Author Topic: ACU  (Read 597 times)

galumay

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ACU
« on: August 08, 2021, 01:38:09 PM »
ACU, Acumentis Group Limited provides valuation, research, and advisory services in relation to property and businesses in Australia. The company offers residential property valuation, government, commercial property valuation, insurance valuation, rural and agribusiness, property advisory, quantity surveying, buyers agency, illicit substance screening, projects division, self-managed super funds property assessment, stamp duty assessment, family law and litigation, and homebuilder grant valuation services. It serves the private owner and investor, professional/SME, corporate, government, banking, finance, REIT, and development industries.

ACU was the subject of a significant cyber attack in 2019 that had a negative impact on the business, and I imagine its reputation with investors. I believe that is behind the business now, systems have been improved to prevent a repeat and the primary actor was arrested, (they were someone with internal access to the business systems.) The business is now generating strong FCF and has done for several quarters now, delivering full FY FCF. FCF yield is over 10% based on this year, and my quick & dirty IV is around 20c. The FY21 results have been released while I have been thinking about this business, and as expected the company reported a loss due to the impairments around a loss of a significant government contract. I am yet to quantify the impact on future cash flows of this loss of contract. The contract continued with extensions to the EOFY so there was no impact on FY21, ACU are just saying that revenue will increase overall in 2022 so no impact there. (of course there is an impact, revenue would have been even higher for 22 is they still had the contract.)

Its impossible to draw any conclusions at this stage about ROIIC as returns have been so lumpy with so many impairments, it could probably be normalised to give some sense, but given that FCF has also been lumpy its probably not going to add any conviction for me.

In conclusion it looks like a reasonable turnaround opportunity, its trading at a significant discount to my range of value, 12c v 20c, it doesnt look like its a business that is likely to have significant growth, and given its history there may be more stumbles along the way, but it could also see a consistent improvement, single digit growth and a rerate if it maintains FCF and can translate that into earnings.
 
PreMortem

There was a further cyberattack in 2022 and more big customers were lost causing further impairments and continued negative reported earnings. Price falls back to 8c

The business recovers but Management make a series of poor capital allocation decisions and FCF is reduced and earnings still negative price falls back to 8c

The business recovers, growth is very slow to negative due to a property crash in the Aus market, share price still around 12c

The business recovers, no more miss steps, single digit growth, EPS grows to around 2c per share as does FCF, share price 25c

Prie expectancy - 8c* 10% + 8c*10% + 12c*40% + 25c*40% = 16.4c

galumay

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Re: ACU
« Reply #1 on: September 08, 2021, 10:14:13 AM »
Revisiting my research on ACU to consider taking a position, but its no better, nor cheaper than other businesses I already hold so at this stage I am not taking a position.