Will Brett Blundy Take The Company Private?, page-26

Loving the debating going on here fellas. Excellent stuff - always healthy to challenge one another’s investment theses.

The way I view this investment proposition is by taking into consideration how the business is positioned operationally at the minute and how it is priced by the market. Fundamentally how is the business positioned? Well yes, you could argue at present they are ‘loss-making based on FY results so far, however, if one were to take a longer term view, is the market already pricing in peak pessimism? Who knows, but I would argue there is value here. If management can offload inventory reasonably quickly and at decent margins relative to historical margins (and you either have to back them or not), then one would think the business will return to profitability very quickly.
If one were to wait for the exact moment that the business trades profitably before tsking a position then I tend to think that investor misses the rebound / re-rate that comes with any such news.

what I’ve learnt in small cap investing over the past few years is that it pays to be contrarian a lot of the time and this is because the market prices assets based on investor emotion a lot of the time and not on rationality and hence why I find small cap stocks are very rarely fairly priced!

One could argue that at $5 or $6, CCX was way overvalued in 2021 and at the time I would tend to agree. A lot of investments were overpriced, as once again, investor emotion was driving markets into a high multiple storm as central banks were cutting rates. The contrarian investor at the time would not hav touched an investment like CCX trading at exorbitant multiples of 40 or 50x earnings and what a decision that was.

However, if management were to take this situation they currently find themselves in and take it by the balls, bringing CCX back to profitable earnings production of say $10m within the medium term, then surely your rational, contrarian investor can see the value in striking a position now when near peak-pessimism is priced into the business. The business traded at $85m market cap today at one point. At $10m profit, that’s a multiple of 8.5x for a GLOBAL business holding inventory that underpins its market value by probably 2x.

Not sure about everyone else but I can see how a case for a long term investment at these levels could eventuate into a multibagger for myself. I agree with NatNicNak that perhaps management could’ve made some different decisions but it’s easier said than done for us retail holders who don’t operate the business. We can only judge to a certain extent.
I am backing management to turn this bad boy around within 18 months.

Not intended to be advice to anyone, only a reiteration of my own thesis to myself, which acts as a reminder to me.