Ann: Becoming a substantial holder, page-12

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29/04/17

10:08

Post #: 24351858
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Originally posted by sharks37 ↑

Gassed, I for one have never said acquiring Track was a mistake (at least I can't remember saying that), but I have the following views on the acquisition:

The positive:

It is evidently a mature cash generating business that generates a solid income stream and as such will provide a solid base of ebitda from which CM8 can fund the development of other income streams (Q&A and now digital influencers)

The negatives for me are 3-fold:

1. CM8 clearly paid too much for it

2. CM8 did not do enough DD prior to acquisition (hence paying too much) but also not uncovering the warts the company has now admitted having found (un-sustainable practices)

3. Point 2 has probably in part led to the long timeframe to integrate it and improve its performance/income

Whether its acquisition was funded by debt and/or equity is a separate matter imo to whether the acquisition per se was the right decision for the business. The issue of the debt load and repayment have obviously been exacerbated by the fact it was too expensive (the amount would have been smaller if a lower price were paid for it).

At the end of the day, it is what it is and there's no point speculating what might have been if they didn't buy Track - just being Q&A it would be a very different business with lower potential, which is why I don't think the acquisition was a mistake - just how it was handled and the higher than necessary acquisition cost and integration timeframes.

Cheers, Sharks

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Think they are at a crossroad and Track will be forgotten in time and new business ideas leveraged off it.

If they can keep up that EBITDA momentum, then this business has turned (the chart is very telling of this), regardless of being hamstrung last 18 months.

3.3x EBITDA at 15c is just great value for a growing tech company.

30c stock imo over next 12-18 months.

CM8 Price at posting: 15.0¢ Sentiment: Buy Disclosure: Held
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Ann: Becoming a substantial holder, page-12

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