Ann: Trading Update, page-10

I agree with all the above in respect of the illogical and poorly prepared trading data in the update. It is a confused mess of data and values.

My take on the update is the post 1.1.21 user numbers are falling from over 200 per day (stated on a previous update) to approx 90 per day in the current calendar year. This is poor, disappointing and worrisome. The company should have expected a negative reaction to this release.

All that said, it is never sensible to use data leading up to Chinese New Year as indicative of anything. Numbers around this time will always bounce around.

I draw great importance from the fact that those who participated in the CR at 6c will have known about the user growth pattern, known about the closure of stores and been given a detailed insight into the new online strategy. Based on all they knew, the CR was over subscribed and introduced a new cornerstone investor.

I am always pretty excited by oversubscribed raisings that then result in a share price significantly lower than the CR price. With cash in the bank underwriting expected future trading losses or investment, it makes very little commercial sense. Even in the last 12 months I can count 4 stocks that I own that have followed this exact trading pattern. Every one is now significantly higher than the CR price and generated some truly sweet returns.

Ironically, commercial risk is at its highest PRIOR to a CR (as the business usually is running out of money). If the raising is successful, its commercial risk is lowest AFTER a CR (with money in the bank). It defies any logic that markets over value situations before a raising and then under value them after a raising. But there you go.

The punters in AUK who probably don't understand anything except the share price movement, have totally lost their balls and sold out. I understand there is a huge execution risk with the new online strategy. I also understand the business has 12 -18 months of capital to get it sorted, and I am certain they will do their very best to achieve that.

Today I have absolutely loaded up at 5.2c, 5.1c,5.0c, 4.9c and then 4.8c on the bell. I do not believe sophisticated investors or management who were happy to pay 6c a month ago, are fools. Quite the contrary, they know more than the market disclosure requirements demand to be disclosed. When retail investors run, after sophs have moved in, I will back the sophs every day of every week. This is the junk end of the market and if I have learned anything, the retail share "investors" at this end are mostly gamblers looking to make a quick buck. They know nothing about building or operating a business.

I don't think anyone can call the update definitive or conclusive. I really think the company expected an entirely different market response. They have been poor in this part of their duties since day one with the completely mismanaged CR 3 years ago at 42c. It was amateurish at best and the days that led to a very large free carry float for many here. Today, the business is an entirely different business and the share price is far more realistic. Nevertheless, the same mis-steps have occurred.

I think it will take 6 months to really know whether the new strategy looks like working, or not. The shares could be trading at 1c or 10c based on the then outlook.

I am cautiously optimistic to roll the dice and expect a double digit price. Many may see me as foolish and that assessment may well be correct. I prefer to have my judgment determined by the outcome of the investment after the facts are in, rather than before. Feel free to quote me in 6 months, as I have been wrong before. But I have also been right.

Time will be my judge, and I am happy to have my call today judged by that measure.