Ann: Change in substantial holding, page-3

Forager's last two change of substantial shareholder notices (this one in January 2017 and the previous one in April 2016) have been purchases from Perennial Value Management. The sell down by Perennial just shows how hard it is to be patient, when trading conditions remain challenging and revenue has been declining.

The company is debt free and adjusting to the trading conditions (restructuring, investing, diversifying etc) so there is every reason to believe the company will benefit when trading conditions improve. The questions, as a prospective investor, are:
(a) how long will trading conditions remain challenging;
(b) how profitable will the company's strategy of investments and diversification be, and when might these be realised by shareholders; and
(c) what are appropriate estimates of normalised earnings when "typical" trading conditions resume?

From a valuation perspective, the company is debt free at 30 June 2016, has an underlying FY16 EBITDA of $11.3m and has an market capitalisation of $39.4m. Relative to trailing underlying EBITDA, this looks to be outrageously good value. But the company was also outrageously good value last year, when underlying FY15 EBITDA of $22.7m (sourced from FY15 presentation, as FY16 presentation shows $24.3m) and the market capitalisation was around $44.1m (47c in early January 2016).

I think this deep value investment could take years to play out. I don't have the same type of patience as Forager or current shareholders to benefit from improved trading conditions.