These three announcements will nicely shift the sentiment meter...

These three announcements will nicely shift the sentiment meter into the positive range. GEM's performance wasn't really the problem, as the HY15 results indicated (profit margins, internal growth, etc). GEM also maintained about 4x EBIT in its acquisitions (except Sterling) and (according to analysts) operates in a highly fragmented market ripe for consolidation. No wonder GEM's consensus target price has remained around $4.50 over the past several months.

Also, just a guess, but the Anchorage takeover of Affinity may change the landscape in GEM's favour. Anchorage might curtail centre buying (or, at least, stop overpaying) and may even divest some centres that GEM would pick-up if vacancy rates and other efficiencies can be improved. See my earlier post on this (also see the recent critique of Anchorage's tactics with the Dick Smith deal):
http://hotcopper.com.au/threads/ann....2594798/page-3?post_id=15999447#.VkTUft8rKEI


So, what weighed GEM down?
1. The former board chair gave the appearance of demonstrating poor moral judgment, both in her past executive activities (e.g., allegedly hiring actors) and in recent events on which the takeovers panel made a ruling against GEM and associates. Short sellers, childcare conglomerate haters, and a couple of finance writers fed on these incidents, which drowned out more substantive information about GEM's performance.

2. A few so-called "financial writers" made inaccurate and overly simplistic statements (including today) about the "so-called "roll-up" strategy that GEM (and other firms) has been applying.
Example "A": Two articles in Feb15 stated that GEM's activity is to "buy unlisted childcare centres at an EBITDA multiple of around 4-5 and roll them into one entity that it can sell to shareholders at a far higher multiple" (fact:  management buys these centres on behalf of its owners -- shareholders -- for about 4-5x future year EBIT; management never acquires an asset that they "sell" at a profit to its owners). See my earlier post on this woeful piece of financial writing:
http://hotcopper.com.au/threads/un-...rticle.2465101/?post_id=14819749#.VkTH098rKEI
Example "B": These writers claim GEM has grown only through acquisitions. Yet see slide 7 of the HY15 presentation, which shows like-for-like centre growth within centres acquired in each year. These are not just fee increases at work!

3. Concerns that GEM was paying too much for Affinity. Fairfax repeated in several articles the warning from an "unnamed" "former investor" that GEM was paying too much, but none of those articles mentioned investment firm analyses that the acquisition was accretive (before Anchorage upped the price) and had other benefits. See my comments on these research analyses:
http://hotcopper.com.au/threads/ann....2565115/page-7?post_id=15744525#.VkTXMd8rKEI