Results Are In For Codan Fy21 Investor Report

[Jeff McClendon]

Do Australian stock market investors really pay that much attention to how much bad press/reviews/reports of issues that the GPX 6000 may have received. Or are there other Minelab products with problems that are much more publicized than one recently released gold prospecting metal detector.

[VicR]

Markets dislike uncertainty - the recent purchase of DTC Communications by Codan is a risk that has some way to go before the market is comfortable that Codan can successfully integrate DTC into their business. Codan announced today that a new contract for DTC of $28m US had been won - with a 18% drop in share price looks like the market was not impressed with this news - maybe hoping for something bigger?

Codans share price  in the last 12 months has ranged from $9.20 to $19.43 AUD. Its finished the day at $10.95 AUD.   Three years + ago you could purchase Codan between $3 & $4 AUD so maybe the price is going back to being a bit more realistic.

[phrunt]

Well, it all comes down to sales really, if sales are not what was expected it's not a good sign.  Sales for the Equinox and Vanquish far exceeded expectations, they said so themselves.

If you see the price they are trying to get for it in Africa which I understand is the leading buyers market you can guess why it's probably not selling as expected.  I purchased my GPX 5000 from Africa as a guy in NZ has a friend that is a Minelab dealer in Africa and he indicated the GPX 4500 and 5000 were very good sellers in Africa, the GPZ wasn't near as common, price probably... the GPX 6000 is priced far too high I believe to make itself a good seller in Africa, here is two African dealers prices, one of which being the biggest official dealer in South Africa.  The Africans doing prospecting aren't scared of a hard days work as they do it to survive, to make a living, they're often young and would shop by price more than worry about a detector being lighter I believe.  

 

 

 

Convert that "sale" price to USD and the Afircan's pay 9,746 US Dollars for their GPX 6000, they can have a GPX 5000 for around half the price.  It appears Minelab learnt nothing from the massive sales the Equinox achieved by being an "affordable" detector, if it was CTX 3030 pricing I doubt they would have sold near as many.  

The cost to make the detector would be tiny compared to the price they sell it for, yes they spend a lot on R&D, but their profits indicate they have a lot of room to move on price 😛

The CEO announced a few months ago he's retiring too and he offloaded a lot of shares, this caused a significant price drop at the time.

[GB_Amateur]

8 hours ago, phrunt said:

they can have a GPX 5000 for around half the price.

Here in the USA the new prices are ~$4k and $6k so ratio is 2/3, not 1/2.  Maybe that South African dealer is discounting his 5000's, trying to liquidate perceived overstock, or possibly putting a premium on the 6000 because of high demand.  Meanwhile, here the SDC2300 is going for ~$3.3k making me think the SA prices reflect a bit of both strategies (dumping 5000's while jacking up the price on the 6000).  Then again, maybe their wholesale prices (i.e. dealer cost) are differently proportioned than here.

[phrunt]

The American market is a hobby market, the African market is a people doing it for a living and lots of them, that could be reflected in price somehow. How much are people willing to pay to tinker around finding a few dinks for a hobby on a couple of week trip a year and a few day trips here and there compared to people scratching out a living to feed and home their family using it 7 days a week every day of the year. 

[VicR]

Global pricing is always interesting - usually you will pitch a price at what the market will accept without affecting sales volume too much - that is maximising margin.   You look at your costs ex works , import duties (can be very high for poorer countries), shipping costs , warehousing & distribution and exchange rates and arrive at a wholesale and retail price after looking at your competition and judging what pricing points will have an effect on sales volumes. In the gold market segment Minelab has limited competition and consumers are willing to pay big $ to maximise their chances of striking it rich - so Minelab are making hay while the sun shines.

In the Oct issue of the Australian Gold magazine there were 10 pictures of SDC's, GPX500 and GPZ7000 in ads and articles - not one mention or advertisement of the GPX6000 - so looks like demand is still high for the 6000 in Australia as Minelab do not have to tickle sales with advertising. The share price is looking into the future and  is a reflection of the uncertainty for next financial year (after 30th June 2022). Last years Codan AGM they were selling the concept of 5 new detectors - this year looks like just a consolidation and catch up phase - which possibly will see a stable profit (or a decline if DTC acquisition  does not work out as planned) - so no great profit surge from new product launches & question marks around DTC results in a lower share price.

 

[schoolofhardNox]

4 hours ago, phrunt said:

The American market is a hobby market, the African market is a people doing it for a living and lots of them, that could be reflected in price somehow. How much are people willing to pay to tinker around finding a few dinks for a hobby on a couple of week trip a year and a few day trips here and there compared to people scratching out a living to feed and home their family using it 7 days a week every day of the year. 

I was just thinking about that. Maybe they didn't get it right on how the African market would perceive the new machine. They don't want tiny gold. That's a waste of their time. They want deeper, bigger nuggets, not small shallow gold. Maybe that may even be the reason they called it a GPX and not something else, hoping they would buy it because of the 5000. If that's the case it would be a huge fail on their part. I guess if the African market dries up and you can't get a used 5000 anywhere, we will know 😄

[phrunt]

Our gold hunting areas here are riddled with shotgun pellets, one of the things I liked about my 4500 when I first got it was I could cruise over a majority of the small lead birdshot with little or no reaction from it yet still find gold, until of course I discovered the flat wound coils.  It was pure joy after spending my time prior to that using my Gold Monster and digging a million pellets a day and struggling to find any gold as I spent all my time digging pellets, the GPX allowed me to bypass many of the pellets and still find the gold nuggets except the tiniest ones of course but they're more for the fun of it, if you're doing it for money you really don't want to waste your time digging them anyway.

Sometimes super small target sensitivity really isn't desirable. 🙂

I'm not sure what the shotgun pellet situation would be like in Africa, I don't think it'd be much of an issue but maybe they consider a 0.03 of a gram nugget as just as much of a frustration as a shotgun pellet 🙂

[VicR]

I agree with Phrunt - since switching from the GPX4500 to the GPX6000 i am picking up all these shot gun pellets that the GPX4500 did not see - but on the plus side the GPX6000 is finding so much more gold than the 4500 ever did.

[Steve Herschbach]

What can a person say. I'm finding lots of tiny pellets my GPZ 7000 never saw. But that tells me straight up the 6000 is hitting smaller gold better. I've been finding specimen gold in areas I hunted with the 7000, too many for it just to be missed. I think the 6000 is just that much better on very small gold, including gold in quartz.

So I guess I'll dig the pellets.