Shawn Burns is Solve the Riddle

 LOVISA FH24—Glamming the world As part of my top 10 holding series I report on the above. The result showed a strong top line and very strong GM performance in what is a difficult trading environment, sss -4%. The top line benefitted from new stores overwhelming some cyclical weakness, mainly in Australia the most mature market. Interest/lease expenses were higher and costs were generally higher due to growth and also some underlying cost pressure. Given the outlook for the business and the assumptions necessary to make a reasonable return from these levels the critical questions remain around the extent of store rollout, ie how many and to a lesser extent how fast, as well as the related ongoing economics of new store rollout. These issues above all others will determine the investment case, imo. Given that what did the last result teach us, China and Vietnam were entered as new markets, and how these evolve, especially China will be a big swing factor. The Chinese mark...

 PSC Insurance—FH24—A bit soft but solid enough As part of my top 10 holdings series, I report on the above. The result was a little below my expectations although the reasons were a mix of operational and tax. The thesis for this holding is that insurance broking and to a lesser extent the agency business is relatively stable and that a reasonable acquisition program carried out by skilled management can add value. PSI is smaller than many of the listed peers, potentially offering better growth and potentially a long-term option of an exit. There are many similar models around the world with track records of value being added. PSI concentrates on lower-quality targets, so some volatility can probably be expected but so far, that has not become an issue. The result saw the company upgrade u/l ebitda for the full year 2-3%, but that was probably expected. The tax rate increased as the UK increased its corporate rate from 19% to 25%, which I probably should have picked up and...

 ADYEN FY23—New generation Payments Platform There is little doubt that beyond the “rails’ businesses in payments being V and MA, the other players face a difficult, competitive, and dynamically changing environment. There is a race to the bottom in margins with technology constantly evolving, competitive advantage looks hard to maintain. Global payments are also a massive market. Those who can gain some advantages are likely to gain significant volumes although the sustainability of those returns can be unclear. ADYEN is a new operator, developed by experienced and previously successful operators in the field. Built off a single integrated platform (no third parties) with the ability to integrate different payment methods and handle cross-border and complex payments it is truly the best in class, but also the most expensive. With technology evolving the legacy providers are potentially caught, counter-positioned where the need to change fights the fear of disrupting yourself...

 BRG FH24—how different? The revenue growth of 2% was low, as the market was subdued and buffeted by the Bed Bath and Beyond bankruptcy which brought about discounting. BRG decided to hold gross margin and therefore suffered some volume loss. All geographies increased GM. Despite that inventories which have been a cause for concern fell and working capital was released reducing net debt to very comfortable levels. The result saw softness in the core, more mature and cyclical markets, offset by new products, and new geographies. Cooking (air fryer) and coffee drove revenues, new geographies increased 70% off a low base. Outlook ebit growth 5-7.5% slightly below estimates, mainly due to lower revenues. FY24 should be clean overall but BBB will impact fh/sh mix. Kleenaid reports are now reported by Whirlpool , look at these. BRG is confident that new products and geographies will drive growth in 2025 and 2026. They sacrificed sales through low promotional activity to hol...

 CSL FH24—Losing My Religion Part of my top 10 holdings series First a bit of history on CSL. Around 2001 the IG market went into meltdown, all players suffered as oversupply tipped the market bringing low IG prices. The market then consolidated with CSL playing a major part in taking out Behring. Since then, supply has been rational. Demand unexpectedly increased driven by extra usage and new indications. These tight s/d conditions built a hugely successful business. Secondly, what did CSL do with all that cash? Allocated it wisely through R&D largely built on using the excess plasma supplies to create high-margin specialised products. The much-vaunted last litre economics. For many years CSL built on these favourable market conditions and spent wisely to perpetuate more growth. Where does that leave us now? There have been two significant acquisitions, Seqirus and Vifor. The IG market remains one of the best you could wish for, despite the C19 poleaxing, while the R...

 CAR GROUP FH24 – Acquisitions so far so good As part of my top 10 holdings reviews, I comment on the CAR result. There have been significant changes for CAR over the last couple of years. Total assets have increased from $1.9b to $4.7B, with a like increase in equity. The main contributors have been the dual acquisition of Trader Interactive in the US and Webmotors in Brazil. Cleverly, CAR did these acquisitions after having an existing equity exposure so that some higher level of due diligence was available. After a few years of solid but lowish growth, the last three years have seen an acceleration. see pg 8 of CAR FH24 presentation :( The interesting question is what is driving this growth and is it sustainable? The core Australian business of a car-selling website has shown solid double-digit revenue growth and improving margins over this whole period (ex C19), however, the group growth was not reflective of this performance. Several missteps in tyre reselling and ...

  THREE THINGS THAT SURPRISED ME My reading and listening schedule is big, I listen and read a lot! No Netflix for me! Most of what I come across is entertaining but not of much worth, some is incremental knowledge, which is great, and a few things make me stop and think and potentially change the way I do things. The last category is rare but worth the overall effort. Three recent things that made me think. Research Effort In the book Richer Wiser Happier by Will Green, there is a chapter on Buffet/Munger clone, Mohnish Pabrai. In a throwaway line, it states that he picked up GM as an idea in various 13F’s and then spent 6 weeks researching the idea. That six weeks caught my attention. Sure, I have built up six weeks and maybe a lot more on stocks I have followed for decades but 6 weeks of effort on a new idea? No way. This made me think that I was undercooking my efforts and that I should be more persistent in uncovering facts and not give up too easily. It also made me won...

  REA Group—Fh24—No prayers necessary “If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And  if you have to have a prayer session before raising the price by 10 per cent, then you've got a terrible business. ” WB As part of the top 10 holdings series, I put down my thoughts on REA post-FH24 result. A strong result with revenues up 18% and NPAT up 22% well above my estimates and requiring upgrading of numbers for the full year. Having said that I was expecting a weak showing on the back of the softer property market, which has now turned, the result exhibited the strength of the franchise. Since I was expecting a cyclical rebound in 2025 my valuation doesn’t move much. From a valuation perspective, almost the whole story is based around the dominant Australian property portal. We continue to see the trends that have supported this company for some time, those being the progression of clients up the dept...

 NICK SCALI FH24 RESULT The company guided to $40-42m and came in with $43m. Revenues $227m were a bit softer than I was thinking but cost control through optimisation and falling logistical expenses made up the difference. GM improved from 62% to 65.6%, about the same as 2H23. Well run good cost control. The six months to June saw $224m in revenues but in a seasonally weaker period. The company stated January up 3.6%pcp, continuing Q223 strength. Q1 soft. The LT store roll targets look to have been moved up for Plush 90-100 (maybe im wrong here), NS stays at 86 stores. Taking the midpoint of Plush and assuming 5 years to execute and similar size stores would add 8% pa to sales, which is meaningful and a core of the thesis. Looks to be a bottoming in sales but is dependent on the broader spending environment. The debt from the Plush acquisition continues to be paid down. $20m paid this half, $28m to go, overall $4m ND. Mentioned consumer sentiment could be improving. I ...

 EVOLUTION AB- Leader in Live Casino This post is part of reporting on my international stocks, which I know less well than the domestic shares held, so will attempt to write on all of them. EVO is not a top-10 holding. EVO is predominantly a B2B business with it clients being casinos, some of the largest in the world. the company creates games that are held in casino studios and either white labelled under the casino name or in EVOs name. C19 saw the business accelerate in what is an established trend of casino customers wanting to play remotely. EVO is a leader in live casinos and the business is built on a scale advantage from a network of studios around the world. Some are in low-cost countries that service many countries, due to regulation, others require studios built in the market, like the US which is more costly but a barrier. EVO other advantage, although potentially less enduring is game innovation with a huge portfolio and constantly enhanced. Note no European...

 PNI FH24—Gaining traction Fund management is a tough business, and many investors would do well to move on to something else. The reasons I hold this investment are twofold. One it is growing and has a proven track record of execution, secondly, I don’t mind having market exposure in a bear market and waiting it out. What you don’t want to happen is that the investment disappears in that waiting time. I don’t think that will happen to PNI. The results were nothing exciting on the reported numbers, basically flat.  However, imo that is not the way to look at a business that is accumulating value in the underlying investments. The services PNI provide are cost recovery. All profits are equity-accounted profits. Value comes in growing the underlying businesses. The accounting is funny so may be put in the too-hard basket. Another factor is that PNI specifically points out the cost of growth to the firm and highlights where that spending went. The growth cost was -$7m in th...

 ADVANCED MICRO DEVICES –The Tiger by the Tail Broadly my international investing strategy is to accumulate quality stocks at reasonable prices. These will be financed by an existing exposure to an international ETF. The companies I would like to acquire would be leaders in their industry. Where does AMD fit into this strategy? AMD is not the leader in semiconductor design, that company is NVDA, especially in GPU’s, maybe AMD is a contender in CPU’s. The truth is I stuffed up NVDA by selling the stock after I entered at a reasonable price, attempting to time the market. NVDA is now much higher, I am left with AMD. That said AMD is no slouch when it comes to eps growth. Analysis of AMD is a little complex. In the US the difference between GAAP and non-GAAP earnings is mainly due to SBC (share based comp) and amortisation of goodwill. Interestingly, one is a real expense (SBC) and the other is not, both are significant numbers for AMD making the analysis a bit complex. The othe...