Adrad Holdings Limited

ASX:AHL

Adrad Holdings Limited

ASX:AHL
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$0.700 (+4.5%)
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#73
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21
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Forum Topics AHL AHL Strawman Interview

Pinned straw:
Strawman
Added 8 months ago

Radiators aren't a sexy product, but I must say Darryl did a good job of building some enthusiasm for me.

This is a profitable company with a well established presence and some real potential for genuine efficiency gains. And having followed Darryl since the Bapcor days (and Burson before that), I think he's definitely someone who can help drive those improvements.

Some notes from the meeting:

- Adrad has two main business segments: manufacturing and supplying radiators and other heat transfer solutions, and distributing automotive parts for the aftermarket.

- The company has a long history, with one arm celebrating 50 years and the other 40 years in business. They are the sole supplier of radiators for Kenworth trucks in Australia since 1974.

- Adrad manufactures bespoke cooling solutions for various applications including trucks, trains, data centers, power generation, and mining equipment. 

- The company is developing new aluminum radiator technology which is cheaper than traditional copper/brass. This requires extensive engineering and testing to get the specifications right for different operating conditions.

- Aftermarket parts are a significant portion of sales. Adrad aims to be the go-to supplier of cooling parts for the automotive aftermarket in Australia.

- The company is focused on improving inventory turns and return on invested capital. Current inventory levels are considered too high.

- Manufacturing is being shifted from Australia to a lower-cost facility in Thailand. This will improve margins while still allowing them to service the Australian market. Asian markets provide an additional growth opportunity.

- Electric vehicles are not seen as a major threat in the foreseeable future given the slow turnover of the car parc. Adrad is developing cooling solutions for EV and hydrogen applications.

- Some of their bespoke solutions have very long sales cycles of 5+ years from initial development to volume production. Securing the first major customer is key.

- Corporate costs are being tightly controlled as the company grows by keeping most staff in the business units rather than centralizing.


Shares seem decent value too. I'll post a rough valuation seperately.
RobW
Added 8 months ago

Hi Tom

Thanks for that.

I guess an interview with Andrew is pretty relaxed versus appearing on Ausbiz. IPO'd at AUD 1.50 so Darryl to the rescue. Rod also impressed. The two of them are in sync. Moving work to Thailand is just another blow to Australian manufacturing, which is unfortunate, but broader access to global markets will likely accelerate growth.

Warm & fuzzy feeling about this one and interesting to see how they deal with the 'on market' liquidity problem. On the radar for now. Slow build or take a stab and lock them away for 2-3 years ??

RobW

11
RobW
Added 8 months ago

Thanks @Strawman. Great interview and confirms my view that Darryl is a 'stand-out' operator. On the surface, you see the standard 'silo' optimization efforts, but with the passage of time, you get to see how these endeavours are leveraged for sustainable advantage and the greater cause....Return on deployed capital as the key measure, as confirmed yesterday.

Presents as a Company which will provide market beating returns (over the short, medium and long term) whilst being a relatively 'low risk' investment. Interesting that he acknowledged the 'free float' of shares being a problem. They dont need capital and a share split IMO undermines the benefits of a low share count (EPS going forward). The only other possibility is for Founders/ Inside ownership to reduce their holdings / sell on market. Need to have a look at the last reported Top 20.

Anyhow, thanks for arranging the meeting.

RobW

17
Tom73
Added 8 months ago

Nice summary @Strawman

Darryl and the CFO Rod said all the right things - or at least addressed the key concerns I had for the business coming out of private ownership. I noted from reports that Darryl had wasted no time as acting CEO to reorganise the company structure but it was great to hear more details on it and how he had changed the focus of investment decisions. He seems to be adding muscle to what are good bones of a well established and profitable company. The new CEO starts in April, but Darryl will be on the board to "supervise" and I am sure what he says will carry a lot of weight, so the new CEO isn't likely to go rouge (he has a good manufacturing background, but not much in terms of ASX listed), with Darryl having obtained deep organisational knowledge from his stand in CEO role, he will be a very solid board member.

It was interesting he raised the on-market liquidity of the company (free float), it's shocking, you get more from a company a quarter the size. His hint at them doing something to fix it was even more interesting, especially since 16.4m shares (20%) came out of voluntary escrow on 29 February... This is probably my key near term concern on price.

It sounds like there is a year or two before a lot of the fruit from recent changes will be seen, added to the last year or so being IPO impacted, there will be noise in the financials and comparatives for a while, which the market isn't likely to appreciate, but if we can look through it, I think there is some good value there.

I have almost finished my analysis and will post notes when they are ready, but I have been confident enough to buy a starter position today, but will be looking for opportunities at lower prices in coming months.

19
Tom73
Added 8 months ago

The SM Interview is of course the gold standard, but below is an Ausbiz interview from when the company IPO'd with the former CEO which may be of interest. What a difference a Darryl makes!


Start at 7:40 minutes in:

A small cap 'buy' and 'hold' | Adrad Holdings to list on Friday on ausbiz

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edgescape
Added 8 months ago

Don McGurk as non exec director was there the whole time the previous CEO was there as well and while the share price kept sliding.

Maybe this time it is different?

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