Australian (ASX) Stock Market Forum

GEM - G8 Education

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This is another one that I like.
Nice consolidation after the gap up.
Didn't get a chance to post a chart last night.

3.72 entry
3.49 stop

Not sure how much upside potential but a nice little setup.
 
pavilion103 said:
Haha that was random!
Reference to my previous avatar?
Click to expand...

Yep.

Obligatory on-topic comment - I haven't done any research into G8 Education. I find it difficult to research for a company that's constantly buying out smaller competitors and integrating them into their business model. I suspect I might have missed the boat on this one.
 
McCoy Pauley said:
Yep. Obligatory on-topic comment - I haven't done any research into G8 Education. I find it difficult to research for a company that's constantly buying out smaller competitors and integrating them into their business model. I suspect I might have missed the boat on this one.
Click to expand...

I'm all technical mate. I'm completely clueless on the research side of things! A strong couple of days.

Back to the important stuff.....
I hope the Cats youngsters take off like GEM has the last couple of days!
 
pavilion103 said:
I'm all technical mate. I'm completely clueless on the research side of things! A strong couple of days.

Back to the important stuff.....
I hope the Cats youngsters take off like GEM has the last couple of days!
Click to expand...

A Cats supporter in the middle of RAdalaide. Would have been fun in 2007. :)

I suppose I should get around to updating my avatar. :(
 
I don't understand this business, it constantly raise equity and debt to buy child care to grow earning Return on capital and equity is fairly ordinary and below par compared to other business.
And plenty of operators more than happy to sell it them

Sound like ABC learning model not long ago....this one seem to do a reverse of ABC learning it raises equity instead of debt but I notice it start to take on debt :)

When I don't understand something I don't touch happy to miss out any gain like hundred of other business I don't invest in.

Just out of interest can this stock be short? any broker lend this stock out?
 
ROE said:
I don't understand this business, it constantly raise equity and debt to buy child care to grow earning Return on capital and equity is fairly ordinary and below par compared to other business.
And plenty of operators more than happy to sell it them

Sound like ABC learning model not long ago....this one seem to do a reverse of ABC learning it raises equity instead of debt but I notice it start to take on debt :)

When I don't understand something I don't touch happy to miss out any gain like hundred of other business I don't invest in.

Just out of interest can this stock be short? any broker lend this stock out?
Click to expand...


Maybe IB?
I'm not sure!

I can't get my head around that stuff!
All I know is that the chart looked good for this one.
When it looks bad I'll exit.
 
I admit that I haven't done much research into GEM, but based on what I've read and heard about their business model, there will come a point when their current strategy doesn't work as well. Already I believe that one listed competitor (Affinity) offers single centre owners 4.1x EBITDA, compared to GEM's 4x EBITDA. That has the capacity to change GEM's business plan if centre owners believe that they can leverage GEM against Affinity when selling out.

I try to hold for the long-term, so I'm reluctant to buy into GEM at this stage because I'm not clear what GEM's long-term strategy is to maintain growth.
 
Sounds wise.
We are coming from different approaches.
I try to identify momentum and get on.
As soon as it stops get off.
If it goes up 15-20% in a few weeks then it's a good profit.
 
McCoy Pauley said:
I admit that I haven't done much research into GEM, but based on what I've read and heard about their business model, there will come a point when their current strategy doesn't work as well. Already I believe that one listed competitor (Affinity) offers single centre owners 4.1x EBITDA, compared to GEM's 4x EBITDA. That has the capacity to change GEM's business plan if centre owners believe that they can leverage GEM against Affinity when selling out.

I try to hold for the long-term, so I'm reluctant to buy into GEM at this stage because I'm not clear what GEM's long-term strategy is to maintain growth.
Click to expand...

So they look to buy businesses at 4 times EBITDA sounds reasonable.

Those same underlying businesses then sell on the market at 24 times:eek: EBITDA when people buy GEM shares.

The disparity allows earnings accretion every time they buy another business.

But what happens when people paying 24 times EBITDA based on technical or illusionary growth stop buying?

If the price drops (for any reason) there goes your chart traders and the disparity between the market and the underlying business value starts to reduce which causes the earnings growth accretion to reduce and snowball in the reverse of what it is happening now, until no more purchased growth is feasible. There go all the earnings momentum players.

Who’s left?

Those that will pay a business like multiple for the underlying business 4-6 EBITDA (if the balance sheet isn’t too stuffed by then)

How long can it last? Don’t know – but play it the same as you would bet on a fly crawling up the wall – not as an investment.:2twocents

History never repeats (bull****) Markets are efficient (yer right!)
 
craft said:
So they look to buy businesses at 4 times EBITDA sounds reasonable.

Those same underlying businesses then sell on the market at 24 times:eek: EBITDA when people buy GEM shares.

The disparity allows earnings accretion every time they buy another business.

But what happens when people paying 24 times EBITDA based on technical or illusionary growth stop buying?

If the price drops (for any reason) there goes your chart traders and the disparity between the market and the underlying business value starts to reduce which causes the earnings growth accretion to reduce and snowball in the reverse of what it is happening now, until no more purchased growth is feasible. There go all the earnings momentum players.

Who’s left?

Those that will pay a business like multiple for the underlying business 4-6 EBITDA (if the balance sheet isn’t too stuffed by then)

How long can it last? Don’t know – but play it the same as you would bet on a fly crawling up the wall – not as an investment.:2twocents

History never repeats (bull****) Markets are efficient (yer right!)
Click to expand...

It's one of a number of "greater fool" shares on the market...

However, I think from now on I will pay more attention to these companies and invest/trade them. Once on the way up and again on the way down. I've always liked the Keynesian beauty contest analogy to the share market.
http://en.wikipedia.org/wiki/Keynesian_beauty_contest. And if one is able to apply this analogy to comapnies like GEM... it'd be pretty lucrative.

I wonder how many of those currently holding are knowingly playing the game, or are playing without knowing. This will probably determine the speed of the fall.
 
skc said:
It's one of a number of "greater fool" shares on the market...
Click to expand...

GXL is the other one. I can't wait to see that pinata pop!

skc said:
I wonder how many of those currently holding are knowingly playing the game, or are playing without knowing. This will probably determine the speed of the fall.
Click to expand...

That's what I'd like to know too. There is no ryhme or reason why a company can magically increase in value by a factor of 6-7 for no other reason than it is now owned by a public company.
 
McLovin said:
That's what I'd like to know too. There is no ryhme or reason why a company can magically increase in value by a factor of 6-7 for no other reason than it is now owned by a public company.
Click to expand...

All private businesses to some extent sells much cheaper than listed bsuinesses, and for good reasons. Reporting requirements, access to capital, liquidity etc are the benefits of being on an exchange.

But I think the biggest uplift in value is through the creation of continuing value. A listed company will have better professional management and succession planning than a small private outfit. How many small businesses have you seen that have no chance of existence beyond the current owner operator?

If the life of the private business is finite... i.e. until the end of involvement of the owner operator (through retirement or running out of steam/passion), then there is significant value in making that business "perpetual". Exactly what that magical factor should be is anyone's guess. But based on how the market is pricing GXL and GEM... it's a pretty large number!

I guess if you are an owner operator who may be unsure about continuing a a business beyond 5 years, you'd pretty happily sell it for 4x EBITDA.
 

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