PPH - PushPay (Church/donor software.)

[percy]

Haha, thank you for your thoughts Black Peter. We might need to make "the gems are well hidden in a flood of irrelevant noise" our new tagline. Podcasts aren't for everyone

For those that listen past the 5 minute mark we discuss Pushpay in a fair bit of detail after chatting about inflection points more broadly, and I'd be interested in any thoughts on the thesis.

Hi Matt,
I listened to it a few days ago.
Can't comment on PPH as I do not follow them.
However I am a big fan of you guys,as you do great research.
Hold a small parcel of LBL, and thought Claude's comments on DDR were good,as usual.
Keep them coming.

[dreamcatcher]

Interesting, now we all KNOW what the big end of town KNEW ..............

Pushpay is to be added to the MSCI small cap index at the end of the month. Freightways, which is making room for Pushpay in that index having plunged 6 percent on Wednesday when the change was announced.

[winner69]

Last Friday on 8 December it closed at $3.46. Confirmation that it would be included in the NZX50 on Friday afternoon saw it open at $3.50 on Monday morning on the 11th and steadily track higher for most of the week as the news spread. Friday's close of $4.15 represents a 19.94% premium on last week's close on no new news other than NZX50 inclusion and index tracker funds being forced to buy in.

I like the stock and was aware they were likely to be included before last Friday so took a decent sized position which I added to this last week on confirmation of inclusion. Even so I was very pleasantly surprised by Friday's close and would have been very happy with $4.00.
The question in my mind...is it suddenly worth 20% more just because of index inclusion ?
.

Dream catcher ...that’s wow eh

If it’s anything like when push joined the nzx50 the share price will rocket ahead next week

Always feel sorry for those invested in ETFs and index trackers when losers get included in indices

[mjoass]

Hi Ogg,

Thanks for tuning in, and the thoughtful response.

"You could argue that there are 3 inflection points. Buy Pushpay at IPO, buy Pushpay at break even, or buy Pushpay at dividend."

We wouldn't consider an IPO (capital raise) or decision to pay dividends (capital allocation) to be inflection points. A fundamental inflection point is a rapid acceleration in underlying cash flows and performance. And to be super clear, this is talking about fundamental performance, not about price charts.

If that didn't come across in the podcast, I expand on it further here: https://mattjoass.com/2018/11/10/inf...int-investing/

"Can you explain to me why this company is less risky now, then it was at IPO? Other than the fact that it has reached break even, as this does not make it less risky."

Sure, so there are fewer fundamental risks to the business. A company that is self-funding is less risky than one that is burning cash because after break-even the company is no longer dependent on external capital. If capital markets tighten for any reason, a cash-burning company faces potential bankruptcy, whereas a profitable company does not.

If you consider a company that is profitable to be equally risky to one that is losing money I'd be interested to understand your thinking?

"Why would you buy this stock, at this inflection point?"

In brief, in the current half year, operating expenses increased by 2% over the same period a year earlier, while revenue increased 49%. That is extremely strong operating leverage.

Put in different terms, Pushpay added 32 percentage points of profit margin in the past year. The market doesn't give much credit for loss reduction, compared to profit growth. So when the operating leverage causes profit to tip past break-even, I expect the market's perception to shift rapidly.

Pushpay shouldn't pay a dividend for a long time. The company's internal rate of return on reinvested capital is well above their cost of equity capital, so it makes sense to aggressively reinvest.

The U.S. companies you noted are interesting. Groupon and GoPro saw their revenues decline by -6% and -20% respectively over the past year, so aren't a great comparison. Here is how Pushpay sits vs. Twitter and Snap (per data from S&P Capital IQ):

TTM revenue growth:
Twitter: 18%
Snap: 53%
Pushpay: 63%

Price/gross profit:
Twitter: 13x
Snap: 24x
Pushpay: 12x

If Pushpay were to trade on a Snap multiple, it would be very rewarding for shareholders. But that isn't required for the thesis to work out well.

Best,
Matt

[Beagle]

Dream catcher ...that’s wow eh

If it’s anything like when push joined the nzx50 the share price will rocket ahead next week

Always feel sorry for those invested in ETFs and index trackers when losers get included in indices

For what its worth I'm not going to have a wager on it this time. I think the whole tech and SAAS investment landscape has changed and going into 2019 we will see even more focus on value. Further, growth since I exited last year at over $4 has not impressed. Founder selling out in the manner he did and subsequent shenanigans over he said - she said divorce proceedings was shocking.

[mjoass]

Hi Matt,
I listened to it a few days ago.
Can't comment on PPH as I do not follow them.
However I am a big fan of you guys,as you do great research.
Hold a small parcel of LBL, and thought Claude's comments on DDR were good,as usual.
Keep them coming.

Thanks Percy! I missed your comment earlier. We're still tinkering with the format, but great to hear you are enjoying it!

[Pricey]

Glad to be well out of this stock at $4+ earlier this year. For me, first sign of danger was when customer numbers went from 7,128 as at 30 June 17 to 7,121 as at 30 September 2017.

[BlackPeter]

Trend chart just a sad picture - below all MA's I can think off - and hype generators either out of fuel or moved on. Party over?

[dreamcatcher]

[BlackPeter Trend chart just a sad picture - below all MA's I can think off - and hype generators either out of fuel or moved on. Party over?)

I'm still here swimming with the sharks who have been buying but don't always play fair in this up/down BS market. As an investor time changes one's outlook sometimes for better or worse just need to look at some others current 50 - 100 - 200 MA.

TRA MPG FSF EVO FBU HLG SUM ZEL MET HGH

Personally will wait for break-even and Xmas/Easter results.

[allfromacell]

A nice long-form interview with the CEO Chris Heaslip. Interview is almost 50 mins but worth the listen imo.

https://anchor.fm/stockmarketmovers/...2nbrg/a-a7jrm9