LPE - Locality Planning Energy Holdings

[galumay]

Most patient holders from the pre consol days would break even at around double the current price.

I started buying a couple of years ago at = to $1.30 precon. I have averaged down to an average of $1 so not too far off being in the black!

 

[Klogg]

You maybe right with the actual sales side of it, but things like the extremely stupid consolidation and what I have seen of management's atitude to suppliers, customers and employees concerns me - but I have a fairly large position because I do think the downside risk is heavily outweighed by the opportunity.

I don't get it. What's wrong with consolidating the number of shares?

For the sake of calculation it made things much easier. I for one appreciated it

 

[galumay]

I don't get it. What's wrong with consolidating the number of shares?

Because more times than not the price falls heavily (as it did in this case), whether its just an anchoring thing I dont know, but a much higher SP seems to give it much more room to fall!

For the sake of calculation it made things much easier. I for one appreciated it

What calculation is easier? You own x number of shares at Y price regardless. If nothing else its a PITA because you have to reprice all your existing parcels and change the size of the parcels.

 

[kenny]

re Anchoring or human nature; In the same way oddly enough, it seems like a share split often drives the SP upwards.

 

[Klogg]

Because more times than not the price falls heavily (as it did in this case), whether its just an anchoring thing I dont know, but a much higher SP seems to give it much more room to fall!



What calculation is easier? You own x number of shares at Y price regardless. If nothing else its a PITA because you have to reprice all your existing parcels and change the size of the parcels.

Calculating based on 251m shares was a larger denominator, lol.

Not doing something because the price goes down is a bad reason not to do it

 

[PZ99]

I think they should've done it much earlier in 2016 when people were buying the promise rather than the result.

 

[galumay]

Not doing something because the price goes down is a bad reason not to do it

Ok, I will play, because I am bored! Your comment seems much less thoughtful than your usual high quality content Klogg!!

So, you are saying doing something because the price goes down is a good reason to do it?!

Fraud, lowering profits, raising costs, over paying for an aquisition, lowering quality control....!

 

[Klogg]

Ok, I will play, because I am bored! Your comment seems much less thoughtful than your usual high quality content Klogg!!

So, you are saying doing something because the price goes down is a good reason to do it?!

Fraud, lowering profits, raising costs, over paying for an aquisition, lowering quality control....!

You don't commit fraud because it's illegal. Nothing to do with share price reactions.

Just like expensing something rather than capitalising it if given the choice. You lower reported profits, which lowers the share price, but you improve cash flow (less tax paid).

Similarly with acquisitions - they usually get the investment community existed and temporarily raise the price. But again, the share price is a bad reason to do it.

It should be purely about the business, regardless of what the price does.

 

[galumay]

It should be purely about the business, regardless of what the price does.

Ok, that gives your original comment a context that makes more sense! I can agree that there are some actions that drive share price down in the short term, but improve the business in the longer term.

On face value your comment just made no logical sense to me.

 

[Klogg]

Ok, that gives your original comment a context that makes more sense! I can agree that there are some actions that drive share price down in the short term, but improve the business in the longer term.

On face value your comment just made no logical sense to me.

Fair. It was very badly explained lol. I would have picked it up too, had somebody else written it.

 

[PZ99]

It's been a long time since I've seen LPE doing this - is this a breakout ?

 

[galumay]

Its a change in price! From my perspective I am happy to see a convergence between price and value, if the results for the full year are consistent with expectations then LPE will probably attract significantly more attention as it beds down profitability and growth.

 

[Klogg]

Its a change in price! From my perspective I am happy to see a convergence between price and value, if the results for the full year are consistent with expectations then LPE will probably attract significantly more attention as it beds down profitability and growth.

When companies are just becoming profitable at very high rates of growth, there's a wide range of possible outcomes. So the valuation one comes to can vary hugely.

In my mind, this is still a no-brainer. At $45m and a fairly sticky customer base (average contract length about 7 years from memory), it'd be hard for these guys not to provide an earnings yield of at least 10%.

Then, if you strip away the extra sales staff, etc., your margins grow. Not that I'm suggesting it's worth doing, but the 'maintenance' level of spend is lower than the last 4C suggests. (Remove any M&A investigation expenses too)

Add to that, the company is proposing growing revenues (run rate) by over $100m (using AER revenue figures per customers quoted by the company), and GP by about $15.4m. They're growth figures, not absolute, using the company's forecast (see recent Market Presentation). FYI, total revenue (run-rate) is forecast at ~170m and GP at ~36.4m (using same Market Presentation and revenue/margin figures quoted by the company).

Even if they miss those targets by 20%, they're still in a very strong position. And recent sales suggest they won't miss them (SME growth for the quarter has been ridiculous).

Low cost provider coming through with the goods.

 

[galumay]

Management competence remains the biggest risk IMO.

 

[Klogg]

Management competence remains the biggest risk IMO.

Interesting. What makes you say that?

 

[galumay]

We touched on it on the previous page. I have also seen some of the CEO's behaviour and commentary about suppliers, employees and competitors - not consistent with my values! Also shareholder communications have been poor at times and poorly timed. There is history in the early days of the business which other investors tell me stops them from being invested. (before my time). Finally I was less than impressed with the response I received when I raised some of my concerns.

Regardless its still a significant position for me both in my personal portfolio & the SMSF because I think the risk/opportunity spectrum is asymmetrically biased to the opportunity side.

 

[Klogg]

We touched on it on the previous page. I have also seen some of the CEO's behaviour and commentary about suppliers, employees and competitors - not consistent with my values! Also shareholder communications have been poor at times and poorly timed. There is history in the early days of the business which other investors tell me stops them from being invested. (before my time). Finally I was less than impressed with the response I received when I raised some of my concerns.

Regardless its still a significant position for me both in my personal portfolio & the SMSF because I think the risk/opportunity spectrum is asymmetrically biased to the opportunity side.

Would love to know more about supplier and employee treatment that you mentioned.

Agree totally on the comms. They need help here. Then again, any of Lev Mizikovsky's companies have the same issue, but his ability to deliver shareholder returns is not in question.

This is now a 6% position. Consider I have 8 positions on total and it's not very big. But then again, ANO makes up about 60%...

 

[galumay]

I will PM you.

 

[Klogg]

In my mind, this is still a no-brainer. At $45m and a fairly sticky customer base (average contract length about 7 years from memory), it'd be hard for these guys not to provide an earnings yield of at least 10%.

Then, if you strip away the extra sales staff, etc., your margins grow. Not that I'm suggesting it's worth doing, but the 'maintenance' level of spend is lower than the last 4C suggests. (Remove any M&A investigation expenses too)

Add to that, the company is proposing growing revenues (run rate) by over $100m (using AER revenue figures per customers quoted by the company), and GP by about $15.4m. They're growth figures, not absolute, using the company's forecast (see recent Market Presentation). FYI, total revenue (run-rate) is forecast at ~170m and GP at ~36.4m (using same Market Presentation and revenue/margin figures quoted by the company).

Even if they miss those targets by 20%, they're still in a very strong position. And recent sales suggest they won't miss them (SME growth for the quarter has been ridiculous).

Low cost provider coming through with the goods.

The language I used there is a little scary (bold). Opening myself up to missing important details.

I revisited the thesis and it checks out from what I can tell. Concerned that SME forecast went from 850 to 3500 for FY19, and there was no market sensitive announcement to state as much.

Cost to simply operate (i.e. not sell) is still a little hazy. Hard to split out what costs are M&A, sales and what is operations.

 

[galumay]

Well caught, Klogg! Its always a battle to keep those heuristics at bay.