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$12.14 corporate travel management limited

VGI short, page-68

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Fishinnick

22,660 Posts.

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13/05/19

22:07

Post #: 38545606
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Originally posted by manny100: ↑

Hi croasian, I agree with your valuation comments. The early part of the VGI report has several slides out lining the very, very high valuation, EBITDA returns and its margins compared to its peers. Had I have known that when CTD was in the $30's like some directors I may have lightened a little as well.
Still I think VGI saw those values and returns and developed a strong mindset that they cannot be true so something sinister may be afoot. So they have interpreted reports etc in a way that supports the mindset. This is common and partially subconscious. Most of the report is based on 'I reckon this because of that'. The issues raised by VGI have been explained. The mindset is so strong that VGI missed/not realised that issuing shares at high valuations (see VGI report on valuations) has effectively bought businesses at massive discounts. CTD are masters of acquisitions. They look for businesses that are good at selling, have good TTV but are hopelessly inefficient at converting TTV to EBITDA.
Another example of a simple but 'how obvious' explanation that VGI missed is in the 'ghost offices'. VGI spent 58 or so pages blasting CTD about the ghost offices not realising they had unwittingly unveiled CTD secrets to success.
And here it is...………….. CTD just did what they do well. Went about quickly converting to online. From memory about 80% of sales in Australia and Europe are now on line. And yes part of that process dealing with legacy sub offices they do not need They just missed the small detail of updating their website. But whammo a quick move up in EBITDA. Its so obvious no one thought of it.
They are all simple explanations unless a mindset has developed. Some of these I have outlined in previous posts.
The big test for CTD will be the Lotus Asia acquisition. Another business great at selling with $A1 billion in sales with an inefficient tiny $A5 million EDITDA. These are the type of businesses they buy - VGI missed that. How long will this take to boost EDITDA? But it will happen. The first half report showed 3 months of Lotus EBITDA contribution and CTD explained that it had dragged down the Asia result.
Relying on organic growth alone will see good growth but it may take a little while to grow back into a comfortable level settling in the mid $30s (spikes excluded). If they keep acquiring businesses similar to those in the past they will continue with very high growth rates.
CTD kept the market informed and answered the issues raised in the report. They provided a couple of forecast affirmations. They probably need to provide at least one more before reporting.
EY confirmed the method and discount rate used for impairment calculations. In any case why would you write down businesses that are making way more than when you bought them?
The notion that companies should ignore or not respond to a negative short report is plainly wrong. In these litigious times you never know when you get hit with a class action or you need to issue for compensation for a lost significant client or failed acquisition that can be sourced back to a report. The Courts are pragmatic and understand that the market is just like the insecure lover that needs to be constantly reassured. If you don't respond, show concern and reassure the market you will not get much sympathy from the Court.
It will be interesting to see whether the potential Capita acquisition fell through because of the VGI report. We do not know. It would have been a perfect fit for CTD who may have converted TTV into great EBITDA - the VGI report actually confirms CTD's great return record.
Ironically if there is an action of this nature determined in CTD 's favour VGI has unwittingly provided a guide to the Court as to how to determine compensation (returns, values etc verified by VGI). One other major error that VGI made was that they allegedly did not present the report to CTD for comment before releasing it. That would not carry any sympathy. As I said not only has the VGI report provided guidance for any compensation it also unwittingly provides support for the business model by unwittingly unveiling CTD's secrets to success.
A good CTD result not necessarily at the very top of guidance may leave VGI a little red faced and a bit nervous opening any mail that looks like it might be from a solicitor.
The issues raised in the report have simple explanations or can be shown to be not exactly what is portrayed. CTD has openly admitted to their 'stuff ups'. Not amending their website and dropping the patent word. CTD are guilty of inattention to some detail but that is about it.
Its a good chance we may see a test of the lows of Nov'19 as sentiment is shot at the moment. While the SP is down I doubt we will see an acquisition as that is one of CTDs value secrets that is no longer a secret! One thing the market will be watching from this coming report is the level of debt.
SUMMARY:
CTD is increasing significantly the EBITDA of businesses they acquire so they are increasing the value of these businesses.
EY correct VGI's misinterpretation of cashflow and show that Working capital increases in line with TTV.
CTD is or was valued very, very highly and has great margins (way higher than peers) as per the VGI report.
Apart from the above the VGI report is somewhat off the mark
The report and surrounding negativity (including Press articles) could be the source of significant a fall in sentiment and the share price
CTD acquires TTV which has inefficient conversion to EBITDA and moves quickly to online transactions to greatly boost EBITDA
CTD relies on the high valuation (and SP) to buy these businesses at an effective discounted price which is great for returns and EPS
The significant SP fall will cause CTD to get lower value from its acquisitions.
CTD may have to cease acquisition discussions until the share price recovers. This may take a lot of time?
CTD may have recently 'lost' a major acquisition opportunity due to the fall out.
If CTD can demonstrate that it has been damaged by the report in anyway including lost opportunities that can be sourced to the report it has an obligation to its owners to seek redress. That will include future losses as a result. CTDs value is its margins and SP value - Maybe VGI has killed off CTD's Golden Goose - no more golden eggs? How much was the Goose worth? We may find out?
Given that there is probably more than some chance of litigation I think its best I do not post on this matter going forward - until the journey forward is clear at least. Its been fun though. I must begrudgingly admit to enjoying Joe's articles. They are cutting (with a chainsaw) but amusing and demonstrate a way with words we all wish we had.
What will be will be and its all just wait and see, It all just may fade away in time just like everything else in markets.
Cheers

Expand

Wow!

Why didn't you know the valuation metrics when you was long through the 6 weeks it was above $30? You had same info as the market and VGI, naturally the directors would know more, but now you say if i knew it was overpriced i may have lightened. No one rings a bell Manny, one has to move with time and keep that pencil sharp 24/7.

This mindset topic is interesting, i think i struggle with it at times or have done but i know im getting better at questioning oneself along with disciplined internal patience......less of a bull at a gate so-to-speak. I know one thing for sure though, if VGI have mindset issues they wont be around for long. I came accross this article the other day i found very interesting and actually agree with alot of it, its mindset related.
https://premium.telegraph.co.uk/newsletter/article1/is-our-fate-decided-the-moment-were-born-why-free-will-may-be-a-necessary-myth/?WT.mc_id=e_DM1006845&WT.tsrc=email&etype=Edi_Edi_New_Reg&utm_source=email&utm_medium=Edi_Edi_New_Reg_2019_05_09&utm_campaign=DM1006845
So i can see where you get your mindset views from.

You also call CTD masters of acquistions along with master of the travel business globally, you seem to think they never buy a dud or have any problems with any acquistions and double, triple etc profits in short periods of time to extent of producing double the margins of any other global competitor because it has some magic sauce 7 billion other people haven't been able to make! Thats a KFC secret recipe if ive ever seen one.

I don't understand the law, i just have principles embedded and unlike you i don't think CTD has much on VGI and view it as a smokescreen.
I also think companies should respond but not like CTD, in my view CTD should have given a response that eliminated any doubt, if they had given full disclosure on the important points the SP would be back over $30 if everythng is how you see it. CTD's rebuttal didn't satisfy all the market thus the $25. A couple things you didn't mention with VGI's approach to this hole thing was that VGI said it contacted CTD a month before they released the report (in the 30's), VGI also told ASIC what it was going to do and they released it on a Sunday (no spooking the market during hours). VGI seems to have been mindful of any sensitivites or whatever the proper wording is. They are not a shorter making money out of fear and panic.

Fish

CTD Price at posting: $24.64 Sentiment: Sell Disclosure: Not Held
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Last $12.14		Change 0.210(1.76%)		Mkt cap ! $1.776B

Open	High	Low	Value	Volume
$11.92	$12.23	$11.82	$8.944M	739.7K

Buyers (Bids)

No.	Vol.	Price($)
1	782	$12.14

Sellers (Offers)

Price($)	Vol.	No.
$12.22	1816	2

View Market Depth

No.	Vol.	Price($)
1	782	12.140
4	13626	12.130
1	1752	12.120
2	3707	12.110
3	5725	12.100

Price($)	Vol.	No.
12.220	1816	2
12.230	7308	2
12.250	14143	3
12.260	3643	1
12.280	3643	1

Last trade - 16.10pm 03/09/2024 (20 minute delay)

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