Thanks for the update sb9. Much appreciated.
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Thanks for the update sb9. Much appreciated.
For the benefit of someone who asked me on the Plexure thread about how the shorts are doing - ‘are they burning?’ - here’s my view as articulated since I sold 2/3 of my shares when ATM reported.
The story on ATM is still a great one but the risk profile on the company has changed - it’s now in a higher risk category necessitating a more cautious investment approach imo.
Downgrades come in 3s and ATM has just had one, albeit a small one in the last results. Hence, the PE contraction from the high 30s.
The need to ramp up marketing and promotional spend to maintain sales momentum with associated lower margins - easy gains are indeed behind the company and it’s going to get harder from here.
The US expansion and associated losses to date is a worry for some of us as the US is no cake walk as many NZ companies have found.
Overall, the shorts are still out of the money but those shorting recently at the higher prices are obviously not burning.
UBS Group AG and its related bodies corporate have been quite active in ATM lately. Their announcements aren't also easy to follow but I gather that they've been over and under the 5% SSH threshold and now they've gone over again.
They must be making money shorting and buying back on the cheap ?
Its all about game playing and mopping up as many cheap shares as possible right now plus collecting shorting fees, I dont see PE contraction as a reason for the fall, just wait until these players take their pedal of the gas or a bigger player starts buying and watch what happens to the SP not to mention any good announcements which may come out. PS-Theres also a takeover possibility but I highly doubt it would be successful.
I think this aspect of the SP drop is often overlooked. The likes of me who recently went all in at $15.10 (after a very good week trading in and out of the stock - decided to hold over the weekend before the SP started it's merry tumble - nice move... *face palm*), have to sit out this raid on lower prices by the big guns. I'm sure as hell not getting whacked with a huge loss to satisfy their games. As you say, eventually the foot will come off the pedal and give the SP a chance to come out from under this downward pressure. Of course, a bit of positive news from TPTB @ A2 would help give the SP a decent spike (not to say the news hasn't been positive, IMO).
https://www.youtube.com/watch?v=EGlGhrbYuxo
Interview on Bloomberg with the CEO.
Another good interview, I like this one because you can see how Jayne's approach to growth is a lot more ambitious to a more conservative Geoffrey. When Jayne was asked when the business will become break-even in the US she was clear that the number one agenda is to grow the brand and market share first, she said she has no plans to cut back on marketing to become profitable sooner. This is very different to Geoffrey's more conservative approach of becoming profitable in the US quickly, and having the sales contribute to EPS which Jayne obviously doesn't agree is the best way to maximise shareholders long term earnings potential.
I like Jayne's courage here and suspect the board is in agreement with her, grow sales and worry about EPS later. The market wants to continue using the PE ratio to value this business and give it a lower multiple due to slower EPS growth but in my view as long as sales growth continues at a fast clip if anything it deserves a higher multiple as earnings are put on the back-burner.
By all metrics I can't see and evidence of growth slumping much, the commerce data from Goldman, port data and sales results direct from the company are all still showing excellent growth. If and when sales growth really starts to slow then a think it's fair to punish the share with a lower multiple.
F19 Half 613M PCP = 41%
F19 Second half 687M = PCP 40.7%
F19 full 1300M = PCP 40.8%
US second half revenue growth = 200%.
Good luck all holders, the business has a long road ahead.
allfrom, bit harsh on Geoffery as he didn't have the luxury of the cash in the bank that she now has, he was more interested in growing the brand in China and Aust which laid the ground for her to be able to spend on what she wants to grow the brand in her way, I do hope that she gets that right !