Summary
The fund managers believe that Close The Loop Ltd (CLG) remains a significant player in the circular economy, particularly following its acquisitions of ISP Tek Services and Captive Trade Corp, which have enhanced its revenue and profitability. They note that the company has shown strong growth potential, with expectations of reaching $200 million in revenue and $43 million in EBITDA in FY24, despite recent challenges affecting cash flow and operational execution. In their opinion, the renegotiation of the HP contract to a three-year exclusivity is a critical de-risking move that may attract hesitant investors. However, some managers express concerns about the company's current valuation and cash conversion metrics, suggesting a cautious approach. Despite short-term setbacks, including a recent downgrade and underwhelming results, they highlight the strategic positioning of CLG within the IT refurbishment sector and anticipate a potential turnaround driven by ongoing expansion and partnerships. Overall, the consensus is that CLG presents an interesting risk-reward dynamic for investors.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Source: Trading View
Become a ThesisTracker Pro Member
-
Unlock current and most recent commentary ahead of the crowd
-
Exclusive access to new insights from the investment community
-
Regular alerts to actionable insights from financial professionals
Commentary From The Managers
Salter Brothers
28 Feb 2025
$0.10
Summary
- Close The Loop LTD (ASX:CLG) results were underwhelming but aligned with the January trading update.
- Decline in EBITDA due to an unfavourable product mix in the resource recovery segment.
- Delays in opening the Mexicali facility impacted performance.
- The investment team visited Close The Loop’s North American sites and remains comfortable with the current holding.
- Salter Brothers believes appropriate execution can return the business to FY24 earnings levels and beyond.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Text:
Text:
Text:
Summary
-
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua, ut enim ad minim veniam.
-
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat, sed ut perspiciatis unde omnis iste.
-
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur, at vero eos et accusamus et iusto odio dignissimos.pedita.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Become a ThesisTracker Pro Member
-
Unlock current and most recent commentary ahead of the crowd
-
Exclusive access to new insights from the investment community
-
Regular alerts to actionable insights from financial professionals
Commentary From The Managers
Salter Brothers
28 Feb 2025
$0.10
Summary
- Close The Loop LTD (ASX:CLG) results were underwhelming but aligned with the January trading update.
- Decline in EBITDA due to an unfavourable product mix in the resource recovery segment.
- Delays in opening the Mexicali facility impacted performance.
- The investment team visited Close The Loop’s North American sites and remains comfortable with the current holding.
- Salter Brothers believes appropriate execution can return the business to FY24 earnings levels and beyond.
Salter Brothers
31 Jan 2025
$0.12
Summary
- Close the Loop Group (CLG) faced a disappointing downgrade in January.
- Discussions with Adamantem regarding a cash offer ceased.
- Adamantem's offer was a non-binding indicative cash offer of $0.27 for 100% of CLG shares.
- CLG issued a negative trading update, reducing earnings expectations for 1H FY2025.
- The downgrade was due to an unfavorable shift in business mix and delays in opening its Mexicali facility.
- Despite these challenges, the company anticipates resolution in the coming months.
- Salter Brothers remains in contact with the company, monitoring the position closely.
Wilson Asset Management
31 Dec 2024
$0.24
Summary
- Close the Loop is a global circular economy provider focusing on recycling, resource recovery, and sustainable product development.
- Wilson Asset Management notes that the exclusivity period with Adamantem Capital for due diligence and negotiations has been extended to 20 January 2025.
- Following the initial announcement, Close the Loop's share price increased by 19%, indicating market optimism regarding the acquisition.
- Adamantem Capital's proposal includes acquiring Close the Loop at $0.27 per share, which is a 49% premium over the 30-day VWAP on 15 November 2024.
- While the takeover proposal has positively impacted the share price, the final outcome will depend on the successful completion of the acquisition and the terms of the binding agreement.
Salter Brothers
31 Oct 2024
$0.17
Summary
- Close The Loop Ltd (CLG) share price experienced a further decline through October.
- Absence of material news flow contributed to the decline.
- An update is anticipated at the forthcoming AGM.
- Management is expected to address key business cash conversion metrics.
- Following a recent meeting with the company’s management, Salter Brothers remains confident in their investment size.
- Further detailed metrics are awaited before adjustments to the investment thesis are considered.
Salter Brothers
31 Aug 2024
$0.22
Summary
- Close The Loop Ltd (CLG) experienced an underwhelming FY24 result, particularly concerning cash flow conversion of earnings.
- Despite meeting target revenue and EBITDA, a significant rise in working capital and increased net debt raised market concerns.
- Salter Brothers conducted multiple meetings with management and performed an in-depth review of the position.
- The company is currently trading at approximately 4x EBITDA and 9x P/E, presenting an intriguing risk vs reward dynamic if cash conversion improves.
- Strategically positioned in the circular economy, particularly in IT refurbishment services, which lays a solid foundation for future growth and long-term value creation.
Salter Brothers
31 July 2024
$0.31
Summary
- Salter Brothers acknowledges challenges for Close the Loop (CLG) despite positive developments.
- The company is expanding geographically with a new plant in Mexico.
- Strengthening relationships with HP Inc. enhances operational capabilities.
- The Circular Planet initiative is growing, adding HP Inc. and expanding into Europe.
- Salter Brothers believes CLG is undervalued and expects a turnaround in share price.
- Recent expansions and partnerships are seen as pivotal steps for future growth and value creation.
Salter Brothers
31 Mar 2024
$0.32
Summary
- Close the Loop Ltd (CLG) witnessed a share price decline in March despite a strong result in February.
- A significant achievement was the strong performance of its ISP Tek Services acquisition, which delivered revenue growth and EBITDA ahead of expectations.
- Challenges arose in CLG’s packaging division, which faced revenue performance below expectations due to shipping delays.
- Despite this, CLG’s revenue of $106.2 million is on track to exceed FY24 guidance of $200 million.
- Salter Brothers is satisfied with the 1H24 results and continues to hold due to confidence in CLG’s outlook.
Salter Brothers
28 Feb 2024
$0.34
Summary
- Close The Loop Ltd (CLG) released its 1H24 results with an upgraded earnings guidance
- Management commentary on the ISP Tek acquisition indicated performance was better than expected, validating the investment thesis at the time of acquisition
- CLG is undervalued, trading at approximately 5x EBITDA multiple, which is discounted compared to its listed peers
- Salter Brothers' conviction remains strong, continuing to top up the position at these levels
Cerutty Macro Fund
30 Nov 2023
$0.34
Summary
- Cerutty Macro Fund continues to hold Close the Loop Ltd (CLG) as it has been a staple in the portfolio since inception.
- Recent significant updates have reaffirmed positive views on management and built momentum for FY24.
- CLG operates in the ‘circular economy’, focusing on recovery, refurbishment, and reuse.
- The company collects from 260k sites globally and remanufactures 500k electronic consumables per year.
- The acquisition of ISP Tek Services, a U.S.-based electronics refurbishment business, enhances CLG's operations.
- On a pro-forma basis, the combined business is expected to generate $200m revenue and $43m EBITDA with conservative growth assumptions.
- The current market valuation prices CLG at a ~5x EV/EBITDA multiple and 8.5x NPATA.
- In early 2023, ISP Tek Services contributed to a ~35% NPAT growth compared to the prior corresponding period.
- Management expressed confidence in achieving greater than $43m EBITDA guidance for FY24.
- Recent contract renegotiation with HP converted to an exclusive 3-year agreement, reducing key client risk.
- Future growth prospects include expanded volumes with additional OEMs, replicating the business in Europe, and warranty product refurbishment.
Cerutty Macro Fund
31 Aug 2023
$0.45
Summary
- Cerutty Macro Fund has maintained a core position in Close The Loop Ltd since the fund's inception.
- Close The Loop focuses on a circular economy, specializing in collection, recycling, and resource recovery.
- FY23 was transformational for Close The Loop, acquiring ISP Tek Services and Captive Trade Corp (CTC).
- CTC is an electronics refurbish and trading platform based in Texas, USA.
- The acquisition occurred at a favourable run-rate ~4.8 PE multiple and was 100% accretive on an EPS basis.
- Despite only consolidating for 2 months, CTC contributed a net profit of $5.4m, showing 32% growth year-on-year.
- The fund was impressed by Close The Loop’s full year results, which exceeded both the fund's and market expectations.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Frequently Asked Questions
Who has invested in Close The Loop Ltd (ASX:CLG)?
Fund managers including Cerutty Macro Fund, Salter Brothers and Wilson Asset Management have invested in Close The Loop Ltd (ASX:CLG).
Why have investment managers invested in Close The Loop Ltd (ASX:CLG)?
Fund managers are investing in Close The Loop Ltd (CLG) due to its strong positioning in the circular economy, focusing on recycling and resource recovery. Key factors driving their investment include:
1. **Transformational Acquisitions**: The acquisition of ISP Tek Services and Captive Trade Corp has significantly bolstered CLG's capabilities in electronics refurbishment, contributing to a notable increase in net profit and positive EBITDA projections.
2. **Growth Potential**: Fund managers see substantial growth potential, with projections indicating that the combined businesses could generate $200 million in revenue and $43 million in EBITDA, even under conservative assumptions.
3. **Strategic Partnerships**: Management's successful renegotiation of key contracts, particularly with HP, has mitigated risks associated with client concentration, enhancing future revenue stability.
4. **Market Undervaluation**: CLG is perceived as undervalued, trading at attractive multiples compared to peers, which could lead to significant upside potential as operational efficiencies improve and cash flow conversion enhances.
5. **Long-term Vision**: The company is strategically positioned to capitalize on global trends in sustainability and IT refurbishment, making it a compelling long-term investment for fund managers looking to align with environmentally responsible business models.
What happened to Close The Loop Ltd (ASX:CLG)?
There have been no recent updates from fund managers regarding Close The Loop Ltd although fund managers including Cerutty Macro Fund, Salter Brothers and Wilson Asset Management have previously commented.