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TCN 5.6¢

Hi @stayer interesting... 21/12/2016, 21482330

  1. Hi @stayer interesting comparison with ARA and I agree this is about trusting the board to look after their own investment.

    I think @splash137 made a good point previously that a buy and build strategy is not that easy with software. Other industries lend themselves to rollup strategies pretty well - telcos being a good example where you effectively buy a sticky customer base and get marketing/admin economies of scale. I find it interesting that people often laud management teams in this sector when it seems to me that they just have an easier task.

    One of the problems with acquiring software companies is the products require constant development and if the vendor was previously primarily responsible for this then it might be tricky replacing the capability. Culture clash is a bigger risk too as it is important to keep the employees (dev team in particular) happy for the same reason.

    Overall, Urgent and Statseeker have been disappointing so far and ERST has been solid but with no growth prospects. But I'm inclined to give David Nelson more time as he's only been in the job for less than a year and as you say the interests of the board are well aligned.

    Also, at these prices they only need to get one of Urgent, Statseeker or an acquisition firing for this stock to deliver excellent returns. If they don't then I feel the downside risk is well protected by the current performance of the businesses in the portfolio. That's a fairly compelling equation in my view.

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