The recording for today's meeting with Gale Pacific CEO Troy Mortleman is now on the meetings page, and you can download the transcript here:

Gale Pacific Transcript.pdf

My 2c:

This is an extremely long standing business, and (for the most part) a profitable one. They don't seem threatened by any tech disruption ("AI cant protect you from the Sun", as Troy said), and seem to have a well established and well regarded brand.

If you normalise margins to account for some cost savings initiatives and one-offs, and assume some efficiency gains, it's also dirt cheap. EG if you assume an operating margin of 5%, or a net margin of just 2.5%, the PE is less than 6x

BUT.. they operate in a very cyclical sector, have significant counter-party risks (eg Bunnings, Graincorp), and a history of poor management (not that you can lay that at Troy's feet, he's somewhat still new to the role). They clearly over-extended themselves in their US investments -- something evidenced by the fact that Troy reckons he was able to find $3.8m in annual savings (which equals their annual net profit from a few years back). It's also pretty capital intensive and is competing in a space that is beset by low cost alternatives (which, to be fair, are quite likely of much lower quality. But there is a commodity nature to their products). The balance sheet could probably be tidied up a bit too (not in asset carrying values, i hasten to add. As Troy said, much of the machinery is already fully depreciated. But i'd personally prefer a larger cash buffer).

I'm not trying to throw shade at is, as i say it could be dirt cheap if some of the initiatives Troy has put in place start to take effect. But it'll need a few good period of strong results to win over the market and score a sustainable re-rate. And a lot of the challenges they face are outside of their control.

One to watch for those that like deep-value, turn-around opportunities.