Breakout

Guys,

Looks like we have a breakout today on strong volume compared to that of late, in anticipation of the Half Year results announcements shortly.

Plenty of reasons to love this business right now, and I will share my thoughts below -

The stock price has traded in a small range for some time now and has provided smaller investors like myself the opportunity to build a meaningful position at what I think is a very low entry point of $1.46 with a market valuation of $410-$420m.

- Trades at a much lower multiple to global peers in chemical manufacturing space
- Still a founder-led business, with Simon Henry holding >50% of equity - this means Simon Henry will continue to run it like his own (which I dont mind at all) and will place the utmost importance on every single acquisition
- Proven long term historical growth from organic areas and from inorganic areas - the company has advised the market not to expect the same growth rate year on year , but even if they can continue to grow EBITDA at more than 15-20% p.a. then I will be extremely content.
- The environmental solutions business will be very appealing to new investors and I am sure DGL can win new business in this space thereby growing their revenue exposure there
- There is no business like DGL listed on the Aussie market
- Extremely high barriers to entry for potential competitors

The list goes on and on. Let's hope they continue to make the right acquisitions.

If they try to increase exposure globally (into the US as they have mentioned) I hope they make the right acquisitions to ensure they don't 'Diworsify' as Peter Lynch barks on about.

Having listened to the 2022 AGM and also the results presentations what stood out to me is their ability to forecast earnings, and with how much conviction they have done so over the last couple of years. Simon Henry pointed out the fact that the CFO never misses, hence the tiny range they give for FY23 earnings guidance yet again, this time of $70-72m. Even at $450m market cap where it sits today at $1.58, this is extremely cheap on a number of metrics.

Today, you can pick up equity in the business at a multiple of FY23 earnings slightly above 6x, which is extremely low for a business that's proven historically how quickly it can grow.

For a business that will try to increase market share globally, I believe once the broader market sentiment improves in months and years to come, I wouldn't be surprised to see this trading at beyond 20x earnings..Imagine if they grow EBITDA too...

I think if Peter Lynch was running an Aussie equities fund then DGL would be his primary holding!

• All the best to all involved, looking forward to seeing if management can (continue to) execute.