Ann: 1H24 Market Update, page-36

Yes, prima facie, it does appear to be cheap (somewhere around 10-12x P/E after adding back amortisation of customer relationships and software that came with the acquisitions that were made).

Trouble is, until the following two things are remedied, I suspect it will continue to remain cheap:

1.  Lack of organic growth:

All the growth in this result (and then some) came from acquisitions.  The Australian business went backwards and Europe'd margins contracted, despite recording an improved top line.  (Sure, they can blame industrial disputes at the ports and Red Sea bottlenecks, but this lack of organic growth and inability to scale well are features of the past few results, too, belying a business with ostensibly strong macro-thematic tail winds.)


2.  Liberal issuance of share capital:

This is no longer a start-up enterprise.  It is a profitable, cash-generative business which should not be the subject of shares being issued left, right and center like water.  More respect should be afforded the issued capital account. Eighteen months ago the outstanding share count was 335m. Today it is 530m, a near-60% increase.  Given the apparent undervaluation of the company, equity is currently a very expensive form of capital for this business.


They talk a great macro-thematic story, but at some stage that isn't enough; it has got to be matched with financial performance that can't be called into question.  

Another sloppy result like this and it risks being perceived by the market as somewhat of a "gunnah" company.

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