tag:blogger.com,1999:blog-4631423976894080706.post3406221210878488138..comments2023-10-17T06:55:06.255-04:00Comments on the red corner: Emeco Holdings -- Equipment Leasingred.http://www.blogger.com/profile/04089263693762295793noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-4631423976894080706.post-6717528817502327442013-11-21T08:20:40.600-05:002013-11-21T08:20:40.600-05:00This comment has been removed by the author.Madhavihttps://www.blogger.com/profile/05667576878660547663noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-84452937772202112102013-06-22T10:21:39.965-04:002013-06-22T10:21:39.965-04:00Hi Lewis,
I'll start at 2009 because they cha...Hi Lewis,<br /><br />I'll start at 2009 because they changed their strategy a little in that year, concentrating on higher value equipment for the mining sector and virtually eliminating the lower-value equipment for the civil construction market. You can see that GFA/Revenue jumped up from ~1.42 to ~2.35.<br /><br />Okay, so the dollar ratio of the equipment at cost to revenue is $2.53-to-$1. There's some volatility in utilization rates so that relationship wobbles a bit (+/- 0.14) but 2.53:1 is good enough rule of thumb. <br /><br />So, since revenue has increased by $364 million, we can estimate that growth capex is more or less 2.35 x 364 = $855 million. (i.e. at the 2.35:1 ratio, it takes an additional $855 million in equipment to generate $$364 million in increeased revenue)<br /><br />Whatever remains must therefore be maintenance capex, so <br />total capex minus disposals = $1,106<br />growth capex = $855<br />therefore maintenance capex = 1106 - 855 = $251 million over that four year period.<br /><br />Accounting depreciation over that time period sums to $451 million which is almost 2x maintenance capex and is therefore too high.<br /><br />Now, the company helpfully breaks out maintenance capex (they call it "sustaining capex") and their figure for the 4 year period 2009-2012 comes to <br />Sustaining capex = 428.8<br />minus<br />disposals = 165.5 = $263.3 million<br /><br />which is close enough. A longer time series would see these two values (251, 263) converge.<br /><br /><br /><br /><br /><br />red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-11229911877472726412013-06-22T09:15:03.715-04:002013-06-22T09:15:03.715-04:00red,
Much obliged as always; I've read back f...red,<br /><br />Much obliged as always; I've read back from your more recent post.<br /><br />Could you explain the first table a little more for me? I can intuitively see how GFA/Revenue is a very strong hint that they're overdepreciating - particularly if utilisation rates are staying flat - but I can't figure out the logic on the lines beneath that.<br /><br />I need to have a longer look at the annual report, but for someone who's never bought a foreign stock - to my detriment - it's very tempting. The investing premise seems extremely simple, particularly since the company can so easily adjust its asset base by allowing depreciating and not investing as much in future equipment. <br /><br />Thanks!Lewishttp://expectingvalue.comnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-38400378085464203332013-03-29T14:03:25.867-04:002013-03-29T14:03:25.867-04:00One of the biggest benefits probably, is that rent...One of the biggest benefits probably, is that renting doesn't involve a lot of cash to be put in since you just need to pay for the equipment when you need it. Because of renting equipment, you even don't need bother regarding servicing so much that's the reason equipment rental is an inexpensive preference.Freddy Stevenshttps://www.hertzequip.com/herc/rental-equipment/trucks-&-trailers+dump-trucksnoreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-56177238480585540952012-12-10T14:53:17.992-05:002012-12-10T14:53:17.992-05:00Hi John, thanks for the comment.
My thinking was ...Hi John, thanks for the comment.<br /><br />My thinking was (is) that (a) Emeco is trading at almost half the price of its comparables; (b) its global utilization rate is in the 70s; and (c) 2nd half of 2009 saw a bigger drop in utilization and FCF came in at 13c per share because it was able to sell down its inventory.<br /><br />The pricing of the renewal of the long term Australian coal contracts is, to me, a test for/of management. If they take the long, strategic view and don't engage in steep price cutting, Emeco will rise to become one of my favorite ideas. As it is, it seems to me a stock priced for the worst case scenario.<br /><br />My email address is theredcorner66 at gmail.<br /><br />red.https://www.blogger.com/profile/04089263693762295793noreply@blogger.comtag:blogger.com,1999:blog-4631423976894080706.post-17254238391538094322012-12-10T04:43:27.772-05:002012-12-10T04:43:27.772-05:00Dear Red
Interesting post. Many of these Oz mining...Dear Red<br />Interesting post. Many of these Oz mining services suffer from being marginal service providers at the volatile end of the cycle and have no control over miners capex who in turn have no control on commodity prices. IE: Emeco's fleet utilisation has dropped to around 60% in Australia and many of its 2013 coal-based contracts are also coming up for expiry which may result in again further and lower utilisation and less pricing power going forward. Yes assets are worth less than the market ascribes, but if they sit idle, are rented for significantly less or are sold close to their WDV because they are not being utilized, Emeco's 'earnings' can be broken for a long-time still. Granted the share price is most likely already discounting this. By the way I couldn't find the link to your email address on your site? I would be interested in getting in touch.<br />Regards<br />John<br />Anonymousnoreply@blogger.com