Good afternoon,

ASX200 continues to recover from the recent pull back and is now back trading above 6000 once again.  Reporting season is now largely over, with over 70% of companies having already reported.  It’s been pretty even on ‘beats’ and ‘misses’, but there has been some big price reactions.  All considered, our companies, in totality, look to be in decent shape.


Upcoming IPO
I’m really proud to announce that Seneca will be supporting Cadmon Advisory and Bell Potter in the initial public offer of shares in The Data Exchange Network (DXN will be the ASX code).
DXN design, operate and own modular data centres (DC’s), providing a similar service to that of NextDC (NXT).  Using their patented modular design, DXN construct these centres 4x faster, 6x cheaper and on revenue yields c.30% higher than the competition.   The company is raising $16m to build two DC’s in Homebush (Sydney) and Port Melbourne (Melbourne), with each expected to generate c.$9m in NPAT, per annum, at capacity.On the board is the former CEO of JB HiFi, Terry Smart and the offer has been corner-stoned by Ellerston Capital (backed by the Packer family).Scheduled to list on the ASX on 30 April, I don’t think I’ve ever been more excited for the listing of a new business and it’s certainly the best IPO I’ve seen since ZipMoney (Zip was technically a backdoor listing but you get the idea!). As my loyal clients know, I don’t do IPO’s every day, despite seeing plenty of deals each year.  It’s fair to say I don’t stick my neck out for small businesses unless I truly believe in their potential.I’ll be providing details of the offer, as well as a copy of the Prospectus to interested parties tomorrow.  If you would like to know more, please reply to this email with your name and phone number (if I don’t have it already).

New Interview
I caught up with former world champ and fitness entrepreneur Will Tomlinson recently to hear about how he’s made a dent in the highly competitive fitness industry.  I reckon you’ll see a whole lot more Tribute boxing gyms opening up across Australia over the next few years.  You can watch the full interview on our YouTube channel.  Whilst you are there, do me a favour and subscribe!

With a number of really large stock price moves this week, I thought I’d spend some time on the stock specifics.

A2 Milk (A2M), Altium (ALU) and Appex (APX), Old Media (NEC, SWM, FXJ) and the Travel sector (CTD, FLT, WEB) all did well last week, essentially all surprising to the upside in terms of revenue growth (The Three A’s), not being murdered (Old Media) and increasing margins (Travel Sector).

Old Media
I kind of get the old media rally.  TV numbers have improved a bit really recently, I can see why people might think ‘this is the bottom’, I get it.  Unfortunately, they are probably wrong in the long run.   “Making TV” has just become too easy, too cheap.  The cheapness of high quality camera gear, the availability of ‘creative’ and desire for people to watch ‘reality’ rather than ‘fiction’, over saturation of ‘news’… there’s just so few reasons to watch TV with ads anymore.I take myself as an example.  I’m not a big TV watcher but on Sunday I took a bit of time to just ‘veg’ on the couch.  I watched a game of basketball on the NBA website that I subscribe to for the season (Minnesota Timberwolves are my team).  I do this by plugging my Microsoft Surface Pro into my Sony TV with a HDMI cable.  Using the same cable, I watched a short documentary from the Complex website and then I watched the new Chris Rock stand up show on Netflix.  No ads.  No traditional TV.  In fact, my TV is just a glorified monitor these days.  It’s main input is my computer.Does that mean I don’t watch the West Coast Eagles on Fox Footy?  Or Claire doesn’t watch MAFS?  Of course not.  Does it mean 70% of my total screen time is now on a mobile device and ‘on demand’ – yep.  Does that mean that I consume advertising in different ways, in different places and that subsequently, the demand for TV’s ‘product’ is in structural decline… yep.

What to do about it
In my mind, because the barriers to ‘creating content’ across all media have come down,  I like businesses with high barriers to entry, where it’s hard to compete.   So why not invest in the infrastructure of ‘content’ rather than the ‘production’ of content, and benefit from the upside without the ‘oversupply’ dramas.  This is why I like the data centres business.  Look at NextDC’s (NXT) performance last week as exhibit A.  Data centers cost quite a bit to build traditionally, the best ones are ideally located.  Tenants are sticky and demand is growing exponentially.  These centres are the railroads/airports/tollroads of the modern era.  They are the basis for which all of life is now conducted.

Battlers
The maker of the Sukin brand of organic cosmetics, BWX Limited (BWX) has found a bit of trouble trying to amalgamate its numerous acquisitions, with the wisdom of some of their spending coming into question.
Market-darling Wisetech (WTC) missed on the markets lofty expectations, which was pretty easy to forecast given the founding CEO sold shares before the result…reckon he knows the business better than your broker.  #followthemoneyVocus (VOC) CEO Geoff Horwarth has hung up the boots after significant scrutiny – there was a petition going around for his removal and share price has bounced 4% today.Elsewhere, Domino’s Pizza (DMP) continues to de-rate and most others making the list just reported mediocre.  Blue Sky (BLA) is probably a victim of its own success with a good report but nosebleed valuation.
 

Have a good week,
LL


*  The information contained in this email is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.