Its not intended that this new thread here is to capture much longer term EHE discussion. But by all means comment (and or correct) but I'd rather go back to Fundies and Growth 2015 OR someone else start a new topic. Just wanted to get this off my chest as a standalone.
For me (and I suspect others here) the truth of it was like this. The evidence was all there for the stag short of a market meltdown (my exact words at the time). Had 15% been there day one I would have sold out...somewhat reluctantly - wondering whether or not I was an idiot for doing so. I really wanted a company to go long on and I thought EHE was suitable. Better growth prospects than MPL.
Also thinking...if this finishes at less than 15% I will hold as its only temporary market weakness. Good if that happens because this my excuse for not selling immediately. Then later if results are in line with pro forma – with acquisitions PE will stretch. Again this was the sort of company and sector to go long on. Sound familiar?
Of course neither of the above scenarios quite eventuated here. Yet I am are still holding...why? I won’t repeat.
The market at large has recently questioned high multiples on MPL and REG but has since ticked off approval. The salary issue resulted in a SP drop mainly limited to JAP – REG since recovered. Challenger annuity product social security/tax ruling much issue. There has certainly been overall market stress – with iron ore prices below $80? per tonne, oil below $70? per barrel and lower gas prices/oversupply and the potential US junk bond issue. And here some talk of the health sector being overcooked - but again there’s been no real sector re-rate in fact there been strengthening in SP on MPL and REG.
So what is the issue? I started to write that the above indicators fed into a weak debut. Repeat overall market stress, JAP, perhaps combined with some IPO (MPL?) fatigue. But even the night before brokers were ecstatic about the EHE price. An immediate upside was likely to take place - according to them and I agreed.
But it wasn’t til pre-open we could see a different view emerging. Some thought EHE was either fully priced or some over. Those that did wanted out and they met with buyers below $5.00. But was this overpriced? The market always right?
I don’t think so. As mentioned before there was a case the other way.
But if I’m wrong (the market says I am) the initial overpricing was not much.
So what was the real problem? Answer - the share register was too heavily filled with funds which were intending stagers and or funds that received disappointingly small allocations. It is understood these were funds mainly overseas and in particular Asia.
Some funds were they allocated a mere 10 to 20% of their bid. Not enough to worry about. So even if they started long their small holdings turned them into dumpers. At another time they may have given it after market support to top up.
So from pre-open we could see that’s things weren’t lining up. Then the first hour – disappointment unfolded. And not just a fluffing around the list price – 15% down extending to over 17% day one. It looked bad. With no quick buck to be made the stagers and the others renegotiated with themselves – to take heavy losses on EHE. Some didn’t mind as they would offset stag profits from prior floats. But the spiral of diminishing hope and self- punishment was set to ruin the party. From initial minor weakness to amplification - over $200M was now shaved from the pro-forma Mt Cap.
At first I was in some sort of denial. But the by the next day - Saturday with help of others I’d fathomed and accepted what had happened.
Even so it’s little to do with the number of beds verses REG as per the nasty little David Kingston rant written up in the Australian, FR and a bunch of other newspapers. Nothing to do with evidence $42M FY 15 / $48M NPAT CY15 couldn’t be met. There was no evidence. If that’s what David really thought, why did he invest into EHE in the first place? The float was after all at least two x times oversubscribed. Nothing to do with the multiple. Nothing to do with Quadrant doing well out of the roll up as written up by the fools. As expected there’s some discussion now about ensuring integration.
I admit for the moment my brand new dollar bills have been tarnished by the mud. They are hopefully still worth the same but don’t look as good. Pure sentiment without critical thinking in the market means capital destruction. Investors that still hold are short on annoyance but are still long on confidence. And if you are really long on this I still think it’s a no brainer.
