This is so great to see the share price continuing to go up for...

This is so great to see the share price continuing to go up for long term holders as it has been a long time coming....as much as I sit here thinking how much more I could have made after making the mistake of selling to early at 3.9c after sitting on the investment for 3 years....lol. Still happy with my return though.

The company valuation is now building in a fair bit of expectation around the considerable improvements in margins so hopefully they can live up to the expectation. It can be a challenging industry to drive up margins quickly but I do have confidence in the management of Cirrus to continue a growth trend. I think there is value in running some peer comparisons in this sector. Say DTL who have been around for a long time and very successful in this space who are also enjoying growth, their half yearly revenue for first 6 months was $644.4m with managed services providing $111m of this figure and this area of business contributing $39m of a total $82m gross profit. Net profit before tax of $9m for the total business and a market cap presently around $290m. PE is around 20 times. DTL gross margin on services is around 35% and margin on product is only around 8.1%.

At a very rough back of the beer coaster summary, compare this to aspiration targets set by CNW and just taking the $50m in services revenue at say 35% gross margin, this equates to $17.5m gross profit from services plus say $6.1m from product sales of $75m = $23.6m gross profit. Take out current employment expense alone of $22m (annualised first half FY19 not adjusting for any one offs or new staff requirements to support growth) and there is $1.6m left for other admin expenses before looking at profits.

Whilst of course there are so many other factors and synergies which CNW can build, it does show the continuing challenge of driving material profit margin growth in this sector which will ultimately feed the share value.



Whilst I think a PE of 20 times is definitely suitable for CNW and potentially higher if they are kicking goals, I do feel that the current value with market cap around $50m is on the upper end but hopefully for the holders it continues to surprise as it sat undervalued for so many years.

Good luck to all and I definitely want to see this company succeed