into train companies systems
Contracts sold on 5 year basis (overcomes short term of COVID)
45% undervalued!
I was actually doing my research on this over the weekend and although its a lot smaller than the companies that I typically invest in I was interested.
I’ve got a few comments to throw in:
- Company is also highly cash generative. Averaging 100%+ FCF to profit over the last 5 years
- Not sure how this 18% ROCE was calculated. I got an average of 9% over the last 5 years
- Consistent net margins of 12%+
- I agree with the valuation on some fairly aggressive forecasts (I got 8.52)
- Disappointed to see the dividend “deferred” pending the outcome of full year impact, that didn’t fill me with confidence. You could argue this is a defensive & sensible move but it lacks confidence in the forward business that surprised me.
- Despite a number of opportunities the group is struggling to expand overseas that probably limits growth for the foreseeable.
My conclusion was that whilst it was probably quite a good move, it wasn’t as good as other options available so I passed.
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