my experience with compass, page-2

Hi Broobar

There's no doubting that Compass paid too much for their pub portfolio, I don't think anyone is disputing that. If I had bought at IPO I too would be unhappy with the company. I was lucky enough to buy in at much lower levels, hence my perspective is a little different. For me, I see a company that is not only trading way below NTA, it's trading under its cash position and has strong cash flow. This makes CXH a buy for me, especially at current levels. There's obviously a fair amount of risk involved with this; particularly concerning the debt. However Compass have stated on a number of occasions that the lender (ST George Bank) is not calling in the loan. And who can blame them? CXH are covering the loan and still have a good buffer of 3 mill to see them through the current phase. St George aren't in the business of selling pubs...

Regarding Challenger selling, these guys bought at much higher levels so I imagine they are simply booking a loss and moving on. This isn't a bad thing; plenty of institutions unloaded Goodman Group at below 20c when the GFC hit, and the stock is trading at 4x it's lows, so I wouldn't read too much into Challenger's selling.

I take heart in the fact that the old board has been given the boot, and that operationally the pubs are doing OK. Current management have done a good job of reigning in costs, and as the WA economy recovers we should see an appreciation in patronage, liquor sales & property values. Sure there is pressure from Woolies & Coles, however at 1.9c I'm willing to take a bet on this stock.

I'm interested in other opinions, particularly from detractors. So please pipe in if you have an opinion.

PS - Do your own research. These are just my personal opinions so don't go making investment decisions without DYOR.