ACX - Aconex Limited

[Lone Wolf]

Can someone explain what's happening here? I'm not in this stock, but I'd like to understand why it happened.

The company is still forecasting profit increases. I understand that the market had priced in larger profit increases, but is this news really bad enough to wipe 45% off the company value?

Does it seem unusual that it opened so much lower rather than falling there throughout the day? I'd understand a smaller gap down by those who didn't like the news, then more selling from those who don't like the open, followed by a race for the exit as the general masses start to realise the ship is sinking. But this opened 30% lower. Did some major holders want out at open? Or was the news really bad enough that a large number of smaller holders had their shares on offer for whatever price they could get?

And lastly but most importantly, what were the warning signs? It was stated the founder/director were selling, admittedly I don't follow stocks closely enough to know this. There was also a build up of shorts, but in some cases isn't that a contrarian indicator? Anything else?

 

[skc]

The company is still forecasting profit increases. I understand that the market had priced in larger profit increases, but is this news really bad enough to wipe 45% off the company value?

Ignore the 45% ... to say whether 45% is right or wrong implies that the price yesterday before the fall was somehow "correct". As we know that is not necessarily the case.

Instead, focus on the current market cap. What market cap makes sense based on the new numbers and the trajectory of such?

Does it seem unusual that it opened so much lower rather than falling there throughout the day? I'd understand a smaller gap down by those who didn't like the news, then more selling from those who don't like the open, followed by a race for the exit as the general masses start to realise the ship is sinking. But this opened 30% lower. Did some major holders want out at open? Or was the news really bad enough that a large number of smaller holders had their shares on offer for whatever price they could get?

It opened at the high of the day and got sold almost 25% lower through the day. So clearly the news was bad enough for some. The open match volume was only 220k (about 0.1% of shares outstanding)... so not nearly enough for a major holder to sell.

It is actually rare to see something open with a small gap then fall through the day. Especially in a relatively larger stock - there are usually enough people watching and analysing the new news. If the news imply a share price should be <$3.50, for example, then any informed trader / seller would jumped to the opportunity to sell it lower on the open.

And lastly but most importantly, what were the warning signs? It was stated the founder/director were selling, admittedly I don't follow stocks closely enough to know this. There was also a build up of shorts, but in some cases isn't that a contrarian indicator? Anything else?

The build up of shorts may or may not a contrarian indicator. But an indicator is simply that... it doesn't mean they will be correct. JBH had a lot of shorts, and so did FMG. In those cases the shorts got it wrong and the high shorts holding proved to be a correct contrarian indicator. DSH and SGH also had a lot of shorts... and the shorts did their homework and got it right this time.

The warning actually happened back in August last year. The FY16 report was a miss and the stock was sold from ~$8 to $4 (it was $4 as recently as early Dec). At that time it was a small enough miss, people still had decent fate in the stock and the high PE small/mid cap was still a darling segment. Hence the share price meandered between $6-7 and didn't really plunge. Come late last year the high PE small/mid cap segment started to fall out of favour (coinciding with Trump and the rise of the resources and banks) and the stock fell quick to $4 before staging a recovery towards ~$6. The today you have news that confirmed that the "hiccup" from August may have been the start of a new trend...

The new guidance today is for 1H FY17 revenue to be $77m, vs pcp of ~$56m. In Apr 2016 ACX acquired Conject which had annual revenue of Euro 24.5m (~A$35m). Strip out the acquired revenue (say $17m) and growth is only 7%. With the full year number, new outlook of $160-165m is only 3-4% higher than the FY16 figure of $123m. This level of growth is definitely disappointing, and doesn't deserve a PE multiple of some 90-100x. Indeed, the full year forecast implies H2 vs H1 growth of ~11%... the market has been looking for >20-25% for this company.

So yes the punishment may seem brutal... but the revised guidance imply a NPAT of ~$6-8m vs a market cap of $614m at close of today. Clearly still a lot of growth priced in that are yet to be delivered.

 

[VSntchr]

I also like how ACX decided that they need to make 2 other announcements throughout the trading day. Everytime it went Notice_Received everyone was like... what else do you want to announce that you couldn't announce in a single filing?!?! There's no word limit to announcements AFAIK.

And leaves traders freaking out for those few mins until the announcement comes out

 

[Lone Wolf]

Thanks for that skc, much appreciated. Let me chew on all that for a while. I've never been too interested in fundamentals so you've given me a bit to look up.

One thing though, I'm struggling to find a reporting calendar that shows an ACX announcement planned for today (the calendars I'm finding only show either what was released today, or upcoming announcements from tomorrow onwards). But it would have been known that they were making an announcement today right? So an immediate solution to avoiding such a move for short-term traders is to check reporting dates and avoid holding over them.

 

[skc]

One thing though, I'm struggling to find a reporting calendar that shows an ACX announcement planned for today (the calendars I'm finding only show either what was released today, or upcoming announcements from tomorrow onwards). But it would have been known that they were making an announcement today right? So an immediate solution to avoiding such a move for short-term traders is to check reporting dates and avoid holding over them.

No. Today's announcement was unscheduled. ACX is not supposed to report it's H1 numbers until 21 Feb. So unfortunately it is not possible to avoid this by looking at the reporting schedule.

That's why, whenever you see someone using simple fractional position sizing / 2% rule and call something a "low risk" position which ended up being >50% of the account size, they haven't been trading long enough and not managing their tail risk.

 

[skc]

The new guidance today is for 1H FY17 revenue to be $77m, vs pcp of ~$56m. In Apr 2016 ACX acquired Conject which had annual revenue of Euro 24.5m (~A$35m). Strip out the acquired revenue (say $17m) and growth is only 7%. With the full year number, new outlook of $160-165m is only 3-4% higher than the FY16 figure of $123m.

Quick correction. FY16 revenue figure of $123m actually included $9m from Conject acquisition. So like-for -like growth forecast for FY17 is in fact ~10-12%.

 

[peter2]

A close above 4.00 puts ACX on the radar for a reversal opportunity. The gap fill to 5.40 is an acceptable target.

 

[peter2]

I've had some ups and downs with this stock, but it all ends well. Thanks to today's offer from ORCL.

 

[So_Cynical]

Up 44.2% today nice surprise and yet another takeover for me, i have lost count of all the takeovers my portfolio stocks have seen, i reckon its like 1 in 6 or 7 stocks i hold gets taken over.

Oracle @ 7.80 AUD per share, a return for me of about 95% profit...sweet, i get CGT discounting too.
~

 

[System]

On April 3rd, 2018, Aconex Limited (ACX) was removed from the ASX's official list in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement between the Company and its shareholders in connection with the acquisition of all the issued capital in the Company by Vantive Australia Pty Ltd.