Sent: Saturday, December 02, 2000 10:42
AM
Subject: Re: [sharechat] Advantage Q1
Result
For the presentations made to the AGM by
Greg Cross and Evan Christian go to their web site
Typical Advantage hype that says a lot about the world but
not much about the real performance of ADV.
I always enjoy reading ADV releases. Brillant speeches
though and ones I will put in my folder to use when my boss is in the crap and
needs some quidance how he can present his case.
Included in the speeches a good lesson in how software gets
developed and the proverbial name dropping. Fancy disagreeing with Bill Gate's
views. I couldn't understand what Bruce Mackay was getting at the other day
when he said we all couldn't use calculators. But bringing Warren Buffet
and baked beans into the speech was masterful.
Don't get me wrong. I admire a lot of the things that ADV
are doing - that is why I show an interest in their activities. I have never
owned any ADV shares but regular chatters might remember I was tempted at 300
but analysis showed 200-250 a better entry point. At 225 interested again but
a few more disasters and you really had to lower expectations to 150 to 175.
Those levels came and when looked at again you really had to assess ADV at 100
(or less)
Evan Christian might say that 'The business is in a lot
better shape today, when the share price is $1.35, than it was nine months ago
when the share price was at $5.60' - but at the end of the day less is
coming through to the bottom line. Tremendous sales growth in Q1 but when you
take into account amortisation not much profit. Reading between the lines
quite a lot more 'restructuring' costs and they have to face up to writing
down flyingpig.co.nz.
I am always wary when the officers of any company say that
that they will be cash flow positive for the year - without mentioning
profitability. A revised sales expectation but what about a revised earnings
figure? Share valuations need some EPS expectations - negative?
At the end of the day the ADV share price will reflect what
levels of sustainable profitability they can achieve.
On this basis the current price for ADV is probably still
too high. The current price also reflects ADV inability to deliver on promises
- read through all the annouincements and get a feel for that. I would like to
be invested in such a company - but ADV not for me at the moment.
But I'll leave the last word to Evan Christian - (he knows
more than me)
In view of that I would like to
state my personal view – and I stress, this is a personal view – about the
market. At current prices, I think ADV stock is ridiculously undervalued by
the market. If you think that the Internet will change the way business
operates, if you want to gain exposure to the digital economy, this is, I
repeat, a great time to consider buying shares in Advantage.
The company has a very clear
vision of where it sits in the market and a coherent strategy for delivering
on that. It has a sound customer base and is a clear market leader in each of
its four business units. All the things that you consider important when
making an investment decision.
The business is in a lot
better shape today, when the share price is $1.35, than it was nine months ago
when the share price was at $5.60. At times like this, the madness of the
market amazes me. Warren Buffett may not be a tech stock investor, but he
makes some good points: when the local supermarket discounts baked beans, it’s
time to stock up and buy more. Now’s the time to stock up on
Advantage.
Peter
See IRG research reports
