Pinned valuation:
LBL was plagued by some familiar issues in the 1H24 result. Labour and raw material input shortages meant margins took a short term hit, though a platform is now set into FY25 with 15 new skilled immigrant workers brought in uniformly across LBL's national footprint in March and a new supplier approved and scaled up for their key OEM customer in the Products division.
LBL will achieve their $60m FY25 revenue target including the revenue from their 40% of the recently acquired WA based Gateway Group, though given that revenue isn't consolidated in the financials I assume the business will record $55m organically (~20% growth). Gross margins should hold steady at management's 55% target, but it is scale over opex that should see strong earnings growth with the bring forward of the step change of employee expenses in FY24.
LBL has previously had NPAT margins between 12-13% but scale with revenue growth should see that creep up towards 14-15% in FY25 or ~$8m NPAT. The most recent figures provided for Gateway was $2.9m PBT in FY23 but the business was growing pre-LBL investment and should accelerate in FY25 as they install LBL cladding cells to drive further growth.
Adding another $1m unconsolidated NPAT from Gateway brings the group to $9m, a 15x multiple sets a price target of $1.15.
Thanks @Wini for that update. The risk/reward equation looks good to me down here, so I've just bought $25K worth of LBL in my largest real money portfolio as a starting position (35,500 shares) - the liquidity was fairly low unfortunately, so I'm glad I wasn't after $250K or a $1m worth of shares because that would have moved the share price, a lot! As it was I took it up to 72 cps and it dropped back to 70 cps straight afterwards. Average price paid was $0.7115. I'm happy with that. The sentiment seems fairly bearish around LBL currently while the outlook is pretty good, so it seems like a good time to be buying to me.
I do appreciate your continuing commentary on Laserbond Luke!
@Bear77 No worries, I agree LBL looks very compelling, we haven't seen the price crater but with the share price bouncing between 70-90c for about three years now, we have had a correction in time rather than a correction in price as the underlying business has backfilled the valuation.
The 1H24 report reminded me of the 1H18 report where I first invested in the business. LBL had just come off a strong FY17, reporting $1.1m NPAT after bouncing around breakeven for a few years and management were bullish on growth ahead. Then at the 1H18 results LBL reported 17% revenue growth but NPAT down 37% due to the following factors:
Sounds familiar doesn't it? Perhaps a harsh critic would be once bitten twice shy and argue that given they have faced labour issues in the past LBL management should be more proactive, but I am forgiving. The company is still growing quickly and expanding their geographical footprint, plus they have mitigated the issue somewhat by using already skilled labour from overseas rather than the lengthier process of training locally (though they continue a strong apprenticeship program).
But the reason for my optimism today stems from what I highlighted above. Management were quite honest about the factors impacting the business, and said they would improve in the 2H18 but it would be FY19 that would see the benefit of the investment in FY18. The sequential NPAT by half from the 1H18 report: $160k, $800k, $1.2m, $1.6m.
Covid has muddied the business for a few years, but ultimately this is a highly aligned management team that I still have trust in. I'm sure issues will pop up again in the future, but it looks like these current ones are past them in 1H24 and the business is set up for a very strong FY25.