Hi Fish, if we accept that audits are 'dodgy' then no one would invest as they would not believe a thing they read in the financials. It all depends on the materiality of the errors. It also depends on how Accounting Standards are applied and how tough the Auditors in applying them - that tends to be one of the biggest issue in Auditing - bending the standards to fit.. I would assume the Independent review looked at how the standards were applied. It will be what it will be. There has been no evidence to suggest CTD's books are 'cooked'. If CTD take a fall I doubt very much whether it will be through anything that VGI suggested. They have all been rebuked. Like any other business look behind the results to assess the quality of the business, what it does, how it does it, its assets, its revenue and its margins. I have addressed in previous posts how CTD account for their high margins and its certainly not rocket science. Generally the high Margins were due to TTV conversion to EBITDA and buying good businesses with plenty of scope for TTV improvement and organic growth. If you rebuke this and believe there is another more sinister reason for the EBITDA growth please let us know the reasons. Another which I have covered previously is that CTD have bought these low TTV conversion businesses for a 'song'. They issue/sell shares at very high PE ratios and buy the business at a much lower PE valuation. So returns on a per share basis are magnified again for the first year at least. (bit like Trumps massive tax cuts). But it provides a low base to move forward on - that is important. The TTV conversion improvements will add to EBITDA over 3 years for an acquisition. After that it comes back to organic growth for that acquisition which at say 15% pa makes that original purchase look like a gift. They are only two of the reasons. CTD is still a relatively small company and will acquire on a regular basis for a few years yet until they grow to large to be easily able to find good fits. Don't worry JP is aware of the path to tread and when its time to back off acquiring. I have to have a laugh at another basic error Joe has been making. Joe seems to assume the LOTUS acquisition was completed this Financial year so that the year will not be clean and CTD will be able to hide its alleged 'evil deeds'. LOTUS was completed in the first half. The penny has not dropped with poor old Joe that the second half is clean and decent comparisons can be made. Debt is small but it will likely be a bit smaller this half. We should see 100% cash conversion. I believe we will see good improvement in the Asia results. It will not be very long before Asia is way bigger than ANZ. CTD 'swear on a stack of bibles' that cash conversion will be back to around 100%. Worth watching. Like every business CTD will have its ups and downs but if things go to JP's plan it will be a very large company in due course. So yes, it is possible the Auditors and the Independent Auditors got it wrong but looking a bit closer under the bonnet does not suggest this will be a problem. Expect an ann not to long after this years results are out concerning a good sized acquisition. Does anyone really believe that CTD would be contemplating an acquisition if the yearly was going to be the disaster suggested by the shorters? Are the shorters being set up? You guys can work your way through that question. What do you think? There is a simple but 'smart as' strategy to play out. Its all wait and see.
CTD Price at posting:
$21.95 Sentiment: Buy Disclosure: Held
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