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We are delighted by Silver Chef

We are delighted by Silver Chef


We are delighted by the trading update provided late Wednesday night by Silver Chef’s (ASX: SIV) – a business I mentioned just last week on the Sky Business Channel as a ‘Stock to Watch’. It is also one we own in the both The Montgomery Fund and The Montgomery [Private] Fund.

Management have forecast strong EPS growth of 12.7% to 18.3% for the first half. This would be an excellent achievement in what many have dubbed a tough retailing environment. Clearly not everyone in the retail sector deserve to be tarred with the same brush.

Our expectations are for the business to report earnings at the top-end of this range given the underlying momentum and demand for their product suite.

Silver Chef provides lease financing to hospitality businesses under the Silver Chef brand and more recently, for commercial businesses under its GoGetta brand and excellent risk management processes appear to be in place. Both brands enjoy a growing a reputation as industry-leading financing product providers. In particular Rent-Try-Buy and Rent-Grow-Own put less stress on a businesses cash flow in their start-up phases, a large reason for their take-up.

Management have indicated to us that they believe their potential market is equivalent to about $250m in revenue per annum. At the full year 2012, SIV reported $85m in revenue. With the potential to expand by a factor of 3x from here, we are long-term holders and anticipate many more positive future updates. Keep watching this space.

A word of caution. We have a large holding across our two well-diversified funds in Silver Chef and as shown, the share price has performed spectacularly well recently. Please therefore seek professional advice and understand the risks.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.


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  1. Tarlock Kudhail

    This is a B3 business with a safety margin of -40%. I think it was the same valuation when you started the Montgomery Fund in October. I use Scafold and am also looking to invest in the Montgomery fund. SO I want to understand how the fund invested in a B3 business with a huge negative safety margin?

  2. hi Roger, according to the Commsec website, SIV has a debt to equity ratio of well over 100%. is this not a cause for concern ?

  3. I am also intrigued by the Silverchef inclusion. When I do my normal scan of a company this is what I find negative about the company:

    Negative “Funding Surplus” and increasingly negative over recent history
    ROE forecast to decrease significantly from current very satisfactory rate to a lesser very satisfactory rate
    Debt more than doubled in last 6 years and ROE is same as 2006
    Number of shares also more than doubled in this time however EPS growth is about 300%
    Net Debt to equity is nearly 150%

    Looked at it before but somehow it just didn’t pass muster.

    2006 and 2012 ROE’s are similar but next 3 years will be down significantly on last 3 years according to forecasts. Shows that they have been getting the same bang for their ROIE buck since 2006 and even better if you compare 2004. However a question mark on the future.

    Cash flow ratio is extraordinary however and I guess that is something that is a hint to have a deeper look at the funding model. You obviously have an advantage that this is your 9 to 5 job Roger and you have the time and experience to look at this. However, this went straight into the too hard basket-investigate when there is nothing juicy and the market is looking toppy – portfolio.

    Was too busy buying FGE at $3.30 to notice this one. Although SIV seems to have the brighter prospects I must admit.

  4. Hi Roger and team,

    Some of the performances from the holdings you mention in various posts are very strong indeed. Silver Chef appears to be one of those. I have a question relating to these stocks and the performance of your funds. The stocks you readily mention all seem to have experienced share value growth many times what the funds have achieved (not that the funds have performed poorly). However it begs the question, where in the funds are you finding the stock picking more difficult? Are there any industry trends in the stocks that haven’t achieved 25%, 50% or 100%+ increases? Is there any value in the stocks that are yet to take off like SIL, BRG, CSL, SRX, CDA, CTD, WEB, TRS, DMP, MMS, FLT and CCP have since 2011.

    Thank You,


    • Hi Sean,

      SEEK is one we really think should perform well. We of course cannot control the share price nor determine the time that will pass before its success is recognised. Indeed the speed with which a business success is recognized is not relevant provided its intrinsic value is rising at a good clip. Something like that was said by Buffett once and I think its great to have so many solid companies recognised by the market this year but we don’t expect it to occur so quickly every year.

  5. you are right not everyone can be tared with the same brush
    but you tared ( fge) with the same brush .As a long standing shareholder I contiued to buy more. I spoke to the new ceo and he said no one fully understands the structure of our buisness we are not just an iron ore player ,and luckily clough is a major shareholder because at that price they could have been swallowed up

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