Another Misunderstood Spin-Off, page-20

"it seems at current levels the worse than average CTI/ROE tend to mean the 0.55 P/B is fairish value. Am I correct in assuming that higher capital reserves in UK banks should mean we expect a lower return-on-assets and by extension a lower ROE also?"

If current metrics remain unchanged then you might be right, P/B of 0.55 might indeed represent fair-ish value.

But investing, by its nature, involves some elements of prospective thinking (of course, not all prospective thinking is worthwhile; some prospective thinking - such as forecasting commodity prices or other macroeconomic variables - is largely futile, but taking a prospective view of what could, or is likely to, happen within businesses themselves based on well-articulated strategic objectives of company management, as well as drawing on precedent, is a perfectly legitimate and proven way to forecast future financial performance of a given business.)

And on that note, I am quite happy with my view that the company's CTI and ROE will look quite different in a few years' time. And, I daresay that accordingly, P/B will, too.


"I am surmising from my own superficial look (because that's all my skill set allows) into this that even with even lower growth rates as long as they keep up with CPI level growth, combined with Fergus's cost cutting would likely bring the worse looking metrics (P/E., CTI and to a lesser degree ROE) back into better ranges, which ostensibly might be predicted to create higher interest in SP from a market perspective (as opposed to a value calculation, if i am saying this right), with value also increasing to a small degree."

Yes, that just about sums up the investment thesis here.


"Then of course, as you referred to earlier, there also Plan B, the asx delisting that might be some level of insurance, as it were."

Bear in mind, however, that because the ASX listing is merely a shadow-listing of fully-fungible UK-domiciled stock, any ASX de-listing would most like only be an outworking of an extraneous event, such as a corporate transaction (merger or acquisition), and not the doing of CYB management.

Meaning that the timing and nature of such an event is impossible to predict, so it hardly bears thinking about.

(Truth be told, if our investment thesis on this company is correct, one of the "risks" is that some other industry executives see it the same way, and the company gets acquired before full intrinsic value potential has opportunity to become manifest in the market pricing of the stock. Put another way, if someone pays me a 30% premium that I am forced to accept in a compulsory acquisition of shares of minority shareholders, then that is not as good an outcome if I think I am likely to double my money).


"...but I am putting a fair amount of "stock" into the assumption that if Fergus is putting his own $ in he must be confident of his cost-cutting strategies and growth targets, so taking a plunge with small investment while i track the investment and keep learning is my next move."

While CEOs, as well as other executives, buying stock in their businesses is indeed a nice thing, I tend to not allocate too much "investment interpretation" to it.

For starters, I don't have any context for what their personal financial circumstances happen to be, nor do I have any insights into their understanding of how capital markets work in terms of valuing their businesses.

I think people tend to overstate the significance of "insiders" acquiring shares. Company executives are, after all, just that: managers of businesses. They aren't trained or experienced investment practitioners.
(Don't get me wrong; I don't dismiss it out of hand... it's just that it doesn't sway my investment thinking at all, merely reinforces it a little bit.)