Capral (CAA) is an old-world company which produces aluminium extrusion; boring, I know, to you ‘tecchies’ who get moist and glaze over on technology disruption. But it is Australia’s leading supplier with 26% of market share and with the capacity to buy more share from the remaining suppliers who are largely private companies owned by boomers who will want to retire and drive the Winnebago around Australia before ascending to whatever exists on the other side. CAA have admitted they are in talks with these people.

Yesterday CAA issued an upward revision to their CY22 results and CY22 will be a cracker. As best as I can determine, eps before tax will be around $1.90 – and before tax is as good as after tax, because this company is in the most unusual situation of having some $240m in tax losses, yet they have some $14.8m in franking credits as at June ‘21.

Sure, CY22 is an extremely upbeat year and CY23 will be more muted, with expectations of residential construction where they derive the majority of their income (think aluminium windows, and frames etc) to come off some 5%.

But for crying out loud, CAA is a stealth bomber flying well under the radar – no analyst coverage and even though the share popped up to $8.95 on the announcement, that’s still a PE of 4.7x

For those wanting an income stream, you can bank on a 70c to 80c fully franked divvy – again that’s not bad as a grossed up divvy of between 11.1% and 12.8%

Morningstar reacted overnight by adjusting the IV from $9.28 to $9.74 – but this is worth north of $10 all day every day, and so says Allan Grey, noted contrarians with ownership of some 20% when they vehemently defended the company from a punt $7 takeover in recent times.

There are two other reasons why CAA – apart from buying market share as discussed above – will be okay going forward:

(1)  The decision of many to return to Aussie manufacturers and end the supply chain lunacy and uncertainty. As chair of a medium sized private manufacturer, I know first- hand the dramas of escalating material prices and freight + the delays in China, on the seas, and most recently, tied up on the wharves in Australia.

(2)  CAA is a leading company fighting anti-dumping, and with considerable success in recent times.     

Another reason to think of CAA as an investible proposition is its strong Balance Sheet; companies with no debt, don’t go broke! In fact, I do believe by the December balance off date, they will have just short of $50m in good old Johnny CASH! As the company presentation states – quote – “Robust Financial Position that Supports Dividends & Reinvestment’. I think even Warren Buffett and his sidekick, Charlie Munger, might be drooling over that statement!