Originally Posted by
Beagle
Posted Wednesday 17th...that was "code speak" for me selling half. I followed my gut instinct yesterday when the SP failed to rally on the back of booming U.S. markets incl Nasdaq and sold the rest.
Here's a summary of my concerns.
To annualize the peak December quarter of giving at first glance does seem a rather creative way to highlight the growth of the company. The fact that they have changed the basis upon which they calculate this ACMR several times to now show this in the best possible light and the fact that they have missed once already with a claim that they would be cash flow neutral by Q4 2017, now out to Q4 2018 does not give me the warm fuzzies. What if so called ACMR is well under $90m for Q1 2018...do they change the measurement basis again to show the current quarter in a better light ? Why not... they have done it so many times already ? Creative accounting 101. This bean counter, (who has a special dislike for creative accounting) is a little more cautious than I was previously.
I don't like the fact that future customer acquisition cost has been warned as being about 18 months revenue in the future, up from 12 months. Considering that customer growth per se was very modest for 2017 the inference here is one could conclude that the majority of the large low hanging fruit has already been picked ?
When one further considers that the vast majority of their growth in ACMR was from price growth per customer, not customer growth itself, (such price growth surely not being repeatable without customer resistance in the future ?), one starts to get a possible different scenario regarding future growth not being as robust.
Maybe they might miss with being cash flow neutral by Q4 2018 again ? Market may be far less forgiving the second time around in my view.
Someone told me they are capitalizing new customer acquisition costs, surely not ?
100 day MA is about $3.20. Very late last year this was about $3.40 before the inclusion in the NZX50 in early December forced a lot of institutions / fund index trackers hands in term of buying in. I don't think anything material has happened to the business since when it was trading around $3.40 apart from the arguably artificial price spike forced by the index inclusion.
Ironically enough we saw exactly this pattern of behavior when Comvita was included in the NZX50 some time back, an immediate price spike of 20% followed by it fairly quickly falling back to its earlier price. On those two bits of anecdotal evidence one might conclude that premiums caused by index inclusion are temporary in nature and a reversion to fair value usually happens fairly quickly. I guess at $4 I simply saw more short term risk than opportunity. Long term I am not so sure anymore. Most of the big Churches are already on board.