"So lots of bouquets, but the major brickback (sic) was the fact...

"So lots of bouquets, but the major brickback (sic) was the fact that they didn't make any acquisitions during the period."

Having subsequently listed to the result presentation, it occurs that - as expected - it wasn't as if management was not trying its hardest to execute an acquisition, but rather that the right acquisition and at the right price hasn't been on offer over the past 12 months.

I guess there are two insights one might glean from this:

1. Management possess the required capital discipline.
2. The market for acquisition targets is not that deep or wide.

In the case of 1.) well, that's obviously a good thing that shareholder capital is not being frittered away on acquisitions simply for the sake of it.

But if 2.) is true then that has implications for the investment appeal of the stock, because part of the investment thesis is that the company will be able to continue to consolidate the supply chain through value-accretive acquisitions.

But if the opportunities simply aren't there to do it, then that has bearing on what sort of valuation multiple one should be prepared to capitalise the company's earnings and cash flows... certainly by at least one, and possibly by as much as two, multiple points, in my view.

Specifically, if acquisition runway still exists for the company, then given its financial pedigree (strong brand resonance, track record of earnings resilience, strong free cash flow generation, 20% ROE, balance sheet in fine condition) then I argue that its a premium-to-market multiple stock.

However, of the business is ex-acquisition because of structural limitations, then I suspect the market will no longer afford the premium multiple.
Which is basically what is appears to be happening now.

Making outsized investment returns from this point, I think requires the acquisition thesis to become manifest, thereby proving the market's thinking wrong.

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