11 thoughts on “Update No. 312 – as at COB 30/06/18

  1. Mark Taylor says:

    Hi Tony
    This is more a comment rather than a question seeking feedback.
    I am concerned that your time spent building the zero fee co-operative (whilst an admirable endeavour) would detract from the main focus of identifying, analysing and profiting from new opportunities.
    regards
    Mark

    • tony says:

      Understandable Mark, but in truth, very little of my time will be involved, I communicate with these investors in the nromal course of business. Five minutes at the end of a conversation about an idea we might execute in a couple of years time is not distracting.

      When launch time comes (at least 2 years from now), there may be a little more involvement, but it will mostly be a matter of introductions to the type of people who will help with the launch or wish to invest.

      Once a few funds are running, we will likely appoint some staff, but I will not be directly in charge of that, someone else will be overseeing operations – Tony

  2. Christian says:

    Thanks for the comprehensive and transparent update. I’ve not followed KPT for a while and I only own it via my investment with EGP. I seem to recall that if the preferred wharf is not approved, that the the business is still viable with the alternate location. Is this still the case ?

    • tony says:

      There are alternative places for the wharf, but the best location identified is Smith Bay. The timber will come off the island one way or another, the issue is how economic the method is. Barging would be the weakest economic alternative and would generate cashflows that would make the current price reasonable. That’s not to say the share price wouldn’t suffer in the event the wharf is not approved. It is hard to imagine the South Australian government would be so shortsighted though – Tony

  3. Daniel says:

    Hi Tony,
    I love you blog and hopefully will one day be able to invest with you. I’ve been reading about UOS in your FY18 Performance Letter. I have two questions:
    1. I understand your thesis as its presented in the report, but are you worried about it being a value trap, and if not, why not? It’s rarely traded close to NTA, so are you expecting that you will yield market-driven capital growth in the share price or simply ongoing compounding of the NTA at mid-teens and expecting that the market’s rating against NTA will remain relatively constant? The dividend yield is quite low.
    2. Morningstar is showing market cap of $323M (0.68 cps) as at 10 July 2018 with 500M shares on issue; however their FY17 annual report is showing 1.3B shares on issue. What am I missing?

    • tony says:

      I am not in the least bit worried about UOS being a value trap. Businesses that create wealth on the scale UOS has aren’t really my definition of a value trap. Our investment being a success is not predicated on a return to NTA or better, that would just be the icing on a fast-growing cake.

      Morningstar and some other data providers mistakenly calculate their market capitalisation from only the ASX listed shares. A large portion of the stock is listed in Singapore, where the stock also trades. The 3B’s make clear where the various components of the equity are listed – Tony

  4. The Real Christian says:

    Hi there Tony. Congratulations on your FY18 Performance Letter. It gave a great insight into your operations and future vision of EGP. You mentioned the rise of Amazon within your letter. I would like to hear from a fund manager’s perspective if such a company had ever registered on your stock picking radar since its foundation in 1994 through to now and what you’d look for into the future. It’s interesting to note that it has only recently delivered a solid profit predominantly based on its web services offerings as the retail arm continues to lag somewhat yet all the hype has led it’s founder Jeff Bezos to the richest man in the world status. Your perspective would be appreciated.

    • tony says:

      I’ve long admired Amazon and around 8 or 9 years ago, I could even have created a valuation based on normal investing principles that might have made sense. I have no idea how Amazon is being valued as it is presently. Circa $900b doesn’t make valuation sense on any basis I comprehend. Revenue multiples, cashflow multiples, earnings, none of it.

      To be fair, I can’t make Netflix or Tesla stack up either.

      Bezos is a visionary, but it would be a miraculous effort for him to justify the current Amazon valuation. We prefer to invest where the unlikely component of an investment is the downside rather than the upside – Tony

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