So can we talk about the Dilutive Elephant in the room? Yes we can.First of all, as Bobasteve have mentioned, and respectfully, we need to be clear on the distinctions on dilution. Yes, with any acquisitions via issuance of new share issues, existing shareholders would face dilution on their shareholding percentages. However, more importantly, we need to consider whether the acquisitions satisfied via new share issuance are value dilutive or value accretive. In the case of the 2 Singapore companies acquired, it is definitely value accretive as the companies were acquired at issuance of shares priced at AUD3c at a PE of 8.5x. Effective PE looks even better, as isolating these companies against the CI1 share price AT ACQUISITION, sets the Effective PE at below 3X! By any yardstick, whether its against the broader All Ordinaries or industry, that is cheap.As for the earnings surprise from HHC, that should come as good news to shareholders, and not construed as some nefarious intent from certain insiders.Although 2020 has been a harrowing year for most businesses, there has been some visible winners arising from a Covid strickened economy. The obvious beneficiaries are those businesses directly related to combating the effects of the pandemic, ie glove makers, sanitisers (Zoono). Indirect beneficiaries include ecommerce (Amazon), videoconferencing (zoom) etc. HHC which is in the business of personal loans has also been a huge beneficiary as Covid disrupted economy has hit the finances of many an ordinary folk and has driven the spike in demand for personal loans. Whether the surprise earnings is temporary or otherwise remains to be seen, HHC and ICS is well poised to build upon their success. In fact the positive flow of news on CI1 is emanating from the success of HHC and ICS. More than anything, CI1 should be more inclined to increase their shareholdings in this 2 companies owing to their sizable contribution to revenue and profits. In fact I believe that the strong performances from these Singapore subsidiaries are keeping the share price firm.As far as future acquisitions are concerned, if done under the climate of rising share prices AND more importantly value accretive to existing shareholders are welcome.On a not so positive note, my reservations on CI1 primarily lies on the corporate front. There has been a host of appointment of advisors, with scant details on the role of these advisors and their respective qualifications to improve the prospects of CI1. Already there has been a deluge of share options being proposed as compensation to these advisors. Without these issues being addressed and addressed clearly, I will remain on the sidelines (and many other value investors I'm sure).Disclaimer. I am not holding any shares in CI1 but may enter into long positions in the near future based on its business prospects (after my doubts on the corporate concerns are cleared) .As for examples of other growing businesses that outstripped extreme dilution, perhaps being justified 4 of years after such growth, the most telling example would be Cisco Systems during its torrid growth phase in the 90s which which was fueled by acquisitions using their shares as currency and worked beautifully for them for many many years until it didn't (still relevant today...)
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