What's really important.........is Australia.
If you look at the Gross Profit of the original Canadian operations for the past three years' Q3, one can see a disturbing trend:
- 2011 - $14,703.000
- 2012 - $12,783,000
- 2013 - $10,755,000
This decrease is primarily due to the implosion of the Prepaid Card Business. Although there will likely be additional weakness in Prepaid, the major damage has already been done. The secondary reason for the decline is the industry-wide decline in ATM transactions in Canada. DCI is not immune. What makes these numbers worse, however, is that DCI made a number of minor acquisitions over this period that did not halt the bleeding. DCI's latest aquisition, Threshold Financial, will give the Canadian numbers a boost for Q4, but in doing so, it will make a true 'apples-to-apples' comparison difficult.
If it weren't for the Australian and UK acquisitions, DCI would have definately have had to cut its dividend by now.....Which leads us to the importance of Austrialia. DCI buying the Australian company 'Customers' was the equivalent to Iraq taking out Iran. Give credit to DCI for convincing lenders and investors to take on almost 100% of the risk in financing the approximate $200 Million acquisition.
Q4 2012 was the first full quarter of results in Australia. By the start of the Q4 2012, DCI had almost three months of Australian operations under their belt - enough time to implement some of the changes required and 'show them Aussies how to run an ATM business'.
The Q4 2012 numbers for Australia, as expected, were large - Gross Profit for Australian ATM Operations was $18,017,000. That number was over 2.5 times the size of the Canadian ATM Gross Profits.($6,895,000).
Therefore, the perfomance of Australia in Q4 2013 is a massive indicator in estimating the long term viabilty of DCI. If we see the number decline year-over-year, it will be a bad sign that Australia is heading in the same wrong direction as the Candian operations. Over time, there will be no other competitors worthwhile to buy out, and dividends will have to be eventually cut. On the other hand, should DCI show encouraging growth in Australia, then the divdend should be safe for many quarters to come, and I forcast the Stock will see a rebound up to $20.
That said....I'm not betting the farm on Australia producing. I'm guessing flat growth, to a decline of up to 5%.