Equities
Harley Grosser

I wrote about 5G Networks (5GN) back in December. Since then the company has entered the Data Centre market, raised $8m and a number of new funds have joined the register. So it is worth an update on what is happening at 5GN and where things might be heading from here. Melbourne... Show More

Harley Grosser

What a difference 3 months can make. Investors are nervous with the main Aussie index off about -13% from its highs amidst talk of a bear market. But in small cap land, we are already there. The Emerging Companies Index is down by more than -20% this year, meeting the... Show More

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

Harley Grosser

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

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.

On Millenium Services - A Stock on a PE of 3 -

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.

On Millenium Services - A Stock on a PE of 3 -

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."

On Millenium Services - A Stock on a PE of 3 -

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.

On Opportunities Post Royal Commission? You Can Count On It -

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.

On Opportunities Post Royal Commission? You Can Count On It -

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.

On Rotting from the head: We need more than a Royal Commission -

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!

On 10 easy mistakes for investors to avoid -

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!

On 10 easy mistakes for investors to avoid -