How to Think Like a Roman Emperor by Donald Robertson
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Value Investing World
Links - 09/05/2024
“In investing today, change is the real constant. What might have seemed a safe investment to Benjamin Graham, such as owning the shares of an asset-rich underperformer, is not necessarily safe anymore because the company’s business model may be imploding. In the world of investing, the idea of dramatic change is nothing new as one era ends and another …
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TAMIM Asset Management
TAMIM Australian Equities – Best Time to Invest
Ron Shamgar, Head of Australian Equities at TAMIM Asset Management, answers the most popular investment question, when is the right time to invest in the stock market.
Disc: All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
The post TAMIM Australian Equities – Best Time to Invest appeared first on TAMIM Asset Management.
ns sector. With its strong financial performance, strategic growth plans, and shareholder-aligned management team, Comms Group is well-positioned to deliver significant returns in the event of a takeover.
In conclusion, Comms Group is a small telco ripe for acquisition, offering substantial upside potential for investors willing to capitalise on the consolidation trends in the telecommunications industry. As always, we remain vigilant in monitoring market developments and positioning our portfolio to benefit from such opportunities.
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Disclaimer: Comms Group (ASX: CCG) and Superloop (ASX: SLC) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
The post A Prime ASX Takeover Target in a Consolidating Telco Industry appeared first on TAMIM Asset Management.
TAMIM Asset Management
A Prime ASX Takeover Target in a Consolidating Telco Industry
Identifying undervalued assets ripe for acquisition can provide significant opportunities for sophisticated investors. Could one such opportunity be Comms Group (ASX: CCG)? CCG is a small telecommunications company operating primarily in Australia and the Asia Pacific region. With its strong financial performance and strategic positioning in a consolidating market, Comms Group stands out as a potential takeover target.
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The Australian telecommunications landscape is marked by intense competition and rapid consolidation. Major players like Telstra and Optus dominate the market, but smaller, nimble companies have been able to carve out niches by focusing on specialised services and underserved segments. Aussie Broadband (ASX: ABB) and Superloop (ASX: SLC) have emerged as formidable challengers, successfully gaining market share from larger incumbents through aggressive growth strategies, innovative product offerings, and strategic acquisitions. These companies are now in the consolidation phase, targeting smaller telcos to enhance their competitive positioning and expand their customer bases.
In this evolving landscape, smaller telcos like Comms Group present attractive opportunities for larger players looking to consolidate their market positions. Comms Group’s focus on cloud communications and secure modern workplace solutions, combined with its strong foothold in the mid-market corporate sector across the Asia Pacific, positions it uniquely for growth. It also makes Comms Group a prime candidate for acquisition by companies looking to diversify their service offerings and strengthen their regional presence.
Company Overview
Comms Group is a leading provider of innovative cloud communications solutions, secure modern workplace services, global unified communications, and wholesale telecommunications services. The company operates primarily in Australia and the Asia Pacific region, where it serves a diverse range of corporate clients, particularly in the mid-market segment.
Comms Group’s cloud communications services are designed to enable businesses to operate more efficiently and securely, offering solutions that include voice, data, and video communication capabilities integrated into a single, unified platform. This approach not only reduces costs but also enhances collaboration and productivity for its clients.
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In addition to its core cloud communications offerings, Comms Group provides secure modern workplace solutions that cater to the growing demand for remote and flexible work environments. These solutions are particularly relevant in today’s business climate, where companies are increasingly adopting digital transformation strategies to stay competitive. By offering secure, scalable, and flexible workplace solutions, Comms Group helps businesses adapt to the evolving needs of the modern workforce.
The company’s wholesale services division offers telecommunications services to other carriers and service providers, generating additional revenue streams and enhancing its overall market position. This diverse range of offerings enables Comms Group to capture multiple market segments and provides a strong foundation for sustainable growth.
Strong Financial Performance in FY24
Comms Group’s FY24 results were exceptional, surpassing market expectations and setting the stage for a promising future. The company reported a record revenue of $55.5 million and an underlying EBITDA of $6.6 million, both exceeding guidance. A particularly notable aspect of Comms Group’s financial performance is that over 90% of its revenue is recurring, driven entirely by organic growth.
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TAMIM Asset Management
Two Small Caps Make a Strong Statement with FY24 Earnings
Despite a challenging start to earnings season for some businesses, two small caps in the TAMIM portfolio have delivered strong performances.
Standout performances from Centrepoint Alliance Limited (ASX: CAF) as well as the continued growth and performance from the boring but beautiful Servcorp Limited (ASX: SRV).
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We take a closer look at both below.
Centrepoint Alliance
https://tamim.com.au/wpv1/wp-content/uploads/2024/07/CAF_ASX.png Centrepoint Alliance reported an impressive set of financial results for FY2024. The company exceeded its own guidance with an underlying operating earnings of $9.1 million, a 20% increase from the prior year. This was driven by the successful integration of Financial Advice Matters Group (FAM), acquired in December 2023, and strong organic growth in licensee fees. The company’s net revenue rose by 11% to $36.1 million. A number of cost control measures implemented during the period improved the cost-to-income ratio from 77% to 75%. These gains, coupled with Centrepoint’s strategic initiatives and market-leading adviser recruitment, have positioned the company well for continued growth.
Centrepoint’s balance sheet remains solid. As of June 30, 2024, the company holds a net cash position of $9 million, with $3.2 million in bank debt linked to the FAM acquisition. The strength of the company’s financial position allowed for a final dividend of 1.75 cents per share, bringing the total fully franked dividend for FY2024 to 2.75 cents per share. Increased revenue and improved cost control positively impacted the bottom line. Earnings per share saw an increase of 21% to 3.92 cents.
Operationally, Centrepoint’s ability to attract and retain financial advisers has been a standout feature. The number of authorised representatives increased by 38 to 549 by year-end, an excellent result given the broader market continues to consolidate. Growth within the company was further enhanced by the integration of FAM which has exceeded internal expectations. The high-margin salaried adviser market was also a significant contributor. Additionally, the launch of the IQ Managed Portfolios and the upcoming IconiQ platform are set to continue to improve Centrepoint’s service offerings, further enhancing its market position.
Looking ahead, Centrepoint is well-positioned to continue its growth trajectory, with FY2025 operating earnings guidance in the range of $10 million to $10.5 million. We estimate this earnings guidance is conservative and with free cashflow of $5 million or more, the dividend should be around 3 cents a share. CAF has been subject to corporate activity in the past and we believe it’s only a matter of time before its largest holder, COG.ASX makes a takeover bid. The company’s positive outlook is underpinned by a strategic focus on expanding its adviser network, enhancing product offerings, and maintaining operational efficiency.
Servcorp
https://tamim.com.au/wpv1/wp-content/uploads/2024/06/servcorp-1.png Servcorp continues to deliver with an exceptional full year 2024 result. The company achieved a net profit before non-cash impairments and tax (NPBIT) of $56.6 million, surpassing its market guidance of $50 to $55 million. Much like Centerpoint, the company’s strategic focus on operational efficiency and premium service led to an increase of 18% in NPBIT. This flowed through to the bank with an 18% rise in underlying free cash to $72.5 million. Revenue and other income grew by 7% to $317 million.
Servcorp’s balance sheet remains particularly strong, with cash and investment balances exceeding $120 million as of June 30, 2024.
This strong cash position ena[...]
TAMIM Asset Management
TAMIM Australian Equities – Company Spotlight – Global Data Centre Group
ASX AI thematic play with this data centre investment company. See why we took a position?
Disc: ASX: GDC is held in TAMIM Portfolios as at 25 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
The post TAMIM Australian Equities – Company Spotlight – Global Data Centre Group appeared first on TAMIM Asset Management.
TAMIM Asset Management
TAMIM Australian Equities – Company Spotlight – Clearview Wealth
Presented by Ron Shamgar, Head of Australian Equities at TAMIM Asset Management
Disc: ASX: CVW is held in TAMIM Portfolios as at 25 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
The post TAMIM Australian Equities – Company Spotlight – Clearview Wealth appeared first on TAMIM Asset Management.
iple geographies and channels.
The fund manager’s competitive fee structure has also played a role in its success, with the majority of its revenue coming from asset-based fees. Performance fees accounted for just 5.4% of total revenues in the first half of 2024, underscoring the stability of its income stream. With improving margins year over year, GQG reported a 54.9% increase in net operating income to US$273.2 million.
However, despite the strong performance, the growth was slightly below analyst expectations, falling short of the 65% growth forecast. This shortfall and an unexpected higher cost base may explain the recent pull back in GQG’s share price. Nonetheless, the company continues to demonstrate solid financial health, as evidenced by the increase in its quarterly dividend to 3.35 US cents per share, bringing the total dividend for the half-year to 5.66 US cents per share, a 46.3% year-on-year increase.
GQG trades on 12.5x PE multiple and a 7% dividend yield. We believe these metrics are too cheap to ignore for what is a high quality, high growth and founder led business.
The TAMIM Takeaway
We continue to focus on industry leading companies with aligned board and management teams that have shown a clear strategy to grow their respective businesses for the long term rather than focusing on short term goals. We believe this type of mentality leads to higher shareholder returns over time and in many cases to takeover offers at significant premiums.
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Disclaimer: Bravura Solutions Limited (ASX: BVS), Viva Leisure (ASX: VVA) and GQG Partners (ASX: GQG) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
The post Earnings Highlights: Bravura’s Turnaround, Viva Leisure’s Strategic Appeal, GQG continues to grow appeared first on TAMIM Asset Management.
TAMIM Asset Management
Earnings Highlights: Bravura’s Turnaround, Viva Leisure’s Strategic Appeal, GQG continues to grow
Earnings season is well and truly underway with a number of companies in the TAMIM portfolio reporting last week.
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Two stand out and high conviction holdings that reported were Bravura Solutions Limited (ASX: BVS) and Viva Leisure (ASX: VVA). Coincidently we recently covered updates prior to earnings on both in Shamgar’s small cap summary.
Bravura Solutions Limited
https://tamim.com.au/wpv1/wp-content/uploads/2024/03/BVS_original.png Bravura Solutions Limited released their full year results last week with continued signs of the business turning its fortunes around.
We wrote back in November last year that we believed this could be a turnaround story but it has even caught us by surprise at the pace of change. Arguably this is one of the quickest turnarounds we have seen.
FY24 Result and On Market Buyback
Bravura Solutions reported an impressive return to profitability following significant transformation efforts.
The company achieved gross revenue of $250.4 million, marginally surpassing FY23, with operating earnings reaching $25.8 million eclipsing the prior period by $26.1 million. The growth was driven by a substantial reduction in operating expenses, which fell 10% to $231 million. The strategic cost-cutting measures included a reduction in headcount and reorganisation of occupancy requirements. As a result, Bravura posted an adjusted net profit after tax of $8.8 million, marking a $31.9 million improvement from the previous year.
Bravura’s FY24 performance reflects the success of its recent restructuring, which has restored the company to a positive cash operating earnings.
The company is in a strong net cash position with $90 million as of June 30 2024, with a net cash inflow of $14.2 million and an additional $56 million of cash payment due in FY25 we discuss further below. Despite the success, Bravura has opted not to declare a dividend in FY24 but with a view to paying dividends in FY25.
Looking ahead, Bravura aims to further strengthen its financial position by targeting cash operating earnings of $28 million to $32 million in FY25.
Earlier in the month the company announced a proposed return of capital as part of its capital management strategy. The return of up to $75.3 million has been further enhanced by an additional $20 million on-market buyback of up to 10% of the company. The strategy will be funded by existing cash reserves and proceeds from its recent agreement with Fidelity International.
Bravura group signs agreement with Fidelity International
The company has entered into an agreement with Fidelity International, granting them a perpetual, non-exclusive licence to use and develop the Sonata software platform.
The deal includes a £29 million payment ($56 million AUD), with £24 million due upon software delivery in August 2024 and the balance in early 2025. While Bravura retains intellectual property rights, the move is designed to streamline Bravura’s operations. We believe that while it may have a minor revenue impact in FY26, there will be minimal effect on profitability.
While Bravura’s transformation continues, the company is moving into its next phase of sustainable growth with some large potential new logo wins being tendered and prospect of further work in the U.K. market with existing[...]
TAMIM Asset Management
The Power of Second-Level Thinking: Beyond the Obvious in Investing
In the world of investing, the difference between success and mediocrity often boils down to how deeply one thinks about opportunities and risks. Howard Marks, co-founder of Oaktree Capital Management, is renowned for his deep insights into market behavior, and one of his most influential contributions to the field is the concept of “second-level thinking.” This idea, explored extensively in his memo “First Level Thinking vs. Second Level Thinking” and his book The Most Important Thing: Uncommon Sense for the Thoughtful Investor, offers a framework for investors seeking to transcend conventional wisdom and achieve superior results.
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What is Second-Level Thinking?
At its core, second-level thinking is about going beyond the surface. Marks defines first-level thinking as simplistic, conventional, and reactive. It’s the kind of thinking that leads to conclusions like “This company is doing well; let’s buy its stock,” or “The economy is in trouble; sell your shares.” First-level thinkers tend to focus on the obvious and make decisions based on straightforward observations that are often already reflected in market prices.
Second-level thinking, on the other hand, is more complex, contrarian, and analytical. It requires asking deeper questions, such as:
* What is the consensus thinking, and why might it be wrong?
* If everyone believes the same thing, what are the implications?
* What are the second-order consequences of this event or decision?
* What might happen that others aren’t considering?
Marks summarises this by saying, “First-level thinking says, ‘It’s a good company; let’s buy the stock.’ Second-level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.'”
This kind of thinking doesn’t just accept the obvious conclusion but instead digs deeper to uncover insights that aren’t immediately apparent. It’s about understanding the nuances of market behavior, investor psychology, and the hidden risks and opportunities that first-level thinkers often miss.
The Importance of Being Contrarian
Second-level thinking often requires investors to be contrarian in their thought process. Marks frequently points out that to achieve above-average results, one must be willing to think differently from the crowd. Markets are generally efficient, meaning that the consensus view is typically already reflected in prices. To outperform, an investor needs to identify situations where the consensus is wrong and act on that insight.
However, being contrarian doesn’t simply mean doing the opposite of everyone else. It’s not enough to be different; you must be different and right. Marks emphasises that successful second-level thinking requires both contrarianism and accuracy. This means having the insight to see things others don’t and the conviction to act on those insights even when they go against the grain.
Marks writes, “To achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.” Indeed, this is the essence of second-level thinking: seeing opportunities where others see none, and risks where others see only reward.
Examples of Second-Level Thinking in Practice
To illustrate second-level thinking, consider a scenario where a company reports strong earnings growth. First-level thinkers might rush to buy the stock, driving up the price. However, a second-level thinker might dig deeper and ask questions like:
* Is this growth sustainable, or is it driven by one-time factors?
* How much of the positive news is already priced into the stock[...]
Value Investing World
Links - 09/03/2024
“First, the process of investing has to be rigorous and disciplined. Second, it is by necessity comparative. Whether prices are depressed or elevated, and whether prospective returns are therefore high or low, we have to find the best investments out there. Since we can’t change the market, if we want to participate, our only option is to select the bes…
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TAMIM Asset Management
Weekly Reading List – 29th of August
This week’s TAMIM Reading List navigates the fascinating dynamics shaping our world today. We explore how Costco has mastered the American shopping psyche and delve into the unexpected resurgence of physical media in a digital age. Uncover why New York is shrinking and challenge your perceptions with an essay on the myth of simple truths. On the tech front, we highlight a new, non-addictive painkiller and the escalating battle against text scammers. The list rounds out with deep dives into the infiltration of far-right groups, the reversal of technological progress, and the alarming deletion of Cartoon Network’s website. Each article provides a unique lens on the trends and challenges of our times.
📚 How Costco Hacked the American Shopping Psyche
📚 Buy, Pose, Post: a semi-triumphant return of physical media
📚 Why is New York shrinking?
📚 The Myth of Simple Truths
📚 USPS Text Scammers Duped His Wife, So He Hacked Their Operation
📚 New Painkiller Could Bring Relief to Millions—Without Addiction Risk
📚 The New York Times’ Ezra Klein problem
📚 Infiltrating the Far Right
📚 Armed and Underground: Inside the Turbulent, Secret World of an American Militia
📚 10 Reasons Why Technological Progress Is Now Reversing
📚 Cartoon Network’s Website Was Deleted. That Should Scare You All.
📚 Monopoly Round-Up: Price Gouging vs Price Fixing vs Price Controls
The post Weekly Reading List – 29th of August appeared first on TAMIM Asset Management.
ent/uploads/2024/08/IMG_3917-1024x490.jpeg
Additionally, Comms Group has shown significant improvements in its cash flow, with operating cash flow up by 150% and free cash flow increasing by 200%. These improvements highlight the company’s ability to generate substantial cash, which is crucial for funding future growth and potential acquisitions. The declaration of an inaugural dividend of 0.25 cents per share, potentially yielding 4-9% in FY25, further underscores Comms Group’s commitment to delivering shareholder value.
The company also expanded its relationships with strategic accounts, such as Vodafone (LON: VOD), and secured licenses to operate in more Asia Pacific countries. These achievements enhance Comms Group’s market presence and provide a solid foundation for continued growth and regional expansion, reinforcing its position as a leader in the telecommunications sector.
Positive Outlook and Strategic Growth Plans for 2025
Looking ahead, Comms Group has provided an optimistic outlook for FY25, targeting 5-10% organic revenue growth and over $7 million in underlying EBITDA. The company is focused on becoming a leading provider of cloud communications and secure modern workplace solutions across the Asia Pacific region. A key element of this strategy involves cross-selling secure modern workplace solutions to its existing telecommunications customers.
Furthermore, Comms Group is exploring strategic growth opportunities through selective acquisitions, aiming to expand its footprint and enhance its service offerings. The company also plans to transform its business by implementing common group-wide processes and systems over the next 12-18 months, which should drive operational efficiencies and further improve cash flow generation.
Importantly, Comms Group is targeting a net debt-neutral position by June 2025, reflecting its prudent financial management and commitment to maintaining a strong balance sheet.
Strong Board and Management Alignment
One of the standout features of Comms Group is the alignment between the board, management, and shareholders. At a recent Extraordinary General Meeting (EGM) in June 2024, the board was awarded 7 million shares that vest between 12.5 cents and 20 cents, compared to the current share price of 7 cents. The board collectively holds 23% of the company, with the Managing Director being the second-largest shareholder. This substantial insider ownership ensures that management’s interests are closely aligned with those of shareholders, a trait we value highly in potential investment opportunities.
The TAMIM Takeaway: A Potential Takeover Target
The telecommunications industry is inherently a consolidating one, where new challengers consistently emerge to take market share from larger incumbents. Over time, these challengers often become the consolidators, acquiring smaller players to expand their market presence. A decade ago, we witnessed this trend with M2 Telecom (ASX: MTU) and Vocus (ASX: VOC), who merged after acquiring several smaller listed players.
In recent years, Aussie Broadband (ASX: ABB) and Superloop (ASX: SLC) have emerged as successful challengers in the industry and are now in the consolidation phase, acquiring smaller peers to strengthen their market positions. We have benefited significantly from owning shares in Symbio (ASX: SYM), which was acquired by Aussie Broadband last year, and have also seen strong returns from our investment in Superloop.
Given the current market dynamics, we believe that Comms Group is a highly attractive target for both Aussie Broadband and Superloop. At a valuation of FY25 EV/EBITDA of just 3.5x, Comms Group presents a compelling opportunity that is too good to pass up. We anticipate a potential takeover within the next 6-12 months at a 6-8x multiple, representing a substantial upside of +71% to +128% from current levels.
Comms Group represents a unique opportunity to capitalise on the ongoing consolidation in the telecommunicatio[...]
bled the company to declare a final dividend of 13 cents per share. The total dividend for the year stands at 25 cents per share, representing a 14% increase from the previous year. The company expects to maintain a similar dividend in 2025, with next year’s dividend forecast to be a minimum 26 cents per share. Even after the recent share price increase, Servcorp offers a 5% dividend yield, making it an attractive income play with growth potential. We see the company’s ability to return capital to shareholders as a real positive.
Servcorp sets itself apart from the competition with its value proposition. The company provides customers with substantially better service than the industry average. With such a focus on staff, Servcorp ensures unparalleled service quality and client support. Its advanced IT infrastructure further provides clients with superior connectivity and service reliability solidifying its premium service.
The completion of the Middle East reorganisation and the establishment of Servcorp Middle East Group marks a key milestone, paving the way for a potential 2025 listing. We believe an IPO on the Saudi stock exchange should unlock $250 million of value to SRV shareholders.
This, along with Servcorp’s focus on expanding its global footprint and enhancing its service offerings, has put the company in a strong position for sustained growth in the coming years. The company has given initial guidance of $60-$65 million of PBT in 2025 which was significantly higher than market expectations. As Servcorp continues to leverage its critical mass and operational efficiencies, it is poised to maintain its leadership in the global workspace solutions market while delivering consistent value to its shareholders both from capital growth and income.
The TAMIM Takeaway
Centrepoint Alliance and Servcorp are prime examples of the type of investments TAMIM seeks—companies with strong growth potential that are also capable of delivering consistent income to shareholders. Despite being perceived as “boring” by the broader market, these companies offer significant valuation upside for patient investors. Both SRV and CAF exhibit qualities that align with TAMIM’s investment philosophy: strong financial management, strategic growth initiatives, and a commitment to shareholder returns. As such, they remain valuable components of our portfolio, poised for continued success in the coming years.
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Disclaimer: Centrepoint Alliance Limited (ASX: CAF) and Servcorp Limited (ASX: SRV) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
The post Two Small Caps Make a Strong Statement with FY24 Earnings appeared first on TAMIM Asset Management.
TAMIM Asset Management
TAMIM Global Tech and Innovation – Technology – Pillar of Power
Technology is no longer a luxury but a necessity. Explore the insights of experts on how technology plays a crucial role in ensuring national security.
Disc: All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
The post TAMIM Global Tech and Innovation – Technology – Pillar of Power appeared first on TAMIM Asset Management.
TAMIM Asset Management
TAMIM Australian Equities – Company Spotlight – Superloop
Leading disruptive and high growth telco in consumer and wholesale markets. Possible ASX Takeover Target.
Presented by Ron Shamgar, Head of Australian Equities at TAMIM Asset Management
Disc: ASX: SLC is held in TAMIM Portfolios as at 25 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
The post TAMIM Australian Equities – Company Spotlight – Superloop appeared first on TAMIM Asset Management.
TAMIM Asset Management
Weekly Reading List – 22nd of August
Welcome to this week’s TAMIM reading list, where we explore the dynamic intersections of business, technology, law, and science. Dive into the lifecycle of companies with insights from “At the Money,” followed by a deep dive into the dark side of AI with an exposé on the “Deepfake Elon Musk” scam. Next, we unravel the monopolistic strategies that have shaped giants like Walmart and Amazon. Shifting gears, we look at how hotels might be colluding to inflate room rates and consider the legal turmoil surrounding Trump’s immunity case. Environmental concerns are front and center with articles on climate tipping points and carbon laundering in Africa. We round out the list with a glimpse into the elite world of Paradise Cove, the enigmatic potential explosion of Betelgeuse, and the spiritual journey of Olympian Sydney McLaughlin. Each article provides a unique lens on the forces shaping our world today.
🎙️ At the Money: Learning Lifecycles of Companies
📚 How ‘Deepfake Elon Musk’ Became the Internet’s Biggest Scammer
📚 The one weird monopoly trick that gave us Walmart and Amazon and killed Main Street
📚 How hotels are colluding to jack up room rates, according to two lawsuits
📚 ‘Originalism is a dead letter’: Supreme Court majority accused of abandoning legal principles in Trump immunity ruling
📚 How Close Are the Planet’s Climate Tipping Points?
📚 Laundering Carbon and the New Scramble for Africa
📚 The Reintroduction of Kamala Harris
📚 Inside ‘Billionaires’ Bluff’: Why Paradise Cove Keeps Drawing the Superrich
📚 If Betelgeuse Explodes, Just How Bright Will It Get?
📚 The Spiritual Realm of Sydney McLaughlin
The post Weekly Reading List – 22nd of August appeared first on TAMIM Asset Management.
clients. In addition Continued cost reduction initiatives and a focus on maintaining a strong balance sheet remain at the forefront of the company’s future plans.
Viva Leisure
https://tamim.com.au/wpv1/wp-content/uploads/2024/08/041817_c565716c72b34206820b0870d5363bc6mv2-2-1.png Viva Leisure delivered an impressive set of financials for FY2024, marked by a 15.9% increase in revenue to $163.6 million, driven by organic growth.
Operating earnings rose by 21.0% to $35.4 million, with enhanced margins and improving operational efficiency. Viva Leisure was cashed up with $22.3 million on hand as of June 30, with significant free cash flow reinvested in acquisitions, greenfield sites, refurbishments, and technology platforms.
Membership growth was a key highlight, with a 10% increase in owned locations to 200,067 members, despite the removal of over 15,000 low-yielding Fitness Passport members.
The company completed 27 site upgrades, achieving a return on investment of over 75%. Viva executed strategic acquisitions, including four Plus Fitness sites and seven independent locations. Furthermore, following the end of financial year the company expanded its footprint by acquiring assets from three Gold’s Gym locations and Surge Enterprises Pty Ltd, adding five more locations in Western Australia.
Looking ahead, Viva Leisure is well-positioned for continued growth, supported by its newly secured Commonwealth Bank facilities, which increase its funding capacity to $165 million. The new facility is designed to increase the free cashflow substantially enabling to grow without the need to raise equity. Q4 exit run rate is currently $39.2 million Ebitda with incremental benefits to flow on from Viva pay and the recent WA acquisitions we estimate starting base of $44 million Ebitda for FY25 before any further growth or M&A.
The company plans a smaller strategic refurbishment program in FY2025, building on the success of FY2024, while also focusing on expanding its digital signage and vending machine networks, and launching its online supplement business, Supp Society.
Viva Leisure CEO and Managing Director Harry Konstantinou said:
“We are thrilled with the outstanding results achieved this financial year, which reflect the strength and resilience of our business model. The significant growth in revenue, EBITDA, and membership underscores our commitment to operational excellence and strategic expansion.
Our focus on organic growth, coupled with prudent investments in our people, technology, and facilities, has positioned us strongly for continued success. These results are a testament to the hard work and dedication of our entire team, and we look forward to building on this momentum as we continue to deliver value to our members and shareholders.”
We certainly know a takeover opportunity when we see one.
We believe Viva Leisure is beginning to look like an appealing acquisition. We feel the company could be a prime takeover target due to its industry-leading position, founder-led management and growing profitability. The valuation is cheap, trading at 4 times enterprise value to operating earnings.
These factors often attract strategic interest, making it a compelling candidate for acquisition or market re-rating.
GQG Partners Half-Year Results: Strong Growth in FUM and Revenue
https://tamim.com.au/wpv1/wp-content/uploads/2024/08/GQG_Partners.png GQG Partners (ASX: GQG) experienced a significant 46.5% increase in average FUM during the first half of 2024, reaching US$139.5 billion. This growth was fueled by positive net flows and strong investment performance, reflecting the trust clients place in GQG’s consistent long-term returns.
Management attributes the positive net flows of US$11.1 billion during the half to the firm’s strong client relationships and the consistency of its investment strategy. Looking ahead, GQG anticipates continued positive flows throughout 2024, supported by a robust pipeline of client demand across mult[...]
?
* What are the risks that could derail this growth story?
* What happens if the broader market sentiment shifts?
By asking these questions, the second-level thinker might conclude that the stock is overvalued and decide to sell or avoid buying, even as others are piling in. This deeper analysis helps avoid overpaying for a company just because it has shown recent success.
Another example could involve a market downturn. While first-level thinkers might react to bad news by selling in a panic, a second-level thinker might look for opportunities that arise from the market’s overreaction. They might ask:
* Are certain sectors or companies being unfairly punished due to broader market fears?
* Could this downturn be an opportunity to buy quality assets at discounted prices?
* What are the long-term implications of this event, and how might the market’s perception change?
By thinking in this way, the second-level thinker is more likely to buy when others are fearful, capturing value that might not be immediately apparent.
Developing Second-Level Thinking
Marks’ work suggests that developing second-level thinking is less about intelligence and more about mindset. It requires a willingness to be skeptical of the obvious, to dig deeper into data and narratives, and to think independently of the crowd. It also demands patience and discipline, as the conclusions reached through second-level thinking often take time to be validated by the market.
Investors looking to cultivate second-level thinking can start by questioning everything. Instead of accepting a company’s success at face value, consider the reasons behind it, the sustainability of its business model, and the assumptions baked into its stock price. In times of market euphoria or panic, ask whether the market has become too optimistic or too pessimistic, and consider the potential for mean reversion.
Marks also stresses the importance of understanding the psychology of other investors. Since markets are driven as much by emotions as by fundamentals, second-level thinkers need to consider how sentiment might shift and what impact that could have on prices. Understanding behavioral finance and the common biases that affect decision-making can give second-level thinkers an edge.
The Tamim Takeaway
Howard Marks’ concept of second-level thinking is a powerful tool for investors seeking to outperform the market. By looking beyond the obvious, questioning consensus views, and thinking more deeply about the implications of events and decisions, investors can gain a significant edge.
Second-level thinking isn’t about being smarter than everyone else—it’s about thinking differently, more critically, and more independently. It’s about understanding that markets are complex and driven by a myriad of factors, many of which are psychological and behavioral. By cultivating second-level thinking, investors can navigate this complexity with greater confidence and clarity, positioning themselves for long-term success in the ever-unpredictable world of investing.
For those striving to elevate their investment game, the Tamim takeaway is clear: don’t settle for the obvious. Challenge assumptions, think deeper, and strive to see what others don’t. It’s in these often-overlooked spaces that the true opportunities—and the real rewards.
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