hi Michael, thanks for the great writeup. enjoyed it as usual. the management seems to be capable and as you pointed, they have brand name and scale. but wondering are these factors strong enough to give them a strong moat? they are like very good sub-contractor for customers but someone with capital and the intensity could compete with them and gave them a good run for their money? As it is an order-book based business, they have to rebuild the entire orderbook each year. Just playing the devil's advocate to better understand how strong is the investment case.
Hi HP, yes I would not call this a strong moat business.
I believe you need Lawrence Chia in charge for this business to continue to perform well. If he resigns, then I might have to reconsider the case.
It's probably not an industry where just throwing capital at a problem will help dominate the market. But a nimble competitor may well take market share at some point. The fact that it hasn't happened yet suggests strong execution on the part of Pico.
Please could you clarify how you’re treating deferred consideration in valuation/ model?
I’d normally add a conservative eat if future deferred consideration to EV and then ignore its effects in the P&l whether write ups/down or sometimes one sees this in the minorities line.
It would be v interesting to know whether the global events giants (relx, Informa) are priced for a return to pre-Covid revenue/profits. Maybe the market thinks the whole sector is screwed in which case this is more of a sector bet than an idiosyncratic one.
Ah. I think your treatment of it makes perfect sense actually. I wish I would have done it your way. In my model, I assumed continued losses for FY2022 and then nothing thereafter as the contingent consideration was only contingent on earnings until FY2022.
Yes, it would be interesting to hear customers' perspective. One might be able to find their comments in earnings calls. I might see if I find anything - if so I will let you know.
It certainly is a sector bet. I believe a return to normal will come, just that the pace of the recovery is still unknown. Given Pico's balance sheet, I think you can comfortably own the stock even under the current conditions.
hi Michael, thanks for the great writeup. enjoyed it as usual. the management seems to be capable and as you pointed, they have brand name and scale. but wondering are these factors strong enough to give them a strong moat? they are like very good sub-contractor for customers but someone with capital and the intensity could compete with them and gave them a good run for their money? As it is an order-book based business, they have to rebuild the entire orderbook each year. Just playing the devil's advocate to better understand how strong is the investment case.
Hi HP, yes I would not call this a strong moat business.
I believe you need Lawrence Chia in charge for this business to continue to perform well. If he resigns, then I might have to reconsider the case.
It's probably not an industry where just throwing capital at a problem will help dominate the market. But a nimble competitor may well take market share at some point. The fact that it hasn't happened yet suggests strong execution on the part of Pico.
Another nice recovery stock, thank you!
Please could you clarify how you’re treating deferred consideration in valuation/ model?
I’d normally add a conservative eat if future deferred consideration to EV and then ignore its effects in the P&l whether write ups/down or sometimes one sees this in the minorities line.
It would be v interesting to know whether the global events giants (relx, Informa) are priced for a return to pre-Covid revenue/profits. Maybe the market thinks the whole sector is screwed in which case this is more of a sector bet than an idiosyncratic one.
Ah. I think your treatment of it makes perfect sense actually. I wish I would have done it your way. In my model, I assumed continued losses for FY2022 and then nothing thereafter as the contingent consideration was only contingent on earnings until FY2022.
Yes, it would be interesting to hear customers' perspective. One might be able to find their comments in earnings calls. I might see if I find anything - if so I will let you know.
It certainly is a sector bet. I believe a return to normal will come, just that the pace of the recovery is still unknown. Given Pico's balance sheet, I think you can comfortably own the stock even under the current conditions.