Well done Andrew on interviewing. one thing that came out was the issue in 2014 that Alf mentioned. CDA sales plummeted then and i couldnt really reason why at the time. they said there was pirating of Minelab. it made me super cautious on CDA for years after. it was interesting to hear they were hacked, maybe a chinese com if i recall, but could be wrong. also more importantly, low chance of replication of that now. i do like comapnies that have a body of leading IP, sets them apart. disc Held

Great interview and Q&A Andrew. I think people would realise now that while he's new to the top job at Codan, Alf knows this business well now, and he is comfortable that it really is as good as he thought it was when he did his DD and then moved across from the top job at Detmold. And believe me, Detmold is big, and growing. Two of the managers I previously worked with at my day job have just moved over to Detmold.

Alf is considered, and knowledgeable about Codan, and I was happy that he never once mentioned the share price, because that is clearly not a focus for him. He is there to manage the business, not try to influence market sentiment. The market will do what it does and Codan will just keep putting more runs on the board.

Also, their various strategies, as outlined by Alf today, are all sound and sensible, from their growth target split 70% organic and 30% acquisitive, to dealing with protecting their IP, to knowing where their best opportunities for organic growth are and targeting those accordingly, to people and culture management, which has always been a very strong focus at Codan by Alf's predecessor (Donald McGurk, who retired in March from front-line management and is now a non-executive director of AMX as well as being on the board/advisory board of a couple of private companies - Adrad and REDARC Electronics). Happy and engaged people produce better outcomes. And Codan is producing better outcomes. There's not much to dislike about this company. Obviously I hold. Codan are in all of my main portfolios, and they are also my second largest position here on SM (after NST). Onwards and upwards. And eventually the share price will follow.

Donald McGurk, retired in March.

Alf Ianniello seems to have got his head around the Codan businesses and he impresses me with his "If it ain't broke, don't try to fix it" attitude.

Fair enough @lankypom im holding some irl but am waiting for some stabilisation or further comment from the company. would like to buy some but the technicals are terrible. feels like we have time on this one to me

@Solvedtheriddle you got the further comment you asked for today. Codan are guiding for $100m NPAT this year.

And Claude Walker (a Rich Life) has just blogged that he has climbed aboard.

Thanks @lankypom good result. obviously i was not alone!

I bought some more CDA shares two Thursdays ago (12th May), figured they'd have another record result for the full year and they've confirmed today that they expect that to be the case as 2nd half profits look to be at least equal to their record first half profits, setting them up for their best year ever, again!

I noted that Claude suggested that their Minelab metal detection division was going backwards now, but Codan said today that Minelab is tracking to record it's second best year ever, not quite the massive drop in revenue that some had predicted due to the issues in Sudan. I figured they'd find new markets to sell into, and they have. Claude's view was that even if the Minelab revenue was in decline the low share price compensates us for that. Couldn't agree more. In my view there's still a very significant margin of safety in the Codan share price at $7.73, where they landed this afternoon at the close, after rising +98c (or +14.52%). While that is a nice rise, it's off a VERY low base now, and only takes them back to where they were trading exactly three months ago - they closed at $7.73/share on the 23-Feb-2022, same as today (23-May-2022).

Six months ago they were trading at $9.83/share. Twelve months ago they were trading at $17.21/share, some 122.6% higher than where they closed today.

For a company that has NOT gone backwards in any way except in terms of their share price, there is still plenty of upside. In August they will report another record year, with their best ever revenue figures, best ever profit, best ever dividend too in all likelihood, based on this:

And they're only paying out around 50% to 54% of NPAT in dividends, so on that basis, with an even better result this year (which is what they've just provided guidance for), I'd expect the dividend to increase as well.

The share price will continue to recover from here as the market realises that their (i.e. the market's) assumptions were far too negative.

Here's some historical metrics (thanks to FNArena.com):

That target price (TP) of $11.60 above is from Macquarie (MQG) who had this to say (below) back in February before Codan released their record H1 results:

Not sure what MQG's TP for CDA is now, but it would be unlikely to be LESS than it was in February, seeing as Codan have only released POSITIVE news since then.

Here's what Commsec have to say about analysts' views on Codan as at 10-May-2022 (before today's positive update from the company):

Again, it's unlikely that their views on Codan's future prospects would have diminished in the light of today's positive update, if anything the two "Hold" calls may get upgraded to something greener.

The other 5 can't go any higher, as "Strong Buy" is as good as it gets.

Here's the rest of Codan's historical metrics from FNArena:

The missing ROIC numbers for 2018 and 2019 doesn't mean their Return on Invested Capital in those years was zero, just that there was no data available on file for those two years. The ROCE, ROE and ROTC suggest that ROIC for '18 and '19 would have been right up there at something over 20%. Their Return on Total Capital (ROTC) hasn't been below 30% since 2017.

And 2022 is going to be even better. Source: Codan-23-May-2022-Institutional-Investors-Presentation-and-Company-Update

Disclosure: I hold Codan in two of my main RL portfolios. One of those is my SMSF. In the other one, which is a larger portfolio, Codan is currently my second largest position, after FMG. Codan is also my second largest position here in my Strawman.com virtual portfolio, with NST being the only larger position.

MINELAB GPZ 7000 Unearths Gold Nugget Worth Nearly $27,000 USD (prweb.com)

Minelab Metal Detectors - Home | Facebook

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Couldn’t agree more @Bear77! I have added almost $100K since mid-May. I have a partly filled order at $6.61 from 19 May hanging over with Commsec. I don’t see that one getting filled now. I would buy more Codan if I hadn’t run out of cash and already dipping into my margin loan.

@Bear77 & fellow Codan holders . . . What's the case for future growth? Looks like it might be more in the communications space rather than metal detectors. Have they given any targets/goals for FY23 and beyond for revenue and/or NPAT? Given your interest I assume you're confident of strong growth? I ask because the current price seems fair to me if growth is 5-10%.

Hi @DrPete123 - I'm confident that they'll grow both their Comms business and their Metal Detection business. Their recent acquisitions in the tactical communications space are performing ahead of expectations according to the recent update - their exact words were: "Codan’s strategy to diversify revenues and profitability continues to deliver results, with the increased profitability of the Communications division continuing in the second half of FY22. The DTC and Zetron businesses have been excellent acquisitions, with integration of both businesses and their expanding opportunity pipelines tracking ahead of schedule. Both businesses are expected to deliver a strong second half result consistent with the first half performance."

Their first half performance was PDG (pretty damn good!) so just matching that in the second half is a bonus. Codan have traditionally been very conservative with guidance, when they give any guidance at all - they didn't give any with their first half results - for the second half, which was one of the things the market didn't like about them - along with Donald McGurk retiring and Sudan and Afghanistan and now Russia - there will always be something - but good companies navigate around obstacles and find ways to continue to grow, and that's exactly what Codan has done. Keeping in mind that they ARE conservative, their bullishness about their outlook in this market update should be taken seriously.

In terms of their metal detection ("Minelab") business, it will resume its growth trajectory. They said yesterday, "In terms of revenues and profit, FY22 will be Minelab’s second best year ever, and we expect it to form a new base from which the business will grow in future years. The growth will come from continued penetration of new geographic markets and new product releases that will drive further market share increases. Minelab’s excellent profit margins have continued in the second half, so while sales into Russia have ceased and consumer demand has normalised post-Covid in our recreational markets, the profit contribution from Minelab is expected to be comparable to the first half."

Minelab gold detectors are widely regarded as being the best gold detectors in the world, and I have no reason to doubt that their other detectors, such as their mine sweepers, are just as good. They even make detectors that can be used under water now. There is plenty of room to grow that business. People have been wondering for years how ARB would manage to keep growing year after year, but they have, and they will. In ARB's case, their very high ROE (30% ROE in FY2012) has been coming down, to as low as 15.4% in FY2020, which is still a very respectable ROE, then they shot back up to 23.2% ROE in FY2021. In Codan's case, their ROE and their ROCE are over 30% and have been rising for the past three years, and they have just guided for FY2022 to be their best year ever.

In terms of guidance for FY2023, No, they haven't given any. They didn't give any guidance for FY22 until yesterday. In the current global environment, I think it would be a brave move for any company of this type to give guidance for future years when it's so hard to work out how they'll fare in the current year, hence only giving FY22 guidance when there is less than 6 weeks left of the FY.

So I concede that nothing is guaranteed and that I can't be confident enough to say they'll grow by x% per year, every year, but when the going gets tough, it's companies of the quality of Codan and ARB Corporation that will navigate through those rough seas the best. While past performance is never a guarantee of future performance, it tends to be a reasonably reliable indicator of what we should probably expect, or what is likely to happen in the future. Not guaranteed to happen, but probably will.

All share market investments involve risk, but backing companies with quality management who have excellent track records of superb capital allocation decisions and who have carved out a very good position within their chosen industry/industries/sector(s), will, I believe, swing the odds firmly in your favour.

I never get this. The technicals are terrible. If the fundamentals make sense surely this is a short term voting long term weighing machine issue? Who cares about the technicals in that setting? @Solvetheriddle

I totally agree @GazD. Codan is one of the highest conviction businesses in my portfolio, and is now in my top 3 companies by weight IRL (average cost below today’s close).

However, as John Maynard Keynes said ‘Markets can remain irrational longer than you can remain solvent.’

In this case, I think Codan investors will be very well rewarded for their patience. In the mean time, I am happy to enjoy the 3.8% fully franked dividends while waiting.

@GazD my belief is that share prices can be set by other factors than fundamentals for quite a while --with the huge amount of momentum, algo, index buying. it could be years before the fundamentals assert themselves in certain circumstances. the one thing that valuation work does not do is measure when gains are to be made. most money is made when the consensus wakes up and starts moving which attracts more buying etc. a sign of that is when the technicals start to improve. there are so many now that only follow technicals, just watch/listen to social media for a bit, imo this is a result of 10 years of bull market and reduced patience and valuation skill in the market. the game plan i try and follow (not easy i admit) is to recognise lower risk value but only fully commit when there appears to be some interest from the masses. thats the plan and the reason for the comment. so its a timing strategy

Appreciate your take. I’ll never learn the technical side so not an approach I can take but good on you for your perspective and for backing it in!

OK guys and gals - here we are - almost a year on from that discussion about why Codan was looking so cheap, and the market has finally caught up. During April, Codan was my best performing portfolio position (in 3 different portfolios, including my virtual one here, my SMSF and another one I manage), with their SP rising a whopping +34% from $5.44 (at 31st March) to $7.29 now. They’re back in a strong uptrend and they look to have further to go yet:

They finished CY2022 (at 31-Dec-2022) at $4.10/share, so they've risen +77.8% during the first 4 months of 2023 (now $7.29/share). That 5-year chart above shows that there is still plenty of upside potential left, and they look even better on a 1-year chart (see below):

Their Comms division is performing very well, and has overtaken their Metals Detection (Minelab) division in terms of revenue contribution to the Group now, and the gold price making new all-time highs on a regular basis lately (in both US$s and AU$s) isn't doing the prospects of their Minelab division any harm at all either.

The market seems to be finally waking up to the fact that Sudan and Afghanistan might have been significant markets for Minelab previously, but there are plenty of people in plenty of other countries that are more than happy to buy the best gold detectors and mine detectors in the world.

Profitable, growing, dividend-paying, good management with a proven capital allocation track record (especially when it comes to acquisitions), excellent industry position, significant moats, and now with a rising share price as well. There's plenty to like!

Disclosure: Codan is my #1 position here in my Strawman.com virtual portfolio and they're a top two position in my largest two real life portfolios (#1 in one, and #2 in the other, behind NST).

Hear hear @Bear77. I was only thinking this weekend that Codan had enjoyed a few good months on the market.

I share the same thoughts about Codan and it is also one of my largest holdings in my super portfolio, with a 10% weighting. Worth noting, I am typically a concentrated investor across both my personal and super portfolios, but Codan commands a top-2 spot in my super portfolio so it is definitely towards the top end.

I will do my best not to repeat your comments above, but I like them for very similar reasons -- impressive track record, world-leading technology that also provides them with a moat, typically great capital allocators, small dividend and impressive ROE. I also love that management have always been quite dry and underwhelming. No bullshit, no crazy guidance, and more often than not they will beat expectations and surprise the market. Further, the recent business diversification to move into comms -- while defensive -- makes the business more mature and provides it with more regular earnings. Another sensible move by management.

I bought more at the recent lows ($4), but it certainly hasn't been a perfect journey either, as I bought all those months ago when their share price was whacked from $20-odd down to the $10 mark. Falling knife, anyone?!

That said, I have never been too concerned, despite some of the scary share price movements. This is a cracking business (one of the best on the ASX in my opinion) and I plan to hold for as long as it keeps delivering for shareholders.