Pinned straw:
I also own a small amount of Adrad and I thought the results were...fine. Well flagged.
I also own a little of PWR Holdings, with a completely different thesis. The latter is the higher quality, 80% gross margin, bigger opportunity but riskier multiple business. The former is the solid, somewhat lower quality, 50% gross margin, with some tailwinds from datacentre build business, priced at a much lower multiple.
One thing that I was annoyed about with Adrad though. I was reading the Annual Report and thinking how clean it looked when I came across this:
Maybe I'm being pedantic but I've put together Annual Reports and given the number of people that are involved this sort of thing should not get missed. If you're not using a specialised tool (and many don't and instead just use excel) you typically have someone who comes through and first job is to roll all the dates and move the current year results into the prior year. That person might miss a table but you then have many people tasked with different notes. Here you'd have whoever is responsible for fixed assets populating the numbers, who absolutely should have picked up on the miss. The Financial Controller will read the whole thing multiple times. The CFO does the same. Towards the end you'll have management accountants and anyone else who can add reading through, looking for a comma out of place or a rounding that doesn't reconcile to another note. If you have Investor Relations they'll also read it (Adrad's IR is external). The CEO should read it cover to cover also. As for the auditors...
I take it back, I'm not being pedantic. Lift, Adrad!
Appreciate you laying out the numbers and your thinking @lowway I’m pretty much with you.
Revenue was decent and the issues crimping margins dont seem self inflicted, and (moreover) also seem recoverable. To me, this isn’t some rocket ship growth story, more of a steady, cashy plodder. This feels like a business that can clip along at 3 or4% revenue growth at a minimum. It could be more than that, and hopefully it is, but my point is that's all you need given that, in the medium term, the real (potential) juice is in margins. Pricing, freight, project terms, hedging etc is the kind of boring-but-important stuff that can collectively move the dial.
And the main thrust is that the market isnt asking for much valuation wise. At around 71c, you’re looking at 10x trailing earnings with a nearly 5% fully franked yield. You don’t need heroics, "just" competent execution. If that’s what we get, a bit of multiple expansion wouldn’t be out of the question which is what could give it a bit of a kick. Especially given the thin liquidity.
[Held and totally talking my book]