My investment case for GEM, page-5

@Islay,

You are right, EVO is a relevant comparable that I omitted to mention (it didn’t show up in any stats I found about the Australian market because of its operating in New Zealand).

At a first glance it does not look particularly expensive either, at an EV/EBIT ratio of 9.8, although its current EBITDA margin is just average at 18%. Highly illiquid stock on the ASX, from what I can see, but certainly worth following given the shareholders involved and their potential for expansion into Australia.

I don’t have an answer for you regarding Affinity, a new IPO is a possibility if equity markets in general remain this strong.

Regarding revenues, the drop in revenue caused by the end of LDCNPG and LDCPDP is not going to be material (total funding as percentage of revenue was 3.21% in FY2015 and 2.33% in FY2016, basically just one year of CPI inflation), but it is important to point out nevertheless.

I agree with you that, when it comes to dealing with the issue of low occupancy rates, the main challenge for corporations is to meet the needs of the local communities. From recent communications to shareholders, and by looking at the increased levels of capex as well, it would appear that Management are at least aware of that; whether they are doing the right things or not remains to be seen.
From a GEM’s shareholder’s perspective, a comforting thing is that this is an issue for the whole sector, and the Company is well positioned to take advantage of this by making cheap acquisitions.

Regarding any changes to the structure of government subsidies, again, I’m afraid I don’t have an answer for you as to what is likely to happen. I would be surprised if a removal of the cap caused a decrease in occupancy rates, though, everything else being the same.

Thanks for all the valuable colour provided.