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GEM - G8 Education

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skc said:
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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Of course I understand that private businesses are cheaper, but there can't be such a huge variation in valuation. It just doesn't make sense to me. I could understand it going from say 4x EBITDA to 8-10x but not to 28x. I haven't spent much time looking at GEM, but in the case of GXL, they are buying very low growth assets and the "synergies" of corporatising the individual practises seems marginal at best.

I was actually having an interesting discussion about how to value non-listed companies with my accountant a couple of weeks ago.
 
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.
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I suspect speed in these matters as with any type of overpricing/bubble/Ponzi etc deflating has to do with weather there is a change of understanding en-mass. If there is you can get caught - if the perceptions however change more slowly there should be plenty of time to slip out before the cops arrive.
 
McLovin said:
Of course I understand that private businesses are cheaper, but there can't be such a huge variation in valuation. It just doesn't make sense to me. I could understand it going from say 4x EBITDA to 8-10x but not to 28x. I haven't spent much time looking at GEM, but in the case of GXL, they are buying very low growth assets and the "synergies" of corporatising the individual practises seems marginal at best.

I was actually having an interesting discussion about how to value non-listed companies with my accountant a couple of weeks ago.
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Of course you do! :) It wasn't a direct post to teach you anything... it was more the fact that I only just realise the addition of perpetuality to the valuation and had to write down my own thoughts.

craft said:
I suspect speed in these matters as with any type of overpricing/bubble/Ponzi etc deflating has to do with weather there is a change of understanding en-mass. If there is you can get caught - if the perceptions however change more slowly there should be plenty of time to slip out before the cops arrive.
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I think these things deflat slowly. I don't doubt that any initial pop will be loud and large, but it'd probably still be quite small relative to the rise as a whole... I guess the driver is the abundance of fools and in particular those who thought they'd buy the dip and win every time. Just a general impression and I will post it up if I can remember an example or two.
 
McLovin said:
Of course I understand that private businesses are cheaper, but there can't be such a huge variation in valuation. It just doesn't make sense to me. I could understand it going from say 4x EBITDA to 8-10x but not to 28x. I haven't spent much time looking at GEM, but in the case of GXL, they are buying very low growth assets and the "synergies" of corporatising the individual practises seems marginal at best.
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ONT is the another one that plays the same game...
 
The shaky business of childcare and past lessons

DateMarch 13, 2014

Lisa Bryant


The Australian government cleaned up and paid the damage bill for one childcare mess after that spectacular failure of publicly listed provider, ABC Learning.

. The G8 share price appears to have already fully anticipated the immediate growth prospects for the company. By failing to hose down investor expectations as the share price shot up, the company is faced with having to support what some would consider a manifestly overpriced stock. It can only do this by either cutting costs or growing.

Cutting costs in childcare generally means reducing staff costs and G8 is currently close to the bone, spending just 60 per cent of its revenue on employee expenses.


Read more: http://www.smh.com.au/comment/the-s...ast-lessons-20140312-34mfs.html#ixzz2vqsf6GXm
 
Post info here if you work out a way to short it ...
The number doesn't stack up for me, the long this goes the higher your chance of making money shorting....

History will rhyme :)
 
ROE said:
Post info here if you work out a way to short it ...
The number doesn't stack up for me, the long this goes the higher your chance of making money shorting....

History will rhyme :)
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Pretty sure its shortable with IGmarkets DMA CFD's.

Personally I'd be worried to short it, the market could remain irrational with this pricing for a while yet, plus with GEM only having such a small share of the child care centre market - there is plenty more acquisitive opportunity.

With that said, I am in agreement with the reasoning behind the short :D
 
goccipgp said:
If we can pass 4.43 then 5.17 is easy .
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Why $5.17? My short term target is $4.70 based on the Wave structures. Just watching bearish divergence presently although it hasn't triggered. Longer term still plenty of blue sky ahead.

I hold.
 
Porper said:
Why $5.17? My short term target is $4.70 based on the Wave structures. Just watching bearish divergence presently although it hasn't triggered. Longer term still plenty of blue sky ahead.

I hold.
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up 57% year to date 14 and over double since 2013.

agree with all comments. this is a massive bubble at the moment. no company can grow earnings at that rate the share price is going at. Whatever growth in GEM is due to acquisitions of low 4x EBIT multiple which when transferred to a p/e of over 20x of GEM, appears to be 'growth' from a low base. But is it really? such growth is a facade. The centres are sold at a low EBIT for a reason. Also its hard to integrate so many acquisitions in the long term.

Doesn't appear to be much resistance. so will keep ballooning up till the eventual crash. Poseidon everyone.
 
This is an example of why I'm a technical trader.

See momentum and get on it.
When momentum stops get off it before a crash.
 
They now put broker forecast as an ASX announcement ..Giddy up :D

http://www.youtube.com/watch?v=XxqcmfYb0OI

Just watch closely when the directors start off loading shares....

MFS/Octaviar S8 all over again in the new bull market?
History was written less than a decade ago and people already forgotten.

Still a small fish so it may keep going a bit longer yet, market can be irrational longer than you stay solvent :)

I will watch from the side line with intrigue
 
Interesting comments and contrasting views.

Whatever our base for investing there is no doubt GEM has been spectacular.

No idea whether this will last but wish I'd bought more.
 

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