Jimmy C / ThunderheadRe .....”I have to confess I'm a bit...

Jimmy C / Thunderhead

Re .....”I have to confess I'm a bit confused how you can be incessantly bullish (even up to as recently as a few days ago) on RUL, and then dump on today's news.”

Firstly, anything I ever share on a stock stems from financial analysis. Unlike many, I seldom refer to a Company’s prospects based on the ruling share price or share price movements. In my world, I get two opportunities a year (the release of HY and FY financials + accompanying narrative) to revisit my investment case. We all read different things into financial reporting and on the assumption that, by and large, the ROI on one’s personal investment matters, I have chosen to exit RUL and look to allocate the funds to an alternate investment. Nothing sinister. After the half year results, I upped my 12 month forward valuation from $1.56 (through memory) to $1.61. Re-running my calc’s this morning yields a very similar number for the next 12 months. So with the opening SP this morning at $1.25, RUL present an estimated return of 28 % over the next 12 months. Considering the risks of an SP retrace due to further COVID-19 disruption and/or other macro events/ considerations as well as the opportunities presented by current volatility, I believe 28% is beatable with equal or less risk. What’s more, I get to Bank a tidy return having paid 57 c (16 months ago).

Finally, what was the biggest surprise this morning ? RUL have issued several announcements during the first half of this CY pertaining to TCV build, with no mention of any COVID-19 drag on the rest of the business. Most Companies have provided these updates and in the absence of this, rightly or wrongly, I interpreted that there was no material impact. The results tell a different story. The Outlook as provided carries these uncertainties into FY2021.

The Positives as I see it. The transition to Subscription over Perpetual is well underway. The carry was well aligned with my read and provides a wonderful platform entering FY2021. Cost containment is evident and my old argument on R&D spend is playing out. And Matthews’ comments on the path to improved profitability says the plan is in tact. Just the timeline has moved. Did he say 2 to 3 yrs ?

Back on the watch list for me.

Take care, the both of you.

Rokewa