Acquisition Of 63 Premium Childcare & Education Centres
http://stocknessmonster.com/news-item?S=GEM&E=ASX&N=781424
Closed today @ $3.50 up 6.38% on the day...
Go cats!
Haha that was random!
Reference to my previous avatar?
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.
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!
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?
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.
So they look to buy businesses at 4 times EBITDA sounds reasonable.
Those same underlying businesses then sell on the market at 24 timesEBITDA 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.
History never repeats (bull****) Markets are efficient (yer right!)
It's one of a number of "greater fool" shares on the market...
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.
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.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?