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Ann: 2017 AGM Presentation, page-38

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Just_a_guy

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103

16/11/17

20:47

Post #: 28870064
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Originally posted by savvyinvestor ↑

interesting discussion on both sides above.
a few observations of my own:
1) if they grow revenue at a 20% cagr then revenue will double to 320-330mill in 4 years then double again to 650 mill in 8 years. if one has a long term virw and is willing to be patient, this will inevitably result in multiple rerates within the next 4 years.

2) if you forget the s&m expenses and the r&d expenses in their balance sheet from h2, they basically made 40mill profit off 80 mill revenue which means around 100mill of gross profit expected this year (negating s&m and r&d so that we hypothetically assume the company just stripped back expenses to the cost of obtaining revenue and gen/ admin expenses, in other words if they stopped investing so heavily in s&m and r&d to drive growth). this helps me to get an idea of the underlying profitability of the business once they "pull the earnings lever".

3) it would be nice for them to provide some detail of their marketing strategy in order to justify their huge costs which i agree are not flowing through as directly to revenue growth as in other industries eg xero. they may however prefer not to disclose such things publicly given they have non listed competitors (eg in USA) who will be trying to copy and emulate aconex as much as possible.

4) the report has no surprises and nothing new, which is good news for the company (ie they are executing as planned) but is a bad thing for the sp of a company which is heavily shorted and has fallen out of flavour and is still on a high p/e in a short sighted jittery market. the very low volume of posts and views on hot copper and the relatively low trade volumes today are evidence of the fact that retail and institutional investors are bored of acx and are looking elsewhere for excitement.

5) i bought in the 3s and wont top up yet because i suspect the sp will drift lower over the next month or two given bored traders and short sighted investors will look for greener pastures whilst shorters will try to flush out weak holders and trigger stop losses. i suspect i will have an opportunity to add more in low 4s by end of the year and ill take that opportunity.

6) long term this is a great company with a bright future as THE global IT leader in the single biggest global industry ie construction. this industry is in an expansionary phase of the cycle buoyed by china and asias one belt one road as well as trump in the us as well as low inflation, low interest rates and low bond yields driving infrastructure funds to invest. acx will be a $10 stock in a couple of years no doubt, but the inflection point in the sp will be difficult to predict. look at the recent sp rises of wtc, xero, bkl, a2m, apx and apy. all have basically risen by 50% or more in a short time frame (weeks to a couple of months) once the market got excited about the execution of the growth story. all of these stocks have had prolonged retraces and flat periods, then broken out. acx will get its chance but i plan on having patiently accumulated at the lowest price possible rather than trying to pick the moment and missing the jump, then waiting for a pullback only to watch it rise 50-100% when the bull takes flight.

patience is key here, in combination with being very frugal in terms of entry price. the market may take a while to agree, but eventually acx will be a darling again. i never would have guessed bkl would rise 50% in a couple of weeks after floundering for a year.

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Very good summary, my only addition is that I feel h1 will be weaker than h2 this year and this has been flagged. I think the market may expect an average result in Feb so I can't imagine the share price will be appreciating significantly between now and then. I've been watching the new users per day rate (as well as mail and documents) over the last couple of years and I can say that after largely staying stable for almost a year, the last couple of months has seen the rate increase.

ACX Price at posting: $4.86 Sentiment: Hold Disclosure: Held
1 Upvote

0 Great analysis

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