I've been watching TSM for a long time and it is testing my patience but I am wondering if brighter times are ahead. I re-read the half year results presentation and update closely and noted some things that I think sound promising.
After a slow start it sounds as though FIDO is starting to gain traction with the expectation of sales being higher than their Rentsmart product by the end of 2013, this is a large shift and obviously will help the Australian operations substantially.
The new lease accounting benefits will fully kick in in 2013, they have made it quite clear that this method is more profitable and will spread the profit evenly over the life of the lease. The changeover has obviously hurt the company's results in the short-term but it appears that is coming to an end.
They've reduced their overheads by 12%, 60 days + delinquencies are down plus they have spent a lot developing their online credit check systems which I note could be licenced to others. Also free cash flow appears to be picking up with $5.9 million for the first half. Maybe they might start a share buyback if the prices remain this low.
The UK is to see another record year, Dixons has lost their main competitor for the time being and it looks like the UK is almost reaching half of the company's entire revenue. I'm thinking people may be underestimating the significance of the UK's contribution and the potential it holds. Also the inertia income is expected to commence in 2013, I would assume this is pure profit and its about to start.
Wondering if anyone else has any thoughts, good or bad? Also I wonder if they may pay a dividend based on the second half results? May be 1 cent? Remember they didn't pay anything from the 2011 year when they made a profit.
TSM Price at posting:
19.0¢ Sentiment: LT Buy Disclosure: Held
