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Deep value investing: a growth stock set to skyrocket
Impression Healthcare (ASX:IHL) is our main deep value play right now. It trades on the Australian Stock Exchange, with an enterprise valuation (market cap less cash plus debt) of roughly AU$11 million at 2.2-cents per share. We have plenty of skin in the game, across multiple accounts. Here’s a smaller account to show our confidence level (dated 6 March, 2019):
One analyst holds close to $50,000 in the company at current prices. That might not seem like much. But it makes Trading For Millions different from everything else on the internet. We put our money where our mouth is, before writing detailed analysis on companies. Plus, our goal is to turn a reasonably small amount of money into a million dollars.
Sure, some people will say we’re selling into every rally with our other accounts. Let them ― we’re not concerned. The blog won’t grow on the back of poor stock write-ups. No one would read our research and our brand would get destroyed overnight. That’s not something we want. Plus, we’re not in the business of providing stock recommendations or financial advice.
It’s that simple…
Trading For Millions is a hobby blog. Take it or leave it.
Collectively, across our analyst team, we have a large sum of money
invested in Impression Healthcare. The goal is to make 5-10 times our original investment by years end. That sounds ridiculous, which is why we’ll analyse all future major announcements and provide open disclosure on any additional buy and sells going forward on the blog.
The background story
To start, when we got involved with Impression Healthcare one year ago, the company was a mess. It was selling mouth guards, which is boring. The business is far sexier today, as you will read below. That said, our friends thought we were fools when we got involved.
“Why buy a mouth guard business?”
“Mouth guards are a joke”
“Good luck making money”.
We certainly copped it!
Unfortunately, while we thought the company would grow more quickly when we got involved, we later found out there were major internal issues. The business was mismanaged, with too many unnecessary expenses. Multiple quarterlies failed to impress the market and the share price couldn’t gain any traction.
That said, with significant news flow over the past few months,
the business model has changed significantly today. One good announcement could send the share price sharply higher.
You wouldn’t think it though…
The share price remains depressed.
Its barely changed over the past year.
In this case, while we invested a small amount of capital to test the waters last year, we loaded up the truck this year. Given our experience, we strongly doubt the share price will remain this cheap for much longer. Yes this a biased view. But, with everything happening behind the scenes (see below), the share price looks seriously primed to take off soon.
The driving force ― management
The old management team was replaced last year.
Fresh blood was installed and the clean-up process started. The new team went to work and cut a fair amount of waste from the company, while streaming its focus.
Alignment Capital’s Troy Valentine deserves a pat on the back for a most of this work. Valentine is the Chairman and has more than 25 years experience across stockbroking, corporate finance and capital markets. His decisions and vision have positioned the company to grow exponentially over the coming months.
Peter Widdows was also instrumental in the turnaround story, mind you. He’s a non-executive director and has provide significant guidance to the company over the past year.
Widdows has a phenomenal track record.
He was the CEO and Managing Director of H.J. Heinz Company Australia between February 2003 and October 2008. Heinz Australia’s sales trebled, with net profit growing by 5.5x, during his tenure. From what we hear, Widdows joined Impression Healthcare because he wanted to turn around Impression Healthcare for fun.
Huge things are happening behind the scenes.
Alistair Blake (Executive Director) & Joel Latham (Chief Executive Officer) are turning the dream into a reality. The two men are deal makers, with significant marketing and development experience. Blake and Latham don’t spend their days lunching or playing golf either ― they are focused on building a real company from the ground up.
Glenn Fowles ― the company secretary ― also deserves credit for the turnaround story. The former Contango fund manager, with decades of experience, helped clean up the old company’s mess with Troy Valentine.
The management team are working hard for shareholders, and have all put their money where their mouth is at higher prices than today. That’s exactly what you want as a shareholder. It’s also what’s needed to send the share price sharply higher.
We don’t think there’s long to wait either…
The makings of a real company
Impression Healthcare is the third cheapest pot stock on the ASX, as at 7 March:
During January, the company officially received a medical cannabis license to ‘possess and supply’ scheduled substances, including cannabinoid medicines in Victoria, Australia. The company has arrangements to import, export, and distribute cannabinoid medicines from the Department of Health. Impression Heathcare can sell them under the Special Access Scheme (SAS) and through the Authorised Prescriber Network (APN) in Australia.
Indeed, despite the above news, the share price has barely moved!