RE:CapEx is growth focusedslimjim11 wrote: Following the earlier comments by d_trump and bluecollar, I checked the split of Capex between growth and sustaining in Q1 2015. From Page 12 of the Q1 2016 MD&A: "The Companys investing activities for the three months ended September 30, 2015 resulted in a use of cash of $52.0 million. Included in these investing activities were, (i) capital expenditures related to the new bid contracts for fiscal year 2016 of $46.8 million (which includes $0.1 million for oil & gas investments in new wells), (ii) $5.4 million in capital expenditures related to replacement capital spending, and (iii) $0.2 million in proceeds from sale of equipment." So in Q1, 90% of CapEx was for growth, and only 10% was to maintain existing assets. (46.8/52.0 = 90%) This means the sustainable Payout Ratio reflecting maintenance CapEx only, is lower than that calculated by either d_trump of bluecollar, who assumed 50% was maintenance CapEx. While I agree, the classification between allocating a Capital Expense a maintenance or a growth CapEx is open to management interpretation, it would take a major re-write of the allocation to turn a 90% growth number into a 50% growth number. My takeaways: 1) The sustainable Payout Ratio is lower than is being currently priced in the share price 2) With significant growth CapEx, I am expecting continuing positive top line growth.
But they also did this in Q1;
“During the three months ended September 30, 2015, the Company entered into additional operating leases with ten major financial institutions to lease approximately $52.2 million in replacement school vehicles and $11.1 million in growth school vehicles for the upcoming 2015 2016 school year.” Which is why I said they can split the Bought/Leased Busses to Growth/Replacement however they wish (smoke and mirrors). It’s the Total that is most important.
In Q1 for the 2016 year they acquired abt. $104m worth of New Busses 50% Financed with Balance Sheet Debt (credit facility) and 50% Off Balance Sheet Debt.
Growing the Top Line revenue has never been the problem. The problem has always been Growing the Net Cash From Operations per Share.
That’s a feature of Dilution. The Company Grows but the Shareholders don’t participate.
As Always; Do Your Own Due Diligence; It’s Your Money !!