Thank you for sharing.
They are people just like us and can make mistakes. I think this is a mistake. I think they have purchased based on valuation metrics but have ignored the broader industry/market/structural issues they face. Their statements are very vague and lack any depth.
Firstly, revenue momentum. Yes, but that is only because they purchased more Cabs by purchasing Yellow Cabs. This is the same business with the same struggles and this is a terrible reason to be purchasing a stock based on revenue growth, especially when it is just bolt on and not through any real market growth. In real terms their revenue is shrinking.
I can purchase product from overseas, sell for a loss and make a killing on revenue. Until the cash runs out. It makes no sense what they have said there.
"CAB management has been successful in turning around the business in the face of structural changes"...
Care to elaborate? I don't see how they are turning anything around based on their financials. Maybe they think what they are doing with their apps and other changes, that there is potential... but there is no evidence to show that is working. Poor analysis IMO.
"We also believe the growth opportunities presented by acquisitions are currently mispriced by the market"
Again, I disagree.
Purchasing Yellow Cabs is a dud.
Purchasing 'Mobile Technologies International Pty Ltd' is a positive, however what can they do? The best result will be that they create an app like Uber has with the same pricing and seamless payment process (LINKED WITH PAYPAL).
Price match is an impossibility however with the Cab liscence costs, fees drivers pay to Cabcharge and Insurance etc... All of which are many times the cost of driving an Uber. Last time I quizzed a Uber driver and asked if they had to pay the $3k annual insurance costs a Taxi driver does. They said they pay no where near that and it is in the hundreds, not thousands. Not only that, Uber makes a loss. Some will critisise Uber, but who cares. We are not investing in Uber here. CAB is competing against a loss making company. How do you compete in any way with that. It is only if Uber folds that they will win... but wait... there are a long line of companies who will take Uber's spot if they depart.
This is a ride-sharing market now, taking market share at a fast pace. The old system is fading quickly and companies with the structural costs and overheads will not survive in the long term CAB being one of them.
Look at traditional CAB/Taxi companies overseas in to get the crystal ball view of where CAB's fate will end up.
The saying goes, ' you can't polish a turd ' and I think CAB will be trying their best to polish it as long as the possibly can with creative accounting, until that creativity game is exhausted.
Cheers,Ryan