Ann: Appendix 4C - quarterly, page-8

Just caught up with the latest thread and by no means this is a lay down due to current business so far -agree.

https://hotcopper.com.au/threads/sh...407250/page-137?post_id=24525336#.WQ7mvVV94qM

"It brings me to a thought I was going to write about last week. Acquisitions/ Synergies/ Roll up strategy.
And I happened to look over HRL after seeing some talk on XSO.

From my memory, before the latest 2 acquisitions and raise, the market had placed a Cap of nearly $25m on the business at 15c (165m shares), which even in FY17, is not cashflow positive. revenues were circa $12m.

The 2 Private businesses they bought had circa $12m in revenues too, and were purchased for $8m (even incl. some earnouts). Both were apparently cashflow positive, and making profits.

So the market had valued HRL at $25m at one stage by itself (revs circa $12m and not profitable yet)
The 2 businesses were purchased (rolled up) for $8m.(revs combined circa $12m and profitable).

Good for HRL now, stock is 8.8c (under raise) and Cap $20.8m (236m shares), has twice the revenue at circa $24m, and likely becomes CFP with the scale FY18.
So effectively, HRL original business is now priced at $12.8m, which seems much more realistic...and looking good value again.

BUT, just look at the valuation gap between Listed and Non Listed prior. This is why roll ups can be great stories in a fractured sector in the early days. Like say GXL.
They always seem to go too far if they keep doing it for too long."

So I am thinking NOW good value - maybe at 8.8c after acquisitions, but clearly not prior.