Thanks for the nice words
@hdhtin - very kind of you to say. Yes, I have indeed entered KTD -- looks like people are keeping a close eye on my *** account.
23 cent entry with further buy orders in the system at 22.5c and 22c to capitalise on any further price drops. I am generally in a process of increasing my cash percentage holding at the moment, however,
this opportunity was just too good to pass on.
Just having a look back through the KTD threads here now and there has been some great analysis and discussion provided from many posters already, particularly
@Transversal &
@TripleTop. Also great to see
@madamswer &
@ValueSearch here as well, both of whom are very experienced investors.
From a product perspective, I have reached out to a number of friends and family who have provided some reflections on the product range for me (I am in the UK at the moment). Feedback has generally been very positive. Personally, I am a perfect customer for a low-sugar, low GI option, such as the Tonik range. I like the broad market and consumer trends, which KTD will hopefully be a beneficiary of. Great tailwinds.
Ultimately, what captured my eye most though was simply the
extraordinary low valuation for a business which is growing strongly (both inorganically and organically). When you find a business
about to hit cashflow breakeven and trading on circa
1x run-rate revenue, it is normally a very good combination for shareholder wealth creation. I also think this company will be a very good candidate as an
acquisition target in the next 12-36 months.
After making steady progress quarter on quarter and focusing on a strategy to move into higher-margin products, it is evident that the next quarter is likely to be CF+ on a net operating cashflow basis. It will take some time for the profits to flow to the bottom line (NPAT) on an annual basis, but the share price re-rate normally occurs before this point; when investors can see the inflection point and the path to an NPAT profit -
I believe this has just happened.
The last ingredient in this excellent mixture is of course the reason the opportunity exists in the first place. I have low levels of doubt at this stage that
as soon as the (somewhat digruntled ex-leaders - i.e. the founders) have exited their position, we are off to the races. I always like to know who is on the other side of the trade to me. And knowing that I am likely scooping up the shares of a former board director who resigned on the 1st of June 2020 - Mr James Gong (noting also that Vivienne Cheung has a major position) - provides me with the confidence I needed to build a reasonable position. JG's shares escaped escrow on the 18th of July 2020.
Smart people like are loading up at current levels.
From a risk perspective, the most important aspect to watch will be
management execution on the organic growth trajectory and the push into higher margins, which will be associated with economies of scale. I am not concerned about dilution, because as already pointed out by Madamswer, the conditions for these performance shares are very conducive to overall shareholder value. I think there is a margin of safety in entering at these levels (circa $60 million MC).
I personally like to trim my positions as they climb (given I am a full-time private investor and do not have a traditional paycheck), but I think there is at least 2-3 bags here for the more patient longer-term investor. Looking forward to watching the journey play out with you all.
T.E.P.
