Nikos17
Nikos17
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Voted on a straw in #Off to the sidelines for Ava Risk Group Limited by Dominator
a month ago
#Off to the sidelines

I have sold my small holding in AVA. My half-year reporting review provided me with some questions that presented new risks that I don't completely understand or are not aligned with my thesis. There is some serious upside and downside potential for Ava Risk Group but I can't say which is more likely at this point. I only like to hold if I have high conviction and I don't at this point so I am selling on that basis.

Risks/problems causing negative views:

  • Basic mistakes:
    • Yet another announcement that needs amending because of a mistake. Makes me wonder if management has it all together? Do they miss the finer details? Are they taking other shareholders seriously? I counted 5 errors since 28 July 2020. All since the old CEO left.

    • Emails to investor email account bounces. Online form to contact the company doesn't work.

  • New details I wasn't aware of or fully accounted for:

    • Chairman's company receives payment from AVA (stated as arms length, could be a benefit but I don't like the look).
    • Potential sell off of services division. Management gets up to 32.7% of the value above $5.3 mil USD. Management has extended this agreement even though it was due to end Feb 2021. I wasn't aware of the risk here when purchasing. If the services division is sold for a inadequate valuation the rest of the business is highly overvalued (if no new IMOD style contracts come through). Management potentially takes a massive slice of the pie... Why extend this deal past 1 Feb 2021. How is it in the interest of ordinary shareholders unless they can get a price around 80% of current market cap? I wanted the services division as part of the company, its revenues are increasing nicely and this section of the business is strongly profitable.
    • IMOD is looking like a potential one off boost to profitability.

Valuation - the guessing game:

Selling of the services division at a 10x EBITDA multiple (figure based on what I've seen thrown around as reasonable):

EBITDA multiple of 10x for services (1HFY21 services EBITDA x 2 x multiple) = $3.8 x 2 x 10 = $76 mil.

Take away potential management profits @ 32.7% over USD$5.3mil($6.8AUD) =  $53 mil valuation of services division to share holders

Cash at bank = $13.4 million

Market valuation of Technology = 135-13.4-53= $68.6 million

Here is the problem for me, taking out IMOD I think this is very expensive and hoping for the best with Aura IQ. If another IMOD comes along this is super cheap....

What would I miss by selling?

  • Aura IQ is a raging success. There is time before the effects come through. By then my question marks around the services division will be answered.
  • They don't sell the services division or they get a great price for it.

Conclusion

Given the current market turbulence and my lack of conviction I have sold out. However, this is not a sell and forget. As things pan out I will be more than happy to jump back in as my concerns are answered. I just can't tell if this is a massive winner or loser at this time and price...

 

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Endorsed a valuation for Reliance Worldwide Corporation Limited
2 years ago
Justification
Voted on a straw in #Bull Case for oOh!media Limited by Jimmy
2 years ago
#Bull Case
stale

This rec is primarily on valuation grounds. I feel OML has been sold off way too much.
Recent acquisition increases debt and not expected to be accretive until 2020
However company has reiterated guidance. This combined with the amount of consolidation in the sector is a positive.
Expect a div yield of ~4% - 5%  

Endorsed a valuation for Wisetech Global Limited
2 years ago
Justification
Voted on a straw in #Bull Case for Wisetech Global Limited by lance2210
2 years ago
#Bull Case
stale

One of the things I like about Wisetech and disclosure (it's my biggest investment at 20% of my portfolio), is that it operates as a big fish in an industry that is so niche that the big boys like Oracle or SAP would ignore for the time being. I think Richard is doing something unique and i am sure if this was a NASDAQ listed stock, WTC would be rated even more. I'll be subscribing to the SPP but don't expect much.