I spoke with James Baillieu last night and I remain very comfortable with my shareholding in this company.
- James thinks CLB will be on the radar of a private equity firm or another acquirer at about a $30M USD run-rate revenue scale. They will start putting some feelers out as they approach this scale (probably already from mid this year onward noting that discussions will be ongoing and take a substantial amount of time to close out)
- No view to make a meaningful play in low sugar / no sugar candies at the moment, although they could bring in some low sugar options. At the moment, the market is >95% sugar based confectionary
- Competitive moat is that they are the only player in the US that offers the "store within a store concept", i.e. they offer a huge breadth of premium candies from a supplier network of over 40 manufacturers. Someone could try to replicate this, but establishing the existing supplier and customer networks would take a significant amount of time, effort and funding to replicate.
- An acquirer would be looking at the quality and reputation of the brand, the supplier networks, growth, quality of the management team and the customer networks etc.
- Cashflow shouldn't be an issue, they are approaching cashflow neutral/positive levels. The only need for more capital would be if they wanted even further
balance sheet expansion i.e. pushing for even more inventory etc. EBITDA is improving and will continue to.
- Ultimately, we discussed that even if a trade-sale only went for circa 3x sales and not 8-10x sales (as per recent comparator transactions), that would be a material uplift for all shareholders (i.e. $30M USD x 3x sales / circa 300M SOI = 40c AUD share price). I.e. there is a big margin of safety at current levels. It is also worth noting that a liquidity event is not the only option for generating significant shareholder value.
Nothing is guaranteed on the ASX, but I am extremely comfortable with my moderately sized shareholding here for a 6-24 month view. Grateful to have been alerted to this opportunity initially by an experienced
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@webbj. Thank you.
The next few months will be very exciting for the share price in my view.
A big opportunity lies ahead.
T.E.P.
