RE:RE:RE:DCM vs SXP Torontojay wrote:
Capharnaum wrote: What you are calculating isn't an adjusted EBITDA, it's an ajusted cashflow measure.
Supremex sells goods while DCM is more of a marketing company. Different risk profiles.
Supremex and Data Communication are comparable companies. Both are in transition phase and are trying to replace "old" business with more profitable opportunities. Supremex is still mostly an envelope company with new business into specialty packaging while Data Communication is a print services company with digital marketing capabilities. Supremex has more interest bearing debt on its books while the operating cash flow before changes in working capital are very close. They have been compared to each other on the investor presentation provided by DCM management. I believe both companies to be deep value plays.
Adjusted ebitda is a "proxy" for operating cash flow before changes in working capital. I've made amendments to this cash flow measure to be more in line with past ebitda measures prior to ifrs-16.
I'm not judging the value of DCM as an investment. What I'm saying is that it's a different type of investment that carries a higher risk profile.
Supremex has a stranglehold on their letter business, so while the market is shrinking, they also have pricing power to make up for it. The packaging business is growing yearly and in a globally growing segment. Demand for those products aren't based on marketing strength but just demand for goods.
Total sales for Supremex increased 5% year over year (Q1 + Q2) while DCM went down 17% over the same period of time. Adjusted ebitda (from the financial reports) was similar between Supremex and DCM.
To generate $118M in sales, DCM had $30.4M in selling, general and administrative expenses (Q1+Q2), compared to Supremex spending $13.2M to generate $105M in sales.
DCM incurred $3.1M in interests charges over Q1 and Q2, while Supremex only had $1.1M in interests charges for the same period. The higher cost of interest for DCM highlights that they don't really have access to capital outside of issuing shares... In comparison, Supremex could borrow more based on their balance sheet at lower interest costs.
Due to all those elements, Supremex is a safer investment when compared to DCM. The higher risk profile of DCM should be represented by a cheaper share price.