Back when the SP was booming I undertook extensive research partly for an investor,it wasn't an instant trade but a long wait for the opportune time to borrow shares and short the stock,there were plenty of shares on offer for borrowing with cheap fees as many brokers were bullish with short term targets of over $2 and beyond a share.This put a shiver up me as the market is run on sentiment until it isn't. Speaking to several brokers I tried to study their rational on being bullish, everytime it came back to ,economy of scale so they can work cheap,purchasing power and mostly the narrative of the Mum&Dad shops have had their day,all was partly true but not entirely my studies found many independent shops were very well equipped had very attractive buying conditions and were more nimble they were also mimicking the business model of AMA and Cap Smart without having too many chiefs. The time to short came when Malone bailed out I don't know the true reason why he did but thought he was a prudent and skilled businessman who can stand back and look in .Also I was fascinated with their debt I heard some wanted it larger any private equity person would as they like running with a large pool of cash. Part of a study I'm undertaking now is adding up every Cap Raise they have had and how much credit they were given off suppliers before invoicing and the roll over of finanes with aquisitions (this may be impossible but some idea can be formed).I want to calculate their true earnings with this in consideration as now they don't have those same advantages but in fact are faced with higher employment costs like everyone else.One area to look at is leases which are very expensive in Australia also with large properties come very large rates and overheads so a 200k to lease property per year for eg could have 60k rates just as a ballpark number One thing I'm certain of there's little chance of AMA disappearing even if a worst case scenario of entering administration it would be bought out and broken up like Nationwide.I've always thought Service King would be looking at it as they are expansionary and have entered China though the details of those operations are sketchy. These companies operating on volume with small scale profits are hard to follow when they only release two financial reports out a year, with finance guys running it I remain intrigued
AMA Price at posting:
59.5¢ Sentiment: None Disclosure: Not Held
