3 thoughts on “Update No. 321 – as at COB 31/03/19

  1. The Real Christian says:

    Hi there Tony. Given your recent commentary and frustrations on Locality Planning Energy Holdings, I was interested listening to renowned financial journalist Alan Kohler AM via the nabtrade investor series platform in mid-February nominating Bidenergy on his buy/watch list.

    Another player in the energy space and offering a niche difference, in the 15 months leading up to Alan’s commentary, BID’s share price went from 5 cents to $1.60 (3200% if my maths is correct) and in the seven weeks following it has crashed to 82 cents.

    I’m sure Alan would have done his research, but I would like to hear your perspective on the prospects on this company and the reasons for the dramatic slide coinciding with Alan’s comments or has it been a ‘natural’ correction in the share price no one had foreseen?

    • tony says:

      As I have mentioned in previous newsletters, we purchased a modest position in BID in late 2017. As mentioned in the newsletter, BID as a robotic process automation (RPA) business has the potential to be an incredibly valuable business if they successfully capture a good portion of their potential market. With this said, the range of potential outcomes is enormously wide and as such it was extremely difficult to pinpoint a reasonable fair value for BID. As such (and as we said we would in the newsletter), we adopted a ‘maximum portfolio size’ approach to the holding which has led us to trimming 74% of our position as the share price was exploding higher.

      There has been some recent ructions at the board level for BID that have caused some of the share price optimism to deflate, but if they continue to successfully execute from an operational viewpoint, the business could be much more valuable than today, the difficulty is probability weighting the outcomes which is why we’ve taken the portfolio approach we have.

      LPE is a much simpler prospect (with not nearly as much upside potential), if they keep delivering growth and the unit economics of the business don’t deteriorate, LPE will be considerably more valuable than the market pricing today. The difference is, if you assume both managements perfectly execute, LPE has nothing like the upside potential of BID, but a good deal less execution risk from their current position in our estimation – Tony

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