Ok part 2 - the brief version. Limited downside at these levels
When assessing a share price and opportunity it’s important to recognise what may be priced in and what your margin of safety could be. I will go through that in more detail in part (5) but expectations are extremely pessimistic on ACF given where the price is trading at. That is a good thing for new holders as there is more room for error.
Some stats to think about. ACF has a net tangible asset backing of 24c as at 30 June vs a current share price of 24.5c. This is very rare for trading businesses and the lowest gap in ACF’s short history on the ASX
Of the +2,000 companies with a primary listing on the ASX less than 30% are profitable
On a PE basis, ACF is in the top 3% for the lowest PE on the ASX
Amongst companies listed in the same industry as ACF, ACF trades at a +50% PE discount
Two fair questions that I will cover off in Valuation are (1) what is the quality of ACF’s earnings. Or in other words, is the “E” in PE likely to materially fall, which is what many low PE businesses face, and (2) is the large PE discount to peers and the market justified. The short answer is no, but I’ll save why for another day
ACF Price at posting:
24.5¢ Sentiment: Buy Disclosure: Held
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