Still here in spirit
@Goodman!. I am carefully following the story of this company as it evolves, but currently from a back seat role. No one can argue that it isn't a dynamic journey with many twists and turns!
A recap of the story so far:
In late 2018 and Jan 2019 when the share price was below 3c, I was extremely confident that we were going to higher levels, despite 5 years of previous eroding shareholder value. The underlying business was strengthening and the floundering reputation of 1ST was not justified. In late 2018, shareholder sentiment was near an all-time low (as measured by the share price) and it was this depressed environment that provided an ideal entry opportunity, with a margin of safety. The MC at the time was less than $8m (with a lower total SOI). The business was almost priced for bankruptcy, which was an absurd proposition.
Across the early stages of 2019, a turning point was hit. Klaus struck gold in 3 back to back major deals and the compounding nature of the business continued to strengthen. Moreover, the major competitor HealthEngine was caught with their hand in the cookie jar and 1ST emerged as a clear market leader ready to seize the mantle, with a trustworthy reputation from a privacy and data perspective.
In July 2019, we did hit 10 cents. Institutions were so eager to jump in off the back of the 3 back to back landmark deals in 2019 that they drove the share price higher 15% day after day until we were up more than 300% from the lows. Measured from trough to peak, across the same time period, 1ST was the best performing share on the entire ASX from over 2,200 companies. Everyone was afraid of missing out on what appeared to be the ASX's newest technology SaaS "growth" stock. 1ST Group's valuation adjusted from a 2x rev multiple to a 10x rev multiple in the space of months. During this period, I locked in 20% of my holding as profit, yet increasingly saw 1ST as a long term hold driven by a fast-changing industry.
However, to date, the level of growth that the market was expecting has not yet materialised and consequently, the share price went up by the stairs but came down in the elevator. The stock reverted from a "growth" stock back to a "value" stock. Suddenly we were back under 3c in a move that not many expected. The drop was partly driven by quarterly results and partly driven by general COVID market sentiment. It was at this level, that many savvy investors once again were accumulating. There was one more bounce to come with history repeating itself. The share price climbed 100% in a day, as was the case off the back of the Medibank announcement when 1ST showed impressive speed to market and released the telehealth platform.
I tell this story for a few reasons:
- Busiess is tough, fierce and challenging. Unfortunately, no one wants to say it, no one’s proud of it, but this is a capitalist society, a capitalist system and with capitalist rules and it is survival of the fittest. It is a tough world out there for small-cap businesses. It takes courage and commitment to run a business like 1ST. The reality is that it is very challenging to turn a profit in the business world; that is the reality of the game. In the long run, under perfect competition, no company makes an economic profit. If there is money to be made, new firms will enter the market, increase supply, drive prices down, and thereby eliminate the profits that attracted them in the first place. If too many firms enter the market, they’ll suffer losses, some will fold, and prices will rise back to sustainable levels. Fortunately, 1ST has a variety of competitive advantages and the number of providers has been consolidating as the industry starts maturing (with only 3 major groups remaining), but the competition is evidently still tough.
- The journey of 1ST Group is not yet over. Current sentiment is low among retail investors but this story is only just heating up. To quote a Pom, It is not the end of the end. It is not the beginning of the end, but it is perhaps the end of the beginning. The management team may be understandably disappointed that the elevated share price was not retained and grown upon, but they will not give up without a fight. A higher share price is important because it allows for growth by acquisition. The share price is ultimately the true KPI. These folks don't strike me as the sort that will rest on their laurels, they are working to secure a foundation that will reap rewards in the years to come. Every setback is an opportunity to come back stronger. Take a look at RAP, the number of bounces you will find is more than popcorn in a microwave. This is almost the norm for the microcap space, I suspect there may be some more bounces to come with 1ST.
It has been a long journey so far. Individuals like John Plummer, when factoring in the length of investment are significantly down. Particularly so when you consider the opportunity cost of the investment over the time period for IPO holders. However, I think JP is more than smart enough to know that this is not the time to give up. Sometimes it is darkest before the dawn. It is in human nature to overestimate in a one year timeframe, but under-estimate in a 10-year timeframe.
Success is not final, failure is not fatal, it is the courage to continue that counts.
Good luck holders and good luck 1ST Group, society is better with this company in it.
T.E.P.
