DW8 Growth, page-12559

@christathome (https://hotcopper.com.au/posts/59553371/single)

Not belittling your concerns but this is the despair from even some LT holders I'm talking about. It's increasingly emotional reading the tea leaves in absence of headline news that captures current sentiment. And I get it, looking at my holding I'm wrestling the same emotions as the next guy. But emotions and investing don't make good partners over the long-run as it leads to buying and selling at the wrong time.

Dean's explanation re the onboarding process was correct as anyone having ever dealt with large contracts can attest. Look at the time it took to wrestle a few signatures from Kaddy owners to close that deal. Now think about the various administrative and executive layers an onboarding deal of the magnitude discussed needs to move through considering the strategic implications and internal balancing act at the firm being onboarded. When it takes often months at an ASX 200 company to get a requisition request for stationary filled in the current operational climate imagine how long a strategic move like this takes to close. I doubt management would twice confirm what they are working on if that was not the case and there's a very reasonable certainty of it closing. They wouldn't disclose this after 1 or 2 meetings with someone's mid-level procurement VP.

Anyone engaging in negotiations with the firm would do so because the saw the value (aka 15-30% cost savings, efficiency improvements, etc.) that would accrue to them by using DW8 services. Trying to buy them out at this or even half the valuation would make zero sense as it would not save them money, but actually require an immediate cash investment that costs them a lot more then they'd save over a number of years. Even if they'd consider an acquisition to swap out their internal capabilities (which isn't feasible in most cases), this would be an even more complex undertaking and makes no sense strategically. If an industry leader wanted to make a takeover bid to gain a foothold in a new business then that's also subject to DW8 share holder vote and this would not happen without your say. I cannot see management and key shareholders giving them the critical votes to convince the remaining shareholders of the merit of such a proposal considering where we are in their firm's life cycle etc. Especially not at prices being irrational where they are atm and handcuff terms they'd be subjected to as part of the deal. That would be short sided across a number of metrics and for Kaddy staff it would represent a massive haircut on the primarily equity-founded deal they entered into last year. Yeah....don't see that happening, especially considering the entrepreneurial commitment the guys have made.

Assuming that there's anything malicious going on aside from people expressing their emotions via price discovery is conjecture at best and an unsubstantiated conspiracy theory at worst...despair. Again, I am not belittling your emotional response but suggest remembering that irrational behaviour and prices occur on both ends of the pendulum swing. We swung way too far to the right last year, and we have swung way too far to the left now.

And even if were to consider sector/market-wide valuation compressions to put it all into context, the fact remains that fundamentals are coming through which will result in substantial company specific compression even if the SP remained the same, i.e. they become cheaper simply because fundamentals continue to improve. Simply assuming we just do 4x the last 4C's operating income in revenue, the valuation reset each quarter assuming the same SP as today would be a double digits pct change so that by year end it would be half of what it was Dec 2021. And that assumes ZERO growth vs. 4Q 2021. Do your own math what reasonable organic growth may be or add one larger customer to gauge impact as valuation compression will increase in a non linear fashion, i.e. the shares will become even cheaper = more embedded value. This firm isn't a ChristmasTree.com type company in the midst of the 2000s tech correction that's going out of business. And the firms that suffered through that period but had fundamental growth (not just eye balls) all experienced one common thing: half way through the sell off they were already trading well below their intrinsic value and within 12-18 months they were substantially higher. Some people may not agree that a 4x multiple is reasonable or even cheap, but I disagree on the grounds of the growth we are actually seeing (add one big customer and the figures change even more). And at 50% plus growth on 4x which we will hit in 4 months time simply by fundamentals rolling into the metric with zero change in SP vs today, this is going to look like a bargain in hindsight.

Hope this helps. If not, then please revisit the fundamentals to determine if the price at this moment, and considering all other items, is indeed rational in your opinion.