Member Info for TheFatGeneral

at a very high level. I reckon on the current trajectory clearpay (UK) clearly gaining traction. Not hard to see how an argument can be made that it would be approx 10-20% (call it 15%) of total APT business value. Given they just spent AUD39b on APT-reckon the TSL residual stake should be worth approx 600m (or the 6.5% ex staff options approx 400m). Looking at 2pound per share approx.

My original investment thesis (i.e a relatively achievable runway of cross promoting their brands across all their distribution channels (AUS/UK etc) remains intact.) Expecting a big hit from COVID and the lockdowns and given what I've read about the UK (I'm AUS based), I'm not expecting a great xmas selling period. Even in AUS, the sales from the myer/DJ/Priceline stockists would have been impacted by the lockdowns in Syd/Mel during the key periods.

So:
Short term - I'm expecting it was a bad xmas selling season - and continued pressure on every brand to move products via D2C which makes it more expensive to sell via this method, so not much from this side either. On top of this, I'm sure the management changes will have had a few eyeballs focused on things other than developing/branding/selling our products.
Medium term - investment thesis holds and I'm happy to continue to see it out
Long term - overall I'm happy with the new management, time will be the biggest test of course, but I like that the new director has a key stake (15%), skin in the game, and the CV's of the other new director/CEO read very well. I think the medium term runway gives opportunity to reinvest back into more brands/extend the distribution so the long term can hopefully come to fruition (i.e the flywheel of new brands/distributors/products).

Overall I see a business with more upside than downside, but it will be key to sail through the corona storm safely. They still rely on one brand for 80% of revenue and a few key stockists at that (superdrug/boots), so not much left all said and done to reinvest in new initiatives each year. That said, if they can keep the ship tight and hoist their sales - plenty of blue skies lie just over the horizon. Biggest risk is they need to raise more capital (can't sell stock etc and need more working capital) - I like that it's not overly diluted and has been kept debt free/capital light)

I did speak with the chairman before christmas, one of the key questions I put was "what will Blake be able to do that Kieren wasn't" and he seemed to intimate that one of the key things they were looking for (when appointing the CEO) was someone with a good marketing nose and who will be able to drive the brands etc. Reading his CV (haven't had the chance to speak to him yet unfortunately) and I think he fits the bill. They say that the key to a successful journey is ensuring you have the right crew - I think we have it - lets set sail!

I've been following this company for a while (and have chatted with Joe) - personally I've found him to be quite receptive/good. If you get to know him and his background...it's a great amount of intellectual capital to bring. I also understand that a lot of Harris' stake was bought by Aus shareholders - and ultimately, the team that took Skinny Tan to 10m in revenue in about 5 years was the Melbourne team, so more than happy for them to continue, I see it as a positive overall.

Going forward, I feel that the underlying business is going from strength to strength. Our customer numbers/sales keep going up and the further opportunities for cross pollination of new brands (Nuthing, Charles and Lee etc) into new distributors and markets (superdrug, priceline, UK, NZ, AU, US etc) is a very impressive runway that, to me at least, doesn't seem to be too hard to execute.

I foresee in 2-4 years that we have C+L, Nuthing, Skinny Tan etc stocked into all their existing main channels (UK, AUS) (superdrug, boots, priceline, myer, DJ's etc) + a few more bits and bobs on the side (US sales, prolong). I can easily see this producing ~20m in revenue -which, if they can keep a slightly better control aka FY 19, should be getting us 3-4m in profit. A very nice multiple given the current valuation.