Author Topic: FLXS - Flexsteel Industries  (Read 1802 times)

spartansaver

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FLXS - Flexsteel Industries
« on: June 21, 2019, 11:00:30 AM »
Furniture manufacturer. Good balance sheet ($30mn in cash) trading at ~0.6x TBV (market cap of $130mn). Okay returns on capital over time. SAP implementation is causing material disruption. New CEO in Dec 2018 announced restructuring which will cost $40mn. Restructuring should save $30mn a year, achieved by 2021. The company plans to sell $45mn of land related to footprint optimization.

+$30mn cash
-$40mn restructuring
+$45mn land sales
-$130mn market cap
=$95mn EV

~$40mn in EBIT by 2021

Close to 2.5x EV to EBIT  if restructuring works. Biggest risk seems to be that the company sources ~40% of end-sales from China (purchases finished goods, which are installed in furniture).

Anyone else take a look?
« Last Edit: June 21, 2019, 05:01:56 PM by Parsad »


valuedontlie

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Re: Flexsteel Industries - FLXS
« Reply #1 on: June 21, 2019, 11:24:27 AM »
That's an awful long time for all of that to happen... the properties won't go up for sale until after the restructuring is complete (in 2021)...

Using today's cash balance as a starting point assumes no cash burn during this whole process (an unlikely outcome)... probably best to throw it on the watchlist and keep an eye on progress?

spartansaver

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Re: Flexsteel Industries - FLXS
« Reply #2 on: June 21, 2019, 11:31:40 AM »
That's fair, I'd added a share to my account to keep an eye on it.

I do assume cash burn in terms of the restructuring ($40mn). The company was still profitable as of the most recent quarter. Maybe cash flow is somewhere around breakeven till 2021 (ignoring $40mn in restructuring costs).