Ann: CUP Announcement - Acquisition of Count Financial, page-26

Investing in any business is always a confronting tug of war between risk and opportunity. Mature businesses, start ups, disruptors and small caps chips all have their story, the unwritten chapters of which could all make investors laugh or cry.

CUP is no different.

The new acquisition has a mountain of execution risk, regulatory risk, market risk and contingent risk. That is why the price is 80c.

At 45c - 50c in April/May, the stock in my view was fundamentally under valued based on what they then had. The Count Fin Group deal is a genuine game changer with massive upside potential and a corresponding level of accompanying risk. There is no way anyone can predict the extent to which the indemnity is adequate or not, or whether the trailing commissions will be unrecouped by the new remuneration models.

I believe consolidation of the financial services industry is a certainty. Smaller (profitable) practices will be swallowed up by bigger players with the compliance systems and processes demanded from the industry. CUP will be distracted by the Count transaction, which is a bit of an issue for me. Nevertheless, they are extremely well positioned to come out at the other end of 3 year build a very profitable company.

GFC 2.0 may stuff up this plan. I am roughly thinking back end of 2020/early 2021 will see a re-rating of all risk assets, and it could be very ugly for everyone including CUP and its clients.

Barring that, I see a significant upside in CUP over the next 12 months as they integrate systems and extricate the poorer Count members. There is a high expectation of a good retention of good clients, essentially acquired for free. That's the opportunity.

The business assimilation and new pricing model roll out process will take time and as the negative livewire article suggests, could back fire on CUP. That's the risk.

There is so much that needs to unfold here and no way of fast tracking it.

If nothing else can be said, serious investing can rarely be considered boring.

GLTASH