Q3 Trading Update Guesses, page-4

Great summary thanks.

I agree the market is mad. Smartpay really highlights the opportunities that arise where companies transform during bear markets when sellers are mechanical and few are looking for opportunities.

I'm not sure there was no catalyst. The acceleration in growth in the Oct trading statement did look like a potential trigger at the time. The rally that began there was entrenched by the strong cash generation in the half year report. Also perhaps, the company's comments in that interview emphasizing there was nothing to stop the growth accelerating. That's how I saw it anyway, gained in confidence that could reprice there. Don't disagree with your thoughts though. It is very hard to guess when a stock will re-rate. Smartpay has looked obvious for a long time now.

Its part of a broader theme of overlooked changes in fundamentals I follow with NZX stocks. Smartpay is unusual in that they created a new business using existing expertise. It was disguised for a while by the existing mature operations. More common is a story that has taken a long time to play out. A lot of disappointment along the way and investor capitulation. When it finally turns around, no one is watching. The fund managers don't look at anything below the NZX50 threshold of $400m market cap (Smartpay should threaten that level this year). The only exception is Milford who are more opportunistic (and also have a private equity arm). There are no special situation investors in NZ although some of the Australian funds invest here.

Pacific Edge was a recent example. That was a ten bagger for me. It ended up being way overbought as the fund managers had to pile in when it went into the NZX 50.