Ann: LaserBond Dec 23 Half-Year Performance Summary, page-18

In response to Michiba, I agree the 40% interest is cautious. I note we can increase it to 51% in three years' time. This gives LBL management a pretty big say in what is happening at Gateway Group in the interim. It's not a bad situation, really.... We've acquired a presence in the key WA market by taking on a business which is "strongly EPS accretive" (according to LBL) from day one. Any new Laserbond-related products and services should grow Gateway's existing revenue. It's set LBL back: cash on hand, and a small dilution through extra shares issued. No extra debt required; no capital raises; no cuts to the dividend. It's strategically, and financially a smart move.

I disagree that taking the logical move to expand into the WA market through M&A -- where the bulk of Australia's mining activities is located -- is "a signal that organic growth is slowing". By this logic, no business would ever expand into any new market; or conduct an easily-digestible, bolt-on acquisition.

I am also puzzled by the comment, "I just don't know who the future buyers of LBL stock are". They'll probably be the same type of people who bought Macquarie Telecom, Nick Scali, DeGray, Baby Bunting, or any other ASX300 / ASX 200 stock when it was smaller than it is today. I can never understand the motivation for these type of hit-and-run posts by non-holders who post on a lot of different stocks, and rarely hang around the forum more than 24 hours. I think portfolio allocation is important when buying small caps. I haven't bet the proverbial farm on LBL -- about 1% of my share portfolio is now LBL, with a view to increase it further over the coming weeks -- especially around 70 cents; which is a substantial de-risking. I note from a cursory look at the LBL five year chart on Google, the lowest we've traded since October 2020 is 61 cents, so despite the recent announcements, I'd argue the stock looks decent value on a forward P/E multiple as long as the anticipated growth materialises.

LBL came on my radar before Christmas. My main concerns were share price valuation, the viability of the "$60m in revenue by 2025" target, and how realistic growth into WA and the US would be. Since then, revenue has increased, the Gateway purchase has been announced, the $60m target is looking solid, and US expansion is on the table. Importantly for a new buyer of shares, the ~20-25% cheaper share price was too tempting for me to ignore. I have also been concerned about management's willingness to expand and grow. Let's face it: the only reason one takes on more risk to buy a small cap stock is for growth, growth and more growth! We are constrained by highly skilled labour availability, and wage expense; and how much growth is there really, in an industrial company with high costs of setting up heavy machinery to operate each site? Most of these questions have been answered over the past week.

I like how our spend on R&D over the past six months is the highest it's been in the past six years. I see LBL's I.P. as an invaluable part of the business. Great companies which grow strongly each period and are market leaders (Aristocrat Leisure comes to mind) do not scrimp on R&D and thus maintain a competitive advantage. Speaking of which, I obviously have no idea about the family/working relationship dynamics, but it would be nice to see the previous director / co-founder brought back into the fold in some R&D consultancy-type role. He's obviously highly intelligent, experienced and knowledgeable about the subject matter. There is nothing to stop him from buying shares on-market to re-build his LBL holding either, which was previously sold. Enough said.

Madamswer is quite correct about the Cost of Doing Business being erratic over time too. I note a supplier issue has potentially deferred about $2m in revenue into the second half of the year; and 2H is usually stronger than 1H for LBL, so I am expecting the August result to be impressive. I wonder if some of that CODB is related to paying for air freight, related to the supplier issue, and hopefully will not repeat this half. I agree with smokeyd that it should have been released to the market. If management has the time and forethought to be responding to Hot Copper posts from the original co-founder, it surely could/should have mentioned this earlier.

The Curren & Co analyst report (26th February, available at https://www.laserbond.com.au/investor-relations/analyst-reports.html) is encouraging with its $1.35 price target. As is the latest presentation just released by LBL. Curren has decreased its revenue forecasts over the next few years slightly. I am not too worried about that. Analysts' targets come and go and can change on a whim.

Points I found pleasing from the 8/3/2024 presentation are:

Page 8 -- "Our intent is to have a facility in North America early in the 2025 calendar year."
Ibid -- "Our strong balance sheet, with continuing low levels of net debt, supports our expansion strategy, both organically and acquisitively."
Page 10 -- "LaserBond has recently invested in additional Sales team members to deliver continuing organic growth"
Page 11 -- "Whilst local recruitment is ongoing, we expect the arrival of a further 15 skilled migrants commencing from March 2024."
Page 11 -- "LaserBond has the potential for an additional $40 million in revenue per annum from our existing...capabilities." (much of this seems to relate to
an increased workforce on the afternoon shift)

Page 12 -- "Our licensing to date has generally delivered bespoke solutions...we need core equipment designs that are more cost-effective, with short lead-time manufacture. The short-term objectives for our Projects Team will be: Design, build and maintain laser cladding cells for LaserBond’s internal use as the business expands; and develop a small range of core designs that will be built effectively within a short lead time.

I see a focus here on standardisation of equipment and processes which is quickly and cost-effectively replicable as the business grows.

According to page 19 of the presentation, LBL currently has 142 staff. An extra 15 skilled tradespeople is quite an increase. I note too, that just in the past month, Laserbond's Facebook page has announced the hiring of a new Head of Projects, and a Head of Sales and Marketing.

Apologies for the long post. It's 40+ degrees here today and too hot outside to even think of leaving the comfort of my air conditioned study.