Ann: FY18 Half Year Results Announcement Date, page-141

Lol was about to like this post since i agree with most of the first half of it, then i got to the end. Regarding politics I'm happy to discuss such matters in detail and can certainly rebut such claims, but not here so I will repeat my invitation to take this discussion offline. My email is [email protected].

Regarding previous high valuations of Shine, I am a person who's initial investment in the company was slightly over $2 (though my average is now below $1). Based on the information available at the time the valuation made sense and in fact appeared cheap when viewed over the long term. Though i will admit that I am much more across WIP accounting now than I was back then.

At the time the company was growing rapidly and had a high ROE. If the company was able to continue it's growth then projected into the long term the stock appeared undervalued at $2, and there did not appear to be a reason that growth by acquisition would stall given the fractured nature of the market, combined that the market is shrinking (placing pressure on smaller players).
It also made sense that there was a large gap between cash receipts and revenue, due to rapid growth and the delay in conversion to cash. Indeed we will see a similar gap re-appear should Shine go on another acquisition spree, and that isn't necessarily a sign that anything is wrong.

But then we had the write off - which would be difficult for outsiders to predict, but someone more knowledgeable than i was at the time about WIP accounting may have suspected this risk. We also had negative sentiment due to Slater and Gordon which hit at the same time and the share price fell. This had the effect of stalling growth.

Here's the good news, growth (through acquisition) may/should pick up again as the share price recovers. This is helped by the fact that a major competitor for acquisitions (Slater and Gordon) is currently on the ropes and is downsizing rather than expanding. Indeed while it is not the only major competitor in the PI market - it is the only competitor that has the funding advantage of being a listed entity. As such in the medium term there is little competition to acquire smaller firms - reducing the potential price of such acquisitions. This is a very good thing. In the optimistic scenario that Shine's share price returns to higher than intrinsic value, it will be able to issue scrip to fund acquisitions and return to growth in an environment that is very favorable to this type of growth.


With rollups (like Shine) a vicious cycle can (and did) happen where the more undervalued they become, the lower the intrinsic value drops since the company can no longer easily fund growth. However the reverse (a virtuous cycle) is also true i.e. the more overvalued the rollup becomes, the higher it's actual intrinsic value rises. As such there is every possibility that Shine may return to being worth more than the price at the time of my initial investment, and perhaps much higher.