@Strawman and @DrPete in my valuation a while back I posted a very wide spread of results because I think that reflects the unresolvable uncertainty for this business.

Looking at one of my "juicier" scenarios, I have FY27 Revenue of $175m, an EBITDA margin at that time of 8%, yielding a valuation at a p/e of 12 = $0.39 at start of FY23 (which is an error I've just found in my model, so the value at that point should be $0.43.)

In that scenario I get an average incremental EBITDA Margin of 13.8%, whereas at the AGM Mike said he is already getting an incremental EBITDA Margin of 15%, which would put him on track to get an overall EBITDA Margin of 8% sooner than I am projecting, which is FY27.

I also noted that in his AGM commentary he confidently referred to the $60m network partner sales that are not yet captured by $SGI as having a high certainty. To be clear, he didn't use these words, but he referred to these sales as future revenue without qualification of any kind. If it was at risk, I would have expected him to have flagged this. If that $60m is captured, then they are well on the way to $200m.

Moreover, if they can switch that $60m on quickly at an EBITDA margin of 15%, then that is an easy EBITDA uplift of $9m! Significantly more than the total FY24 EBITDA.

So, in summary, I'm pretty comfortable with @Strawman's updated valuation, even though I prefer to embrace the uncertainty of a much wider range.

I have a small "buy" order in the queue at $0.215 in RL, as I would like to build my position, and see a strong potential return from that level.

I'm mulling over who to cut loose in Strawman, so I can also increase here.

Disc: Held in RL and SM

Excellent points @DrPete and @mikebrisy.

The specifics can be debated, but the general asymmetry of the return potential seems to remain in place.

Let's see how I go rationalising things at higher and higher prices.. lol

I saw someone say the other day (I think it was Ian Cassel) that when prices are rising, you only think about the upside. But when prices are falling you only think about the downside.

So true.

That's exactly what I'm worried about @Hackofalltrades!

I do think I'm erring on the side of conservatism, but only future developments will reveal if the assumptions used were overly modest, reasonable or excessive. And I guess that's the trick -- be conservative relative to the evidence available today, but be sure to adjust as new information (good or bad) comes to light.

But to answer your question directly, if shares shot to 36c tomorrow, and there was no new information, I think prudence would suggest, at the very least, to reduce the weighting within the broader portfolio.

I won't complain if this is a conundrum I'm forced to face in the near term ;)

Hi @Hackofalltrades -- You're right, there's no reason you couldn't sensibly posit a valuation well over double the current market price. It's just that you are implicitly saying that the market is not only wrong, but extremely wrong -- and while that is certainly true from time to time, it's an assumption I've learned to be careful with. And, practically speaking, if you have a valuation that is double the current price, well, you already have a significant discount to take advantage of. That is, given the vagaries of valuation, especially with less mature operations, would a valuation that was 3x or 4x the market price really be needed before you took a position? Is 2x not a sufficient discount to fair value already?

But I do take the point.

In regard to the trading service mentioned, it's one of those advisory services that is focused on trading (as opposed to investing). It's their own IP so I don't want to leak it on a public forum. But they are quite small, and it's probably not a major factor. I guess I'm just saying that the recent price rise could be due to reasons that have little to do with the fundamental progress of the business. It's really easy to see what you want to see in share price moves, so I wanted to be cognizant of that.

Some great points @Slideup

I heard through the grapevine that a trading service has been promoting it recently, so maybe we're just seeing the result of a bunch of hot money. The kind of capital that is there for a good time, not a long time..

Or that could be entirely incidental!

I guess you need to account for tax if you're going to sell and buy back in real life, but my concern is one of timing. I'm terrible at that. And you have to try and time the sell and then the subsequent buy.

That being said, I agree we could easily see Stealth back in the teens at some stage. But, for now, I'll continue to hold, although I am very tempted to sell a little on SM to free up a bit of cash and reduce the weighting a little.. we'll see.

I am way too lazy to try 'timing the market,' so I have never done that either.

That said, IRL I have recently sold off some Stealth as it had become a percentage of my portfolio that made me uncomfortable - my holding is still sizeable, but just a bit less than what it was. I have reflected this in my Strawman portfolio as well. Although I haven't 'cashed out,' I've put the proceeds into Bailador, a company I also like. It may not be the optimal financial decision, we will find out in the future I guess. Regardless, this approach does allow me to sleep well at night which is (pretty much) my primary consideration when making all investment decisions.

Yes, there are taxes to consider when trimming and reallocating, but since this is in my SMSF and I have been a long-suffering holder (more than a year for all my purchases), the tax implications are not high. Certainly not zero, but not enough to influence my decision either.

I like that @GazD -- definitely a difference when it comes to rationalising falling prices. Which I'm a master at!