Originally posted by manny100
I have now read the report on another thread. I have also read the CTD response. The only issues which IMO need further clarification are the changes to the % rates of goodwill impairment and allegations that IT expenses are capitalised. CTD say its because VTG misunderstand etc the business. Well if these analysts who do this for a living don't then how are retail investors going to understand? These areas definitely need more clarification as they both directly effect the bottom line. The effect could well be material.
The allegations that the IT advantage is overstated is also somewhat of a concern.
In general the report makes many remarks that could have the reader thinking that CTD were misleading the market or even worse. Reads like the script of one of those Conspiracy theory shows.
The 'worse' would be why CTD are consulting their lawyers. The decisions concerning the 'worse' thoughts are made by people who would be concerned about their reputations. VTG will just argue they are red flags and nothing more and that is what they are paid to do.
Of course the 'worse' for holders is that those allegations that could materially effect the bottom line have legs.
Looking for $18ish and then $16ish.
Could you please clarify regarding the capitalisation of IT expenses? As far as I am aware this is fully disclosed in note 8 of the FY18 financial statements. What exactly are VGI alleging CTD have done that is not above board in respect of this?
To me there is nothing earth shattering about the points raised by VGI particularly regarding the capitalisation of expenses which are fully disclosed in note 8 of the financial statements, although i will caveat this by saying i have not read the report my conclusions have mainly come from what i have read in the media and the response provided by CTD.
However at $30+ CTD was clearly overvalued, if I take the top end of FY19 EBITDA guidance as $150m and if i understand managements commentary that $20m of development costs will capitalised and add these back FY19F EBITDA is ~$130m is effectively a multiple of some 16x EBITDA which appears a hefty price to pay.
I have no doubt however they key to determining how hefty that price is comes down to understanding the company's organic growth profile which is a time exhaustive exercise given the number of acquisitions made over the journey and one I have yet to decide if I will undertake.
(20min delay)
