Ann: Appendix 4C - quarterly, page-5

Thanks for posting this, @rodin

Just a few observations that I made to myself having read their blurb:

1. DMX manages a fund that is just $3.0m in size. Not sure how they make a living on that basis. I suspect it is almost exclusively the capital of the DMX founders that make that $3.0m figure

2. Curiously(but hopefully not ominously) they are also shareholders in a company in which I have been a long-term shareholder, namely SDI. SDI's financial performance, along with its share price, tends to be volatile over time.

3. The brokers they quote in their write-up on ZNT, namely Wilsons and Bell Potter, have ~$1.25 Target Prices. Whenever I see a broker's target price being roughly 20% above the prevailing share price, then I interpret that to be the typical default level from lazy broker analysts, without any real regard given to the real upside.

Because, given the total absence of a track record with this company, the lack of liquidity of trade in the stock, as well as the execution risks involved in its business strategy, I think that one would need to be able to envisage 50% upside potential in order to buy the stock.

Which I do.

But investing in these sorts of roll-up stories requires the setting of some very clear and definitive milestones which, if not met, require discipline to sell the stock, no matter how promising the presentations look or what the brokers are saying. Otherwise, one is simply courting trouble

For the road is littered with the carcasses of debt-fueled acquisition strategies that have gone bad.

So, for mine, the milestones that I have set for my investment in ZNT are as follows:

1. Profitability of the core business (i.e., excl.the effect of acquisitions) must not contract
2. Pay less than 5x EBITDA for acquisitions,
3. No arguments of synergy benefits by management in order to justify acquisitions.
4. Net Debt-to-EBITDA < 1.0


The minute any one of those milestones are breached, I sell.