STUDENT TRANSPORTATION INC 5.25 PCT DEBS T.STB.DB.A

CapEx is growth focused

[slimjim11]

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.

[righand2]

Good stuff slimjim. As for Bluecollar, you will note that he consistently posts encouraging "analysis" on stocks he owns, and just as consistently tries to put doubt in the minds of shareholders of stocks he does not own. So beware of those who offer free "advice" on stocks.

[d_trump]

nice pickup slimjim.....my 50% was just a very conservative guess. I'm not surprised that it's mostly growth.

[ffhwatcher3]

Why are you making this so hard and ignoring the obvious.  Read the most recent annual reports and MD&A that goes along with it.  They spend almost $46M on replacement capex this past July and August alone.  At $70k/bus, that is almost 700 new replacement buses just to replace 700 old buses, all on existing routes under existing contracts. They have about 13,000 buses that last

[BlueCollar51]

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

[BlueCollar51]

CORRECTION   That should have been abt. $115m for New Busses. $52m Balance Sheet Debt, $63.3 Off Balance Sheet Debt.   The morning coffee hasn’t quite kicked in.