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DX.

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SteMiS
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DX.

#429652

Postby SteMiS » July 22nd, 2021, 2:23 pm

I'm a big fan of DX.

DX. is a parcels delivery business comprising two divisions; Express and Freight.

Freight - Specialists in the delivery of larger and heavier items, including those with irregular dimensions and weight (“IDW”), to business and residential addresses nationwide.

Express - Specialists in the express delivery of time sensitive, mission critical and high value items for B2B and B2C customers.

After floating at 100p in Feb 2014, the business stumbles through a series of profit warnings and an abortive attempt to merge with John Menzies distribution division (subsequently sold to PE) until it's share price reached single figures. By then shareholders had had enough and a rescue refinancing backed by Gatemore, involving a complete change of management, was undertaken. Ron Series was brought in as Chairman and Lloyd Dunn as CEO. Both guys know the industry inside out, were involved in the successful turnaround and sale of Tuffnell Parcel Express and both invested serious amount of money into DX. Dunn alone owns 10.8% of the company.

Since then there has been a complete turnaround in the company's fortune involving a reorganisation of the sales function and accountability and the commencement of an expansion in depots (15 in the next two years). From an underlying loss of £1.7m in 2018/9 the company moved to a profit of £3.1m in H1 2020/1. It recently issued a trading statement revealing "that DX will significantly exceed existing market forecasts for adjusted profit before tax for the financial year ended 3 July 2021". It helpfully identified the forecasts to which it was referring - "Adjusted pre-tax profit excludes share-based payments and amortisation of acquired intangibles. Prior to this announcement, the range of market estimates for adjusted pre-tax profit for the current financial year was £10.0m - £10.3m." - https://www.investegate.co.uk/dx--group ... 00075811F/

On 19th July Finn Cap issued a research note, which DX. helpfully provides on it's web site. They are forecasting an ebitda of £37.3m for y/e 30.6.21 (market cap at 33p = £189m). In the next two years they expect Express ebitda to increase by 12% and Freight by 27%. I don't think that's particularly aggressive, especially with all the depot expansion, so hopefully it's set up for underpromise, over deliver.

However because of the iceberg effect (i.e the relatively fixed nature of central costs and depreciation), that will lead to a 95% increase in PBT, leaving DX. on an EPS of 3.3p which is a P/E of 10.1. Taking account of forecast net cash of £33.4m that's a tax free P/E of 8.2.

The exit here is a sale. Series and Dunn are not lifestyle managers. There are in to turn this around and hopefully do what they did with Tuffnells. Strip out central costs and by 2022/3 you have a strategic business with it's two divisions forecast to be making a combined ebitda of £68.4m (PBT - £42m) with £33.4m cash in the bank. What would a consolidator pay for that? Current valuation at 33p is £189m. I'm looking to more than double my money in two years.

GrahamPlatt
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Re: DX.

#429702

Postby GrahamPlatt » July 22nd, 2021, 4:38 pm

Monday 19th: * Dx (Group) Plc DXDX.L : Liberum raises price target to 50p from 40p

SteMiS
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Re: DX.

#456525

Postby SteMiS » November 8th, 2021, 1:03 pm

Results out today with an adjusted PBT of £13.0m (cp to £0.3m 2020) on sales of £382.1m (up 16%). Outcome was slightly higher than market forecasts of £11.8m

https://www.investegate.co.uk/dx--group ... 00085713R/

"Despite the ongoing challenges, including driver shortages and global supply chain disruptions, we remain confident of further progress over the new financial year. We have now launched a second major capital investment programme of between GBP20m-GBP25m to be invested over the next three years to support our growth plans. We believe DX remains well-placed to continue to increase its market share."

GrahamPlatt
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Re: DX.

#456564

Postby GrahamPlatt » November 8th, 2021, 3:27 pm

It was covered in this morning’s Small Cap Value Report by Jack Brumby on Stockopedia. It is “interesting”, but I have moved on from small caps.

SteMiS
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Re: DX.

#628177

Postby SteMiS » November 17th, 2023, 10:57 am

SteMiS wrote:The exit here is a sale. Series and Dunn are not lifestyle managers.

There you go. Slightly disappointing take-out price and not to an industry consolidator but nevertheless a decent return...


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