petec Posted June 25, 2015 Share Posted June 25, 2015 Gio, a couple of questions: 1. Is your FCF number before or after acquisition spend? If a lot of the FCF has to be spent on acquisitions in order to get the growth, how does that affect your thinking? 2. Do you mean 17,144 companies below $200m revenues, or 17144 between $100m and $200m revenues? Thanks! Pete Hi Pete, 1) I define FCF as cash flow from operations less interests paid, less capital expenditures (maintenance capex + organic growth capex). Acquisitions imo are investments for external growth. And of course any investment for external growth is capital that could be withdrawn by shareholders without affecting the already existing businesses at all. Not even their organic growth! Therefore, it doesn’t affect my thinking at all. 2) Sorry! It was not clear. Let’s look at the slide in attachment (which had already been posted before): There are in the US, Canada, and Europe 17,399 companies with annual revenues below $300 million. This is the overall number of companies that could be purchased. Compare this number with 131 acquisitions made by CSU during the last 5 years. Cheers, Gio Thanks Gio. I hadn't seen the slide - very useful. Re the FCF, my view is that if you are going to use that definition of FCF then you should only assume organic growth in your valuation. If you are including acquisitive growth, then the cash spent on those acquisitions should be treated in the same way you treat capex. You can't have both the cash and the growth, when the cash funds the growth! Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2015 Share Posted June 25, 2015 Re the FCF, my view is that if you are going to use that definition of FCF then you should only assume organic growth in your valuation. If you are including acquisitive growth, then the cash spent on those acquisitions should be treated in the same way you treat capex. You can't have both the cash and the growth, when the cash funds the growth! But I have never valued CSU with a sum of the parts analysis. Instead, I have just put a multiple on its FCF. And that multiple will be lower for a company than doesn’t grow FCF, will be higher for a company that grows FCF organically, and will be even higher for a company that grows FCF both organically and through acquisitions. Gio Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2015 Share Posted June 25, 2015 In other words, imo it doesn’t matter how you grow FCF, it only matters how fast you grow it. The faster, the higher the multiple you deserve. Gio Link to comment Share on other sites More sharing options...
KCLarkin Posted June 25, 2015 Share Posted June 25, 2015 Re the FCF, my view is that if you are going to use that definition of FCF then you should only assume organic growth in your valuation. If you are including acquisitive growth, then the cash spent on those acquisitions should be treated in the same way you treat capex. You can't have both the cash and the growth, when the cash funds the growth! The important factor is the ROI from the reinvested cash. Let's assume that CSU gets 30% ROE on future investments. If they are growing 15%, they would only need to reinvest 50% of FCF. So that would be a 2% starting yield, growing 15% per year. Compare that to a more mundane growth business also growing 15%/year but reinvesting with a 12% ROE. This company would need to issue shares or debt to fund their growth. They might both trade at 25x FCF and grow 15% per year but CSU would be a much better investment. But of course, those assumptions could be wrong so I would say that the price is high enough that there is little quantitative Margin of Safety. The moat of the businesses, the attractive business model, and the quality of management provide a qualitative Margin of Safety. Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2015 Share Posted June 25, 2015 But of course, those assumptions could be wrong so I would say that the price is high enough that there is little quantitative Margin of Safety. The moat of the businesses, the attractive business model, and the quality of management provide a qualitative Margin of Safety. Yeah!... When I don’t see a “quantitative” margin of safety, I usually respond by leaving room to average down… Because I can never know when the market will hand me the opportunity of seeing a “quantitative” margin of safety… And in the meantime a very high quality business like CSU might have created lots of value! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
Travis Wiedower Posted July 8, 2015 Share Posted July 8, 2015 I run my business on Quickbooks (I hate it) downloaded to my laptop. There are some SaaS solutions out there. I'm not using any. Why? What happens if one of them suddenly disappears. I want to run my core accounting on a package that I own. If Quickbooks goes under I can still run the program and I don't lose any data. When you go SaaS your data is now living somewhere else, that's a risk that needs to be mitigated somehow. Off-topic but you should check out Xero. It's SaaS but it's simple to export everything/backup to a Quickbooks-compatible file. Would be easy to do on a weekly basis or whatever if you were that concerned about it. I used to use Quickbooks and I absolutely hated it until I got so fed up I switched. Xero is soo much better, wish I switched a long time ago. Link to comment Share on other sites More sharing options...
KCLarkin Posted July 22, 2015 Share Posted July 22, 2015 Constellation Software Inc. (TSX:CSU) will be removed from the S&P/TSX Completion Index and added to the S&P/TSX 60, 60 Capped and the 60 Equal Weight Indices. This is why the stock is up today. Link to comment Share on other sites More sharing options...
Liberty Posted July 22, 2015 Author Share Posted July 22, 2015 For those wondering why the big jump, it's on non-fundamental news unfortunately: S&P Dow Jones Indices Announces Changes to the S&P/TSX Canadian Indices 17:15 EDT Tuesday, July 21, 2015 Constellation Software Inc. (TSX:CSU) will be removed from the S&P/TSX Completion Index and "added to the S&P/TSX 60, 60 Capped and the 60 Equal Weight Indices". Constellation Software will not be added to the S&P/TSX 60 ESG Index at this time. Also, Constellation Software will be added to the S&P/TSX 60 Equal Weight Index at a relative weight equal to the relative weight of Catamaran at the close on July 24, 2015. The shares of Catamaran will be removed from the S&P/TSX Composite, Capped Composite and Composite Equal Weight, the S&P/TSX 60, 60 Capped, 60 ESG and 60 Equal Weight and the S&P/TSX Capped Health Care Indices after the close of trading on Friday, July 24, 2015. Link to comment Share on other sites More sharing options...
giofranchi Posted July 27, 2015 Share Posted July 27, 2015 CAE sells Datamine to Constellation Software http://seekingalpha.com/news/2657935-cae-sells-datamine-to-constellation-software?app=1&uprof=25 Gio Link to comment Share on other sites More sharing options...
Simple Investor Posted July 29, 2015 Share Posted July 29, 2015 Anyone know what percentage of the company Mark Leonard owns? Also what is the SEDAR document type that displays that info? Thanks. Link to comment Share on other sites More sharing options...
Liberty Posted July 29, 2015 Author Share Posted July 29, 2015 Anyone know what percentage of the company Mark Leonard owns? Also what is the SEDAR document type that displays that info? Thanks. He owns 1,436,136 shares. http://www.csisoftware.com/wp-content/uploads/2015/04/MIC_Eng.pdf Link to comment Share on other sites More sharing options...
Simple Investor Posted July 29, 2015 Share Posted July 29, 2015 THanks. Link to comment Share on other sites More sharing options...
gary17 Posted July 29, 2015 Share Posted July 29, 2015 another simple way is to use SEDI https://www.sedi.ca/sedi/SVTReportsAccessController?menukey=15.03.00&locale=en_CA Click on "Insider Information by Issuer" click 'next' Type "Constellation" Gary Link to comment Share on other sites More sharing options...
Liberty Posted July 29, 2015 Author Share Posted July 29, 2015 Q2 is out: http://www.csisoftware.com/wp-content/uploads/2015/07/SR_Q2_2015.pdf http://www.csisoftware.com/wp-content/uploads/2015/07/PR_Q2_2015.pdf Link to comment Share on other sites More sharing options...
gary17 Posted July 30, 2015 Share Posted July 30, 2015 seems like they missed analyst top and bottom line estimates - might be some buying opportunities coming - Gary Link to comment Share on other sites More sharing options...
giofranchi Posted July 30, 2015 Share Posted July 30, 2015 seems like they missed analyst top and bottom line estimates - might be some buying opportunities coming - Gary Maybe... Though Adjusted net income per share is up 30% for the first half of 2015: the overall preformance still seems to be very strong! If a correction comes, I am buying more! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
Liberty Posted July 30, 2015 Author Share Posted July 30, 2015 seems like they missed analyst top and bottom line estimates - might be some buying opportunities coming - Gary -6% organic from FX. If you adjust for that, which isn't under the company's control, I'm very satisfied with the performance of the business. Who knows what Mr. Market will think, though. Expectations were obviously high. Link to comment Share on other sites More sharing options...
InvestingOnSale Posted August 6, 2015 Share Posted August 6, 2015 Anyone know what percentage of the company Mark Leonard owns? Also what is the SEDAR document type that displays that info? Thanks. He owns 1,436,136 shares. http://www.csisoftware.com/wp-content/uploads/2015/04/MIC_Eng.pdf Did Leonard just sell 1 million shares? I see on my Bloomberg terminal on 7/31 a "sell carried out privately" for 1 million shares. And it looks like he now owns 436,197 shares on SEDI. Strange. He held 1.4 million shares since at least 2006. Link to comment Share on other sites More sharing options...
FiveSigma Posted August 6, 2015 Share Posted August 6, 2015 https://www.insidertracking.com/company?menu_tickersearch=CSU%2ACA%20%7C%7C%20Constellation%20Software This site shows sale of debentures, rights, AND common shares. Strange. Link to comment Share on other sites More sharing options...
Liberty Posted August 6, 2015 Author Share Posted August 6, 2015 Here is your answer: http://www.csisoftware.com/2015/08/constellation-enters-agreement-with-1388369-ontario-inc/ Constellation Software Inc. (“Constellation”) (TSX: CSU) today announced that 1388369 Ontario Inc., an Ontario corporation (“1388”) which currently owns 1,000,000 common shares of Constellation (representing approximately 4.7% of the issued and outstanding common shares of Constellation) and which was previously controlled by Mark Leonard, President and Chairman of the board of directors of Constellation, is now controlled exclusively by the adult children of Mr. Leonard. Following the change in control of 1388, Constellation and 1388 entered into an agreement whereby 1388 will provide notice to Constellation within five days of any sale, transfer, or assignment by 1388 of its Constellation common shares. Mr. Leonard continues to hold 436,136 common shares of Constellation (representing approximately 2.1% of the issued and outstanding common shares of Constellation) directly. Link to comment Share on other sites More sharing options...
gary17 Posted August 6, 2015 Share Posted August 6, 2015 Wow - so this is really starting to sound like a retirement in planning.... Link to comment Share on other sites More sharing options...
loganc Posted August 7, 2015 Share Posted August 7, 2015 Wow - so this is really starting to sound like a retirement in planning.... Doesn't it seem more likely that this is simply a transfer that has occurred for purposes of estate planning? I don't know the details of the tax code of Canada (I assume Leonard is a Canadian citizen), but something like this doesn't exactly seem like a sale to me. It seems like a likely explanation would be getting the assets out of his taxable estate. It would seem to me that such a transfer, if I am correct, would have no impact on his motivation or incentives. Link to comment Share on other sites More sharing options...
KCLarkin Posted August 7, 2015 Share Posted August 7, 2015 One reason to do this might be to avoid probate taxes. Link to comment Share on other sites More sharing options...
Liberty Posted August 7, 2015 Author Share Posted August 7, 2015 I don't see it as a sale. He probably expects to keep the majority of the shares in his family for the long-term and this is probably the best way to do it (more tax efficient). Guy was flying economy or whatever until recently, I don't think he has an extravagant lifestyle and expects to be liquidating his holdings any time soon... but that's just my guess. Link to comment Share on other sites More sharing options...
FiveSigma Posted August 7, 2015 Share Posted August 7, 2015 I bet there will be a question on the next earnings call about this transaction. Link to comment Share on other sites More sharing options...
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