Financial road map to M4

Evening all,

Firstly allow me to formally introduce myself, as my posts on the IAM forum up until now have been brief as well as few and far between.

I’m a full time investor, am passionate about my profession and on a daily basis I strive to become better at what I do and ensure that my due diligence and research is always improving and never ending. Having been 'full time' for a number of years (after exchanging the corporate lifestyle for a more modest and relaxed existence) I try to spend a good period of time understanding and observing both existing and prospective investments before making an informed and educated decision. After all, committing one’s hard-earned to any investment vehicle should not be considered without adequate due diligence, whether that vehicle be property, shares, private businesses, commodities, collectables and so on. Understanding that my financial future will be the result of present day decision making keeps me motivated, as does the outcomes of any financial endeavours that I willingly become a part of.

Having said all that, I do not consider myself to be a conservative investor. I welcome risk as long as the reward makes sense and is clear and realistic. As far as the share market is concerned, my goals are very simple;

1) find undervalued established stocks that have solid growth potential

2) discover the next Ferrari or Rolls Royce amongst a scrap yard full of metallic ordinaries and sh*t heaps, then hitch a ride and hopefully watch that vehicle outperform almost everything else over time - once it’s ready to hit the open highway.  

With regards to the speculative end of the stock market, I have been fortunate enough over the years to be part of a few success stories, which have significantly contributed to my bank balance without requiring a massive capital outlay. This has helped me build a financial buffer which has ultimately allowed me to focus on a full time career as an investor.

However for every success that I have been a part of at the speculative end of the market, there have been at least half a dozen failures that were ultimately detrimental to my net worth. That is the nature of the beast, and once one accepts the pitfalls and realises that the majority of speculative investments will never make it past Old Kent Road (in Monopoly terms), then one can begin his/her quest to sort the wheat from the chaff so to speak.

The key to becoming a successful investor IMHO (particularly at the spec end of the market) is understanding the PEOPLE who are employed to design, maintain and navigate your investment vehicle past treacherous obstacles and through storms and so forth. IMO this is more important than the vehicle or product itself, as it is THEY who will ultimately determine whether your vehicle ever reaches Mayfair (or at least Fleet Street).
Thus I highly recommend that investors try to gain an understanding of what motivates their employees (directors). Pick-up the phone, send them the odd email if you have any questions or concerns, listen to their podcasts, meet them face to face and attend seminars and AGMs and look at their track record of delivering vehicles from A to B. Eventually you will be able to form a decent picture in your head as to who these people (in charge of your vehicle) really are.

Are they worthy of your trust and what is their motivation or end game? Is it purely money that drives them, perhaps to fund a life of luxury or perhaps even a drug habit? Alternatively, are your director’s a group of savvy and well organised individuals who have made it their mission to improve people’s lives and build something that will stand for generations and leave a profitable legacy that will reward all shareholders for years to come? These are some of the fundamental questions that each investor must seek answers to. Otherwise one may as well be handing their part ownership of the car keys to a bloke who has no bones.

With respect to IAM, I’ve been an investor since the SRT days, although admittedly my interest only began following their intention to acquire Intiger. My investment up until last month has been relatively modest, but when I saw that 'The Bull' had been thrown out of the elevator i.e. similar to other specs after they have typically been pumped, then I knew that a unique opportunity was presenting itself and the time was right to take a larger stake in the company. Consequently my interest has grown tenfold and is now well into six figure ($) territory.

I was also very fortunate that I was able to time my increase in investment to a T. Some of you have seen me provide in-depth analysis via the Xped forum on many occasion and may also be aware of my carefully considered decision to exit the majority of my holding in that company early last month.  The truth is that I became uncomfortable with my investment choice (specifically the people driving that vehicle as opposed to the technology itself which I still rate as revolutionary) and fortunately my decision to cut my relatively modest losses meant that I was in the right place at the right time to take advantage of the recent crash in IAM and establish a large holding. In the end I was able to significantly add to my ‘heads’ holdings as well as buy a serious chunk of oppies at virtually the same average price that I received for my XPE shares.

What happened over the course of the next 2-3 weeks was astounding if not extremely timely. The IAMOA’s rose from 2.2c to 3.7c whilst XPE went in the other direction from 2.6c to 1.5c. In short, I was able to not only limit then recover my losses in Xped, but also managed to gain some ground versus where I was this time a couple of months ago. I do not share this with you to gloat, but rather to share my experience of what is possible if one is having second thoughts and is able to time their 'switch' to a more suitable vehicle well.

I have a number other investments of course, but none have been anywhere near as volatile as Xped and Intiger over a 6-12 month time frame. Key learning: good timing isn’t everything (especially if you are invested for the long term) but it sure can make a difference to one’s investment portfolio in the short term as well as maximising your leverage to future growth.

However I repeat that I am a long term investor and all going well my intention is to hold this stock for many years to come. That was my intention with Xped (and still is albeit on a much smaller scale). But at the same time I will be the first to bail if I think that any cracks in the hull (that could appear at any time - talking boats now ) become fundamentally irreparable and /or will have a detrimental effect to existing shareholders and their ability to achieve a decent return on their capital.

Financial road map to M4



Rather than waffle on about Intiger’s promising fundamentals including their capable team, low cost operation and attractive capital structure (I believe that these points have been well publicised on HC already and adequately understood by existing shareholders) I thought I’d share some of my own analysis that was compiled and recently updated following last week’s 4C.

Below and left is the collation of past and current 4C’s, whilst to the right I have provided a forward estimate of indicative future quarterly cash flows that would be required to meet the $40m cumulative net profit target (Milestone 4) by June 30, 2019. Click to enlarge.



You’ll see that at the top of the spreadsheet I have also provided a theoretical number of practices and the required growth rates in order to achieve those targets. These are obviously loose figures (given the many variables that will affect the no. of practices and payments from each practice on a quarterly basis) however I have assumed for the moment that each practice that uses Intiger’s services in one form or another will generate approximately $25K per quarter on average (which seems to be close to the current run rate if the number of existing practices that were on board during the December quarter can be used as a guide).

It should also be noted that my assumptions re: receipts do not equal revenue and similarly cash on hand figures (after operating, investing and financing outflows are deducted) do not equal net profit. But the spreadsheet at least provides a quarter by quarter demonstration of what it may take to achieve M4, and thus I will be following Intiger's progress with great interest over the next 26 months.

Like others have already mentioned, I would rather that only $39m in cumulative profit is achieved by June 2019 (sorry Mark ). Although of course I won’t be at all disappointed if we over achieve that milestone.

In any case, I hope that the above spreadsheet and my musings can be of some benefit when conducting your own research.

GLTA

Cheers
Elpha  

p.s. will be attending the Melbourne seminar next Thursday evening and have invited a financial planner (a good friend of mine who worked with Mark Rantall years ago but has never heard of Intiger) along for the evening. These days he works for a relatively small FP located in Collins St and recently I have heard him complain about admin. and the amount of back office work that he often finds himself doing on a regular basis. I suspect that he and the team that he works with could use a bit of help and thus an introduction of Intiger’s online portal may prompt them to take a closer look at Intiger's services soon enough.