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The basis of purchasing Amber Technology is a P/E and turnaround play. I think Amber provides a large margin of safety for a potentially high short term (1-2 year) return.
For the thesis to play out Amber only has to maintain the profitability of the past two halves on going. The main risk of the purchase is that these results are one offs. To counter this point, Amber recently acquired Hills AV. This seems to have provided the company with operating leverage to start producing greater revenues and profitability. Management guidance, which is normally conservative, is that the current results will continue. If the company can maintain the previous two halves results ongoing a 100% return is easily achievable with a P/E expansion to around 15 (based on profitability of $3 mil).
General positives:
Valuation - Probabilities of outcomes:
Risks:
How I expect this will play out:
When to get out:
Disclosure: Held
General Notes
Positives
Negatives
Has the thesis been broken?
Valuation
Fun while it lasted (which wasnt very long), I achieved a small profit and dividend. But, Im selling my holding. Too impatient to wait for a PE re-rate. First time Ive actually tried to employ this strategy kind of "cigar-butt" style in low quality company. Not for me i realize. I have other ideas of better companies and strategies i would rather use my capital for, opposed to a wait and hope game.
But, now that ive sold expect a re-rate to be imminent.
Sold today after a sudden jump in the share price. Was strongly considering selling at 40c plus levels previously as this was nearing my valuation. In my opinion, the maximum upside from here is an additional 25% (50c). Ambertech isn't a high-quality multi-compounder (at least for now) so no issue trading this company rather than being a long-term investor. Therefore, decided to take the trade profits today, I am not surprised by the sudden jump given the extremely low volumes over the past couple of weeks.
I will continue to monitor AMO progress.