In investing, sometimes you just get them wrong. The thesis breaks and you’re forced to recognize the error and adjust accordingly. Unfortunately, that appears to be the case with Millennium Services. Show More
A couple of months ago the Capital H Inception Fund acquired a stake in IAB after they disclosed the possibility of 'material transactions.' It seemed fairly clear that the Indirect business was worth a lot more in the hands of an acquirer than what the public market was willing to... Show More
It’s been a while since I bought a stock trading on a PE multiple of 3x. There was one in 2012. Another in 2015. Both were, with a bit of luck, multi-baggers. Show More
The listed independent platform providers – HUB24, NetWealth, Praemium and OneVue – have been stellar performers in recent years. It’s not surprising when you consider the favourable environment they’ve been operating in. Show More
A year ago I posted a wire offering 6 pieces of advice rarely given to private investors and SMSF. This wire is a follow up to that article. If, as a private investor or trustee of an SMSF, you can take away just one piece of valuable information from this... Show More
Since the Royal Commission kicked off hardly a day has gone by without Australia’s largest financial institutions in the news, for all the wrong reasons. Some of the accusations are quite shocking and make for great headlines. Show More
Last year I formed the view that there were opportunities in oil stocks. A handful of oil producers lagged the oil price as equity investors doubted the sustainability of the rebound. But a number of factors suggest that oil, while the price will of course be volatile, is now well... Show More
Ashley Services Group (ASX:ASH) listed in 2014 as an integrated vocational training provider and labour hire group. The emphasis was on the Training division but when that business collapsed under the well publicised VET funding scandals it kicked off a long period of restructuring and uncertainty. Show More
While the mid and large cap stocks have been well covered thus far, the smaller end of town typically gets less attention and for those that do it is concentrated amongst a few of the market’s favourites. So here are a handful of micro cap stocks that haven’t received much... Show More
Rhinomed Ltd (ASX:RNO) is a nasal, respiratory and breathing management technology firm based in Melbourne with a US office in Cincinatti. The company is developing and commercialising its technology platform in the sports, sleep, cold & allergy and drug delivery markets. The technology is based on an adjustable nasal stent... Show More
They say you learn more from your failures than your successes. I’m not sure that’s true but one thing I am sure of is that if you can learn from the mistakes of others rather than having to make those mistakes yourself then you will save a lot of time... Show More
A recent addition to the fund is Prime Financial (ASX:PFG), an integrated wealth management, accounting and capital advisory business. The company provides a broad range of services from financial planning, investment advice, life insurance, accounting & tax compliance, SMSF establishment and corporate advisory. Show More
Managing your own capital on a full-time basis is a constant process of learning and self-improvement that requires conviction in your views and the ability to shut out external noise and focus on what matters. If you get it right though, all the ups and downs are more than worth... Show More
SDI Ltd (ASX:SDI) is a developer, manufacturer and distributor of dental restorative materials and small dental equipment. With it’s suite of non-amalgam, significantly higher margin products - glass ionomers, composites and professional whitening - all experiencing growth, the company has guided to NPAT of $7.2-$7.8m in FY16 and is trading... Show More
A few months ago we introduced you to Wingara Ag (ASX:WNR) - the emerging exporter of Australian oaten hay to China, Japan and South Korea. Yesterday Wingara announced the acquisition of an additional nearby processing facility - Pyrenees Hay Processing Co-Operative Ltd (PHPC). Show More
Wingara Ag (ASX:WNR) – an emerging agricultural exporter to Asian markets – is an attractive way to play the long term thematic of Asian demand for Australian agricultural produce. An exporter of Australian oaten hay (a high quality feed type for dairy cows) to customers in China, Japan, South Korea and Taiwan,... Show More
In February, we stuck to our process of unearthing quality businesses led by well-incentivised management teams and began accumulating a new position that we expect will re-rate substantially when the investing community wakes up to the story. Capital H is generally looking for stocks that the investing community either has... Show More
JustKapital (JKL) is a large holding in the fund that still represents good value. Upcoming catalysts include demonstrating to the market that they are growing the debtor book of MML, which would also imply growth in revenue and earnings for the disbursement funding business. Acquisitions in this area, a key... Show More
In January I published this note https://www.livewiremarkets.com/wires/30291 stating the view that Adacel (ASX:ADA) was trading around fair value but that numerous opportunities existed for earnings upgrades and for the impressive growth story to continue. Last Friday Adacel announced another profit upgrade for FY16, guiding to 70% growth over FY15 (previous... Show More
Earlier this month we published a wire on JustKapital Litigation Partners (ASX:JKL), and shared our view that the company has an enormous growth opportunity in front of it, is led by impressive management and remains significantly undervalued. On Friday JKL announced that the acquisition of Macquarie Medico Legal (MML) is... Show More
One more update here: with the CEO now gone that represents, in my view, a breaking of the above thesis. While there are a few paths that might lead to a higher share price (sale, take private, recap, etc), the removal of the Chairman and now the CEO, (the latter being the one I backed to turn MIL around) means I simply got this one wrong.
Hi Angus, the announcement was a bit vague and seemed to hint at a potential guidance revision at the AGM. Sounds like the new board is completely clearing the deck, including any promises from the previous board. So unfortunately the risk appears higher now, in addition to the uncertainty around what their intentions may be. Hopefully they provide a bit more clarity around the new board's intention at the AGM.
One aspect of the above thesis that I didn't see coming was the board tussle this month. In the interest of keeping anyone who may be interested updated on my thoughts, below is an excerpt from the Fund's recent quarterly investor letter discussing MIL: "At the end of the quarter there was a board shake up as one of the original founders joined the board and another pushed for the removal of three directors. The return of the founders should in theory be a positive for the business, but it needs to be done with as little disruption as possible. In this regard the avoidance of an EGM is positive, but the removal of the Chairman is a surprise that creates short term uncertainty. This has seen the stock give back some gains. You could make the argument that the Chairman presided over a period of shareholder value destruction (which would support the case for the incoming directors) but he was well credentialed, supportive of the existing management team and committed enough to put his money on the line, buying 4.9% of the company on-market. What he now does with his large holding, the intentions of the new board and any resulting key management changes are all unknowns. This short term uncertainty creates some cause for a review of the position to determine the implications for the investment thesis, which is currently underway. That is countered by the fact that despite the short term uncertainty the upside from a successful MIL turnaround remains substantial. As such we intend to remain long term supporters of the company."
Appreciate the positive feedback Parth!
Bill, Venkata, John, Hanh, Cindy, Chris & David, Thanks everyone for the feedback. Much appreciated and glad you enjoyed it!
Thanks Alan, appreciate it.
Hi Mark, absolutely. Very possible and if it happens would be transformational for CUP. But it requires CBA to essentially rollover and exit at all costs without looking at other ways to maximise the value since selling to CUP would mean CUP are the only possible buyers and they’d get a fantastic price. Given the bad press around Count etc that may be possible, but I would have to assume CBA will look at ways to maximise what they get for Count/CUP stake in which case the other scenarios come into play. Then need to factor in the timing of when CBA want to offload Count (later this year) and if/when CUP are in a position to do it. The stock will need to be a lot higher for the numbers to work. But the hiring of a team like Genesis does suggest something big is in the works, eventually. Whether it is Count or something else. But agree with you, it’s possible.
Hi Jim, SGH wouldn't be my first comparison! People businesses are good businesses *if* you get the incentives right. Acct and advice have big barriers to entry, high returns on capital, sticky clients, etc. And the new model where principals own equity in their individual firms, in my opinion at least, is highly scalable. Under this model the larger the CUP network grows the stronger it becomes. This looks like a turnaround at the inflection point of transitioning to growth, which can be a good time to take a look as you can get earnings growth & multiple expansion. But, lets see how it all plays out as management need to deliver now.
Good point on the reduction in supply of quality advice when demand is increasing. There is more at play here too, with new education standards professionalising the industry, but that will kick off a big reduction in adviser numbers. On balance, the quality of advice will increase. The fire sale of bank-owned advice businesses post RC is not a bad thing though, they are good businesses when well run, not just for the sake of distribution. There will be big opportunities coming out of the RC for investors keeping their eyes open.
Bob, I hope you put the proceeds into something else that went up, but selling too early after more than tripling your money is a nice problem to have!
Hi Huiyi, Thanks for the positive feedback. On your point about when exactly to sell - I considered writing an article on that topic but I simply couldn't because I'm still figuring it out myself! And I'm not anywhere close to mastering it. Unless the market just offers you a price that is too good to refuse I think the best you can do is understand the business as deeply as possible so you have an idea when the underlying drivers are changing. And sometimes even if you get that part right the management team will just keep delivering regardless, so understanding their level of motivation and incentives is key too. The main reason I've sold something over the years has been to invest in another idea. That has often paid off but in situations like MNF (and others) I would have been far better to just sit and do nothing!