Summary
The fund managers believe that Lindsay Australia Ltd (LAU) represents a compelling investment opportunity due to its strong earnings and defensive profile. In their opinion, the company is currently trading at a significant discount to fair value, with a forward earnings multiple of less than 8x, compared to its historical average of ~12x and peers at ~13.4x. They anticipate EBITDA growth of 15-20% in FY24 and over 10% in FY25, bolstered by recent acquisitions and favorable market conditions following the liquidation of a competitor. The fund managers emphasize that LAU's strong position in the refrigerated transport sector enhances its pricing power amid inflationary pressures. Despite recent weather-related disruptions impacting EBITDA guidance, they argue that the P/E ratio of 7x and a grossed-up dividend yield of over 7% reflect a robust balance sheet and a solid competitive stance, making LAU a promising long-term investment.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Source: Trading View
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Commentary From The Managers
Centennial Asset Management
29 Jan 2025
$0.88
Summary
- Centennial Asset Management believes Zip has the potential to rally in the short term.
- Zip is well positioned to deliver further strong growth in revenues and profitability.
- The US buy now, pay later market remains relatively immature, allowing Zip’s US footprint to grow rapidly.
- New product launches are expected to contribute to the company’s transaction volumes and earnings growth in the coming year.
- Zip’s balance sheet strength and ongoing buyback are expected to support share price performance.
- Zip has surprised the market with better-than-expected earnings over the past year.
- The company has upgraded expectations post the most recent quarter, indicating potential for additional upside earnings risk.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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Commentary From The Managers
Centennial Asset Management
29 Jan 2025
$0.88
Summary
- Centennial Asset Management believes Zip has the potential to rally in the short term.
- Zip is well positioned to deliver further strong growth in revenues and profitability.
- The US buy now, pay later market remains relatively immature, allowing Zip’s US footprint to grow rapidly.
- New product launches are expected to contribute to the company’s transaction volumes and earnings growth in the coming year.
- Zip’s balance sheet strength and ongoing buyback are expected to support share price performance.
- Zip has surprised the market with better-than-expected earnings over the past year.
- The company has upgraded expectations post the most recent quarter, indicating potential for additional upside earnings risk.
Contract Asset Management
31 May 2024
$0.91
Summary
- Contract Asset Management highlights a new position in Lindsay Australia Limited (LAU), currently trading below $0.90 after previously exceeding $1.40 this financial year.
- The firm has a long-standing relationship with this family-led business, included in the BKI Investment Company portfolio.
- Lindsay Brothers Transport, established in 1953, is recognized as one of Australia’s leading integrated transport, logistics, and rural supply companies.
- LAU operates from 16 terminals with over 1000 vehicles, serving Australian farmers across the supply chain.
- In early May, LAU management slightly revised its EBITDA guidance downwards due to weather disruptions, viewed as a short-term challenge.
- Contract Asset Management believes that the seasonal volatility is adequately reflected in the current share price.
- Forecasts indicate LAU is trading on a P/E of 7x and offers a grossed-up dividend yield of over 7%.
- The company’s Balance Sheet is robust, and its competitive position has strengthened in recent years.
- Contract Asset Management remains optimistic about the future prospects of both the business and the stock.
Cerutty Macro Fund
31 Oct 2023
$0.97
Summary
- Cerutty Macro Fund has recently added Lindsay Australia Ltd (LAU) to its portfolio.
- The investment was initiated due to LAU trading at a significant discount to fair value.
- Lindsay's conservative valuation reflects a market assignment of less than an 8x forward earnings multiple.
- This valuation is notably below its historical average of approximately 12x and the peer group average of around 13.4x.
- Management guidance indicates EBITDA growth between 15-20% for FY24, supported by asset integration.
- Expected EBITDA growth over FY25 is projected to exceed 10%.
- Recent developments in the Australian logistics market have positioned LAU favorably.
- The liquidation of Scott’s Refrigerated Logistics has opened opportunities for LAU.
- Cerutty believes LAU is well-placed to absorb the market share now available, enhancing its position in refrigerated goods transport.
- This increases Lindsay’s pricing power during a time of elevated inflation.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Frequently Asked Questions
Who has invested in Lindsay Australia Ltd (ASX:LAU)?
Fund managers including Cerutty Macro Fund, Centennial Asset Management and Contract Asset Management have invested in Lindsay Australia Ltd (ASX:LAU).
Why have investment managers invested in Lindsay Australia Ltd (ASX:LAU)?
Fund managers are investing in Lindsay Australia Ltd (LAU) due to its strong earnings potential, defensive profile, and significant undervaluation. Despite being perceived as a stable rather than high-growth investment, LAU is trading at a discount to its fair value, with forward earnings multiples significantly lower than historical averages and peers. Recent management guidance suggests promising EBITDA growth of 15-20% for FY24, bolstered by strategic acquisitions following market disruptions in the logistics sector. Additionally, LAU's established position in refrigerated transport and robust balance sheet enhance its competitive advantage, making it a compelling investment choice for fund managers.
What happened to Lindsay Australia Ltd (ASX:LAU)?
There have been no recent updates from fund managers regarding Lindsay Australia Ltd although fund managers including Cerutty Macro Fund, Centennial Asset Management and Contract Asset Management have previously commented.