the call: Friday 19 June

Hi, I'm Juliette Sali. Stay with us after today's episode of the call for a bonus conversation with Australian vintage CEO Tom Dusseldorb. It's a company taking a fresh approach to the wine industry. That's coming up at the end of the show. Cheers. Hi there and a very warm welcome to this Friday edition of the call we have made it through yet another trading week. Well, almost. And on Friday's often we do a small cap special and I love these ones. We still do 10 stocks picked by you with two expert guests and we take about 60 minutes or so to do it. So a very warm welcome to this episode. Claude Walker from a rich life here with me in studio. Nice to see you and Luke Winchester from Maryweather Capital who's joining us from well. Let's just call it Maryweather. I know not quite but still up the coast here in New Sepp Wells. Look, I'll start with you because you're here in studio Claude. I was talking to a guest earlier who said that small caps, the smaller end of the market, has had such a rough drop for decades pretty much in Australia. But he's a technical analyst and he actually said he sees the whole scenario changing. I mean, that's great. I can't say I agree that we've had a rough drop for decades. I think my entire lifestyle has relied on us not having a rough drop for the last decade. So, you know, thank the universe for that. But no, it's, I look the name of the game for technical trader and myself is extremely different because they're looking at short-term stuff. And like momentum, whereas I'm trying, and as is Luke, absolutely trying to find those kind of rare situations where there's a company specific event that causes that particular business to just have way more demand. And then you need to combine that with it being a decent business model. And then you get these huge multi-baggers like Luke, who's been calling SKS Technologies a buy consistently for, I don't know, since 2022 at least. And he's recently put out on his fund letter that he sold out at a last bit. And it's like $8 something now. And that's just an example of what mean he are both looking for. And so, yeah, it means that we go through some rough rough periods and the technical traders that don't want rough periods at all. Now listen, Luke, SKS, because I had a guest on earlier today as well, who reckons this one still has a lot of life, a lot of juice, a lot of opportunity left in it. Why do you sell? Did you sell it all? We did the thing. Yes, as Claude said in the recent May report from River the Capital disclosed that we've exited the final parcel of SKS. A fantastic investment for us. And honestly, I do wish it all the best. I think Matt Jinks and the team there have done a fantastic job of growing that business over the last few years. And for me, most importantly, done it without acquisitions, without dilution, and the full accretion coming through to shareholders is Claude pointed out. You've seen the share price really respond to the organic growth of the business. Look, that's how our modus operandi is, small microcapping investors. Claude and I want to find them when they're small, they're unloved, they're under research by cell side, under owned by large institutional funds, and then hand them off to those guys when they're 800 million billion dollar market caps. They can still squeeze some juice out of them. Don't get me wrong. And I think SKS can do well from here. But we want to go and find the next generation of those ones that could potentially be those multi baggers for us. Okay, let's find out if today has any of those on the list. But of course, we will start with our stock of the day, which is Electrooptic Systems EOS. It is in the defense space. It has risen to a two-week high on signing a drone contract and entering a joint venture in the Middle East. It is a defense tech manufacturer. So it has this 124 million US dollar defense contract with Generation 5 holding, which is a UAE provider of defense equipment. It's also entered a joint venture agreement with Gen 5 for the development, and manufacturing and global distribution of a high energy laser weapon. So let's get a view from our expert guest starting with you on this one, Luke, because EOS has been, you know, one of those stories that has been so caught up in this whole defense thematic. It has done so well. But there's always a lot of skepticism as to whether these contracts will, you know, result in all of the promise. Like, where are the dollars? Where are they actually going to? They've made a big acquisition as well to get into that European market. Do you like the stock? Look, we don't own the stock. Certainly in the right thematic, the doing. I mean, defense spending, you know, like it or not, and however you want to get exposure to it, it is at thematic across global markets that will be strong over the next few years simply because of the weight of dollars, you know, coming from these government contracts. EOS, you're right. Very divisive stock. One of those real battleground stocks where the bulls and bears can both point to a lot of different things at any one point in time. I agree with you. My main reservation about this business has been you go back through its history. It hasn't struggled to win big revenue contracts and have years with, you know, really strong revenue growth, but very little does fall down to the profitability line. And it always, you know, that that profit seems to get pushed out further and further into the future. And even I noted that, you know, on the research, you know, coming through before we got a stock of the day, they lost $80 million last year. Now, their forecast this year to more than double revenues is a fair chance that, you know, you can turn that $80 million loss in decent profitability this year. Can it support a two point, you know, nearly $2.1 billion market cap as we see here today? That's where I think it starts to get a bit trickier, but to be fair to them, if you win contracts like this, then, you know, you certainly go a long way to doing that. So, you know, this one contract alone today is nearly two thirds of the revenue that they'll report this year due to come through in 27 and 28. Clearly, there are line close with this Gen Gen 5 Gen V, more be out of the UAE. They took some of the recent placement that EOS did. So they're a shareholder in EOS. They've now got the joint venture. They've purchased this large order for the drone slinger module as well. So EOS, in the right space, I'll say a hold for the program that Dean, just because it's one of those ones, I'm sort of coming to it, you know, again, on some short research. I know it's one of those real battleground stocks. There was a pretty compelling short report a few months ago. I had a read of that and sort of looked at a few of their points and thought, geez, they, you know, they always do sound good, but, you know, there were some points in there. I thought we're pretty well made. But, you know, then you come out and win contracts like this. It's hard to sort of argue as well. So one that I just prefer to probably stand the sidelines for, but if you're there, I will say a hold. Okay, got it. Thanks, Luke. Now, Claude, it's difficult to get a real grip on the technology that these type of defense companies make. It's also difficult to know if there's going to be something that supersedes it, you know, from some other sort of provider, right? Well, yeah, exactly. You're stolen one of the points that I was going to make there. Now, that's fine because there's plenty to talk about with this one. I'll look, I agree with Luke's points and he's covered the fundamentals there. So I won't go over that. But I will discuss why you might want to own it, which is that it's a momentum trade right now. Australia has very, very few genuine defense companies listed on the ASX and especially not many that are really fully focused on defense. We've seen with drone shield how much that hype can just take the share price to crazy heights. Now, both of these companies are definitely in the right spot. The matter is that the new reality in any active war now, like really a lot of the technology, a lot of the countries have is a little outdated and it's far too expensive. You need cheap ways to shoot down drones. And I do anticipate that these guys will have plenty of demand for their products at least until it's proven there's something else is better. So, you know, I think Australia should be pumping this out the bushmasters and their main system is built for bushmasters that were actually useful in Ukraine, the bushmasters. So yeah, essentially, I think it's great, got a great thematic trade. So if you're a momentum trader, you know, like I wouldn't be getting off anytime soon because or like, you know, not until the sentiment changes. However, as a fundamental investor myself, someone who really does want to have a valuation backed by my estimates of future free cash flow, this one's too hard to predict for me and the valuation's just too high already. So for me, it would be, I guess, a sell essentially, but that's on valuation. And I don't think that people should always sell on valuation. I think that it makes sense when you've got a hot stock that's a great thematic. Yeah, sell a little on valuation, but let it run a little bit too is my general rule even when it's overvalued. So yeah, okay, take profits at the moment. But just because the thematic's so good, I don't see any valuation support on it right now though. Okay, got it. Thank you guys. So that's a bit of nuance for EOS. Let's get to a little bit of a rundown as to the stocks we'll be talking about in the next half hour. And that is control bionics, dimmerics, monashivf, chiro-sight for two of our viewers out there and alternate as well. All right, So I hope you're listening. Get your pens out. control biomex. This one's for Benard. It was a regular fewer. Thanks for writing in. He says at $0.7, CBL looks to be flying under the radar or is the company simply not performing. Its half-year loss was $3.6 million compared to $3.2 million in the previous corresponding period. He reckons they seem to have sophisticated technologies for disability and sport. But questions, is there enough potential momentum to get the company back into the Black soon? I don't think that it's going to make a profit soon. The reason for that is that the today, since listing, the historical revenue growth has been extremely low. So that in 2021, FY2021, they had four million revenue, which is very small. Then that would have been okay if it was growing 30% a year. Fast forward four years and in FY2021, they only did 6.1 million revenue. So that, to me, says that the growth is very slow. Whilst they are still making losses with a significant percentage of their revenue, I think it's safe to say they're not going to be profitable any time soon. I do want to say for the viewers that don't know this talk, this is actually I agree with the question that it's like it's really cool tech. This started with basically allowing people to use their eyes or essentially nonverbal people to be able to communicate and to use computers and stuff like that. They've branched out into monitoring sports people and on top of that, they're talking about moving into the rehab space. So I do think that it is actually possible in the very long run that these guys could actually build a pretty decent business because it does seem like their technology is quite good. But unfortunately right now, they really rely on governments agreeing to pay for their technology for those people that really need it. So public health care, they're waiting for an NDIS pipeline, waiting for approval and etc. So it's hard to grow quickly. I don't think it's going to get escape velocity. I don't think that the fundamentals will be there any time soon. I really liked this company in 2021 when I listed. I thought this is cool tech, but it's just having really slow revenue growth. So for that reason, you know, with my fundamental hat on, it for me would be like essentially a sales still until it gets a lot close to profitability. This is the, therein lies the problem. Oftentimes you like the tech, you like the problems that it's going to be solving or at least attempting to be solving, but it still comes down to dollars and cents, right Luke? It does and the night made that point and I want to praise him for that because he's asking the right question. There's good tech here, there's good potential here, but is the trajectory enough to get them into the black and into sort of making a profit? I came to the same conclusion as Claude. It's hard to see over the short to medium term, over the long term. It's more possible. But I find it interesting that this is one that floated a few years ago, had a brief look. And similar to Claude, you know, my understanding was that we're in that sort of neuroscience space for people who obviously had degenerative diseases and issues with mobility. They seem to have a lot of trials at the minute though with sports teams, so professional sports teams, and potentially a use case here of data tracking of muscle use and things like that with some wearable bands. So there's more, you know, it's one of those technologies that you can maybe apply to a few different areas and you're trying to find a use case. But I just come back to exactly as you said in the Dean, when you take a step back from the potential and what could happen in the future and look at where we are today, that tunnel to try and find that the light at the end of it of profitability is pretty hard to see. So one that I would probably be exiting. And just sit on the sidelines, keep it on your watch list. And if some of these trials turn into obviously paid contracts, you start to get a better feel of what that sort of unit economics looks like, what the addressable market looks like and can build a more coherent investment case. So, again, one we hope does well, but would be on the sidelines. Got it. Now we sort of stick around the space for Medtech to Biotech, Dimerix, DXB is the ticker code. This one's for Josh. So it is looking for some sort of a fix for inflammatory diseases from what I understand. So it is in clinical trial phase. It's got a whole portfolio of drug candidates for, you know, these issues is this company and you have you Luke, I'll start with you, you know, further along that road to commercialization and profitability. Yeah, look, not what I've looked at too closely and bearing in mind, always a bit of a tourist to these biotechs where I happily admit the science and the technology goes over my head. But, you know, you start to look for more sort of qualitative signals as a generalist investor for stuff like this. And what I would say is, is there was a promising announcement a few weeks ago, or a few days ago, which it's hard to see that little blip at the end of the chart there in a Dean. But that was Dimerix announcing that they'd signed a licensing deal with a Chinese based business for the distribution rights for their new drug into China with a $14.1 million upfront payment. So, you know, like as someone who I'm not across the science in this space, I'm looking for signals that could potentially, you know, show me some interest in the business or the potential of the business, potential distributor willing to fork out $14 million just to have the rights to distribute. There's something potentially here. So, I think it's worthy of, of deeper research for people who are willing to be a bit more speculative in this field of investment. But taking a deeper look, I think part of the problem isn't, and we saw that longer term chart there. It's sort of, you know, has pulled back a fair bit. It's that the timeline for the approval of this drug seems to be getting pushed out further and further. So, again, not quite across all the specifics of this, but a quick use of my research assistant Claude today. Sorry, Claude, I know you do like that. Yeah. You know, sort of said, well, you know, why the share price come off the last time they announced their trial results? And it was mostly, I think the FDA sort of coming back and refining the trial and the market, perhaps seeing the writing on the wall that the timeline for approval and the timeline for commercialisation potentially being pushed back. So, look, one I don't own, one I'm not rushing to own, it's not my style, these sorts of biotechs. But I will say that if you're someone who does, you know, play in the space, I think it's interesting that a company's forked out $14 million for distribution rights, and it might be worthy of some deeper research. Okay, so we'll put that on a watch list, okay? Dimmerick. Well, say a hold if you're there. Okay, a hold if you're there, you know it. And there's probably a reason why I see, I know what you're going to say sometimes, look, Claude. So, here's the story. I went to university with twins and their names were Bill and Ted, and this was in the 90s, so yeah, Claude. No, the jarring thing is that I grew like most of my life, whenever someone said Claude or I read Claude, it was me, and now it's just everywhere, my brain's like, "Whoa, whoa, whoa, whoa, no, it's not me, it's never me now." What do you think of Dimmerick's? Yeah, so actually funnily enough, these guys had a webinar just the other day, which was after we got the list, so I like dialed into that. And it was really interesting to listen, so they've got a, they were lead candidate currently in a fully recruited phase three, or phase three, orphan drug trial for treating like rare kidney disease, because it's rare if they can prove that this particular treatment is safe and efficacious, then it's a bit easier for them to get to the point where they're selling it than, you know, your typical drugs. Now they're probably, they're going to need to, either have milestone payments or do deals with people or somehow raise capital at some point in the time, so they're not out of the woods yet, they're still high risk high reward stock. And on the other hand, they're already getting licensing deals and they, you know, really the initial results, I think the thing that really impacted me was, I think after the end of the study, the patients can choose to continue on, and if the people were on placebo, they get to have the real one then, as like they were worth for doing the study. And I think that, not only the past, the futility study, like just an initial point just to check that it wasn't a complete waste of time, and then 90% of the patients in this two-year study rolled into the extension study. So what that tells us is the very least that, like most of the patients, first of all, it's not like having terrible side effects, and second of all, they personally think, yeah, I'll keep doing it. So I think that's a pretty good sign, but that's just dumb suck in there. I'm definitely not a biotech expert, so caveat there. All I wanted to make the point is that these are the exact kind of stocks that have basically had a complete drought of buyers now because of the new CGT rules. If someone was investing in their own personal name in biotech stocks, it just stops making sense to do it now. Like it would be much more sensible if you wanted to invest in high risk reward stuff to do it under another structure, not under your personal name. Like companies have 30% tax, but if you do it under your personal name, on the winners, you're going to get taxed at 47% or whatever it is. So there's just been in these kind of high-risk rolled small caps. There's an absolute strike of buyers because nobody who is buying in their personal name wants to buy anymore, and the people that want to keep doing it, they've got to go and set up a different structure and stuff like that if they want it to be tax-optimized. So and I'm not a tax advisory, so you're sorted out yourself, guys. But the point is that, yeah, it's been really hard. It's also then it sort of snowballs down into this tax-lock selling point as well. So I just think that they've been hit with a lot of sentiment. things that have hit the price down massively now. And so I would not be selling now if you're in there, definitely not, because I think that it's just had like a whole bunch of stuff affecting the share price negatively that's not even the fault of the company. So I'd hold on for a little recovery post 30th of June at the absolute least. Now it's definitely not the kind of stock I buy, so I can't give it a buy. And also it's just, I don't have the scientific expertise really like to do it. And I think a biotech investors like they really get into the weeds with that. So I'm not going to call it a buy, but as it goes, sitting as a non-expert on biotech, it actually looks like it's been absolutely beaten up in the last few months. And so I would consider just like waiting for a recovery before selling if you wanted to sell. - Okay, thanks guys. - So that cost you here, did you know becoming an Osbus contributor gets your stocks straight to the front of the queue at the call and to the expert of your choice if a big if you become an Osbus contributor. It's our small way of saying thanks for your support. The link to become a contributor is in the show notes and we'd love it if you could leave us a review as well. Thanks for listening. - Let's get to a little bit bigger of a company and that's Monash IVF. So this is an interesting one because so many people would like to access IVF. The company put out an update. So I think it was about a week ago. And look, is this something Luke that also gets impacted by the cost of living realities that we're dealing with right now? - I assume I'm working the scenario which is fine. - Oh sorry, I'm looking at you. - Yeah, yeah, that's cool. Yeah, so the, oh I followed this one for really a long time and it definitely does get impacted by cost of living kind of stuff in the sense that it's expensive to do and also the bigger factor is just when cost of living goes up, people might be like, yeah, maybe I'm just not going to have an extra kid now because I feel stressed out. It's not so much the IVF they kind of forward but it's everything that comes after that that they don't want to afford. And so I think that absolutely affects it and that just is on a societal level. And I think the bigger issue with Monash IVF though is that they've taken a long time ago like this incredible brand but still to this day is at the forefront of this kind of IVF science and still is coming up with new add-ons they can sell and stuff like that. But the problem is and I'm sure that any investors would be aware of this but they have had a couple of absolutely terrible mix-ups there. The first thing that's going to come up if you Google like IVF Monash IVF mix-up is like it's sort of a woman give birth to another person's baby. I just think that you, I, to me, it's like wild that these guys haven't lost more market share and they have lost market share. And I think there's like a little disconnect there because people might be thinking, oh, you know, market share only went down a little bit because of this terrible press. And you know, that's on the conference call Monash IVF refers to it as, oh, you know, this is a good result in the context of the bad press. I think it was on my notes. And they, the other thing was they'd lost doctors. I think as a result of this mix-up as well. Like I, from memory on the call that was like six out and they got four back in but that kind of churn is still not good for the business and also that still fewer fertility doctors there. There's also more competition in Victoria. The competition they set on the call that used to be like five competitors in Victoria which is like I think their most important state. They've got big stuff going on in South Australia as well but now there's 10, okay? So that makes sense because if you've got this company, it wasn't even one thing. I just quoted one of their mix-ups. If you've got these companies that's literally meaning that the DNA of the child's people are covered is not the DNA that they was supposed to be. Like for me, wow, like wow. And I think the way that the markets reacting is now, it's like, oh, we've taken the hit now and now people are going to start forgetting but it doesn't work like that with IVF because you might have done your, you know, the initial eggs with them and maybe have five embryos with them, you know, before this mix-up happened. And then well, they've got your eggs, you've already started your journey with them, you're not going to switch halfway but I think new people are going to think twice and it really is a weakness for competitors. Like how great for a competitor to say, we've never put the wrong embryo in someone. - Yeah, okay, so this is a cell? - For me, it's a, yeah, it's a cell basically. Like, yeah, it could recover. Like I assume it will eventually but like, no, I wouldn't want to have part of it. I think that it's still going to struggle for my share. The one cool thing about it is though, they've basically been making slow but steady progress in Southeast Asia. So yeah, look, I think there'll be a time when they're a buy but it's still too early for me 'cause I don't buy the story that their competitive position, you know, they've taken the hit and it's up from here. - I also love when they say because of the bad press. Well, what chicken an egg, right? - Yeah. - Okay, Luke, what do you think about my gosh IVF? - Yeah, you cause the bad press. (laughing) - Yeah, look, on its own merits, the business as it's today I agree to sell the only thing you could point to hold or to have some faith in a better outcome in the future is there has been takeover interest in this stock before and perhaps given that update the other day, the share price. It obviously came off a little bit but I think it is underpinned by that bid that came through sort of earlier this year. So I don't like being around stocks for that and donating. If you're someone who does try to sort of play these M&A takeover things, I think this is one you could certainly hold for me though. I'm always focused on the business. I don't want to be there with the hope that someone buys something I own. So yeah, on the business today, I'm not gonna repeat everything Claude said 'cause he's spot on. I also don't agree that this is one that turns around quickly. So I think this is a sell and a move on. - Okay, so I didn't mention the takeover 'cause I think it's like at 80 cents per share and it's like 73 now or something like that, is it? So yeah, so I just like not that much upside for the risk that it falls through. - Okay, let's get to stock number four and this one is for Emma. By the way, the last stock was for Gabe. If you would like us to answer a question for you, you just have to send a note to osbiz.co/callpix and we try to do the best in getting it to the right expert and sometimes it takes a little while. If you would like it to happen quicker and to the expert of your choice, you could become an osbiz supporter. We'd love it if you did. All right, this one is for Emma. Emma says, "I hold this stock." And by the way, we're talking about chiro site, CTEs, the ticker set code. So she already holds it. I love the context, thanks Emma. And she's optimistic about its growth prospects based on its second warehouse facility and what appears to be strong underlying demand for its services. Anything to look out for, Luke, anything to look out for, Emma. Look, in the short term, no, this is a very good little microcap. And I think it's an example of the sort of stuff that the Claude and I are always trying to find. So chiro site, it's one I've actually owned in the past many years ago now and to be fair, the business has changed a little bit from back then. It used to be a provider of cord blood services. So when a baby's born, you can store the stem cells out of their unbilical cord. And you would use to freeze that for 18 to 21 years, something like that. And that was their core business. And sort of didn't really take off in Australia. In the US, it's a much bigger market, that storage of unbilical cord blood. But in Australia, we just don't really do it because of the cost and everything associated with it. But they managed to turn their infrastructure of cryogenically freezing things and are now targeting sort of the logistics and the storage of clinical trial samples and things like that. So it's an example of a microcap that's done a really good job of sort of pivoting their business and just growing very nicely over the last few years. They had a trading update a few weeks ago, showing that every key metrics growing at about 20% year on year, revenues about 22 and profitability a little bit better as they get some margin expansion, calling out the end of the future. They've got a new warehouse coming online, can drive more efficiencies through what they already have. So from Emma's point of view, if she's asking for clouds on the horizon, it's sort of hard to see today because the business does appear to be in that nice little sweet spot where they've sort of put the infrastructure in place and they're now driving that throughput through it. So from a valuation point of view, it's about 20-ish, 25 times earnings, but that's not too steep because you're at that real inflection point where a couple of million bucks profit, but it starts to inflect quite strongly over that sort of operating cost base from these levels. So one that actually kicked myself a little bit here today, and it's very liquid, it's hard to get a position. So definitely for Emma it's a hold. But one that I've always sort of had on my radar and probably didn't spend enough time to really understand how that business was pivoting away from the traditional court blood services to the cryo logistics. And yeah, well done to the people have been there. I think definitely keep holding. If you're not there like myself, I think maybe on the watch list, it is a liquid you can get one of those days where, it can be off 10, 15% in a week or two just on some small selling. So maybe on a pullback, you're looking to pick this one up. But no, as far as Emma's concerned with the suggestion, I think it's an easy hold and well done to her. - All right, thank you. Claude, agree to disagree somewhere in between? - I roughly agree, yeah. So like, Like Luke, I've watched this one over the years because it is that little sweet spot of small, little known unknown companies that definitely have a long time proved their ability to at least sometimes be profitable. Now, what we've seen in the last couple of years, hopefully we could get the five-year chart up 'cause it tells the story, but you know, they basically you change their business in the same way that Luke outlined and their results have been going really well. And I think I really missed a trick on this one because one of the big new things that requires cold storage is mRNA vaccines, which is obviously like a new thing that's like happened in the last few years. And also, there's definitely, I know that like vaccines are not that popular with some people right now, but I think hopefully science wins in the end and there'll be probably more vaccines requiring this cold storage chain of custody. So that could be a tailwind. And I love it when there's like a little business that's already profitable and it's got a potentially long-term tailwind behind it. Like that is the like one of the most repeatable setups you get 'cause it's already profitable. You get more demand, revenue goes up, a lot of that falls to the bottom line. Now, because they're like capital intensive, yeah, new facility, sometimes there's a step back when you're like starting a new facility and because it's a small company, you know, one-year step back can really take a big hit. But so far, they're tracking 40, they're tracking 25% or 28% above last year on their profit. So maybe we're looking at a company on 20 to 25 times FY 2026 earnings, assuming the last quarter is the same as the run rate is the same, which could be wrong. But that all looks very positive to me. Now, look, if you're in this stock, you basically Emma can't sell anyway, right? Like she's going to push this, there's only buy right now for $30,000. So she can sell at the moment, actually. But half the time you can't sell on this one. So you don't want to be too heavily into this 'cause when there's some sort of problem or the market's crashing, you cannot sell. So look, I think it's cheap and I think it's good. I don't own it myself. It's almost one of those ones that's so illiquid that I'm almost scared to buy it. But yeah, I would totally consider owning this the right price when you had one of those freaky sell-offs. I think there's a lot of little microcap diehards, like me and Luke, that are like, now we've seen this one. We're like, yeah, we're not going to do anything now, but if people start freaking out, we might start putting in local offers for this one. So Emma should haul, Emma will haul. I think she should haul. I basically, yeah, just you got in this, you got in this, the setup's good. I say sit back and let's see what happens if my theory proves correct about more MRO and EVAC scenes and more demand, then it really could be a good one. Awesome. That's what the show's all about. Okay, let's get to stock number five. And it is, "Autonate this one is for Raj." So he writes, "Is it deep value or a value trap?" He remembers when everyone was bullish about the stock as it was going up with annual revenue of $65 million. He's sure that it has deep value. Is it not? He asks, "One question he's always been wondering about. "They have a real business with a real product, "real customers and sales. "Why can't it make a profit?" So when the share price is sliding continuously, he writes without very much news, "Is it not management's responsibility "to update and/or clarify the market "about their business and thesis? "Do management have any skin in the game?" He wonders, "If the management do not have any interest "in the company and they are not willing to step in "at this current price point, "should I assume that there is still more downside risks?" So Raj has a small holding in the stock. He wants to know if he should continue to hold or if he should be moving the capital after tax lost selling to someplace else. Yeah, Raj, thank you. You've raised a lot of pretty relevant points, I think, when it comes to "Autonate." Yeah, do you remember the days clawed that this one was a total market darling? - Yeah. - Sort of COVID times from what I remember. - Well, I'm one of the fools that lost money on this stock and I've long sold it. I don't own it now. The reason I sold was because I do not admire management at all because of the way that they trade and shares in the company. You can go and look at the changes of directors interest notice. I won't say stuff in case I'm slightly wrong, but they say specific things. But the general theme of it was that they had decent results, they had growing profits or a bit there anyway. And then they had. The guidance was positive or whatever. And then they're selling the stocks, the CFO quit. There were all of these signs that are generally kind of orange flags or red flags. They're basically, you can see the chart. They were selling, I don't know, anywhere from 13 to 20 kind of thing. So they really management really got their money out of it. And then you see the big drop off at the beginning of 2024 as it turns out, oh, we were getting orders pulled forward. And blah, blah, blah, all of this stuff that they should have known and they should have guessed and you would have think thought talking to their customers they would have a clue about. And that I just don't like that kind of behavior at all. So the management, my respect for the management is not sufficiently high that I would. Trust them. Like that I don't want to trust them yet, or it's not about that, it's just like I don't want to be in there long term. However, I do really love Ryze's question because this thing has gotten ridiculous. Like this is so cheap now that surely there are people looking about this like being like, "No, maybe we just buy that whole business." And then I'm not going to let management buy in cell shares. I'll take it private. Like it's not going to worry about that kind of stuff. And so I think it's gotten so cheap now that people will be like think that some people will be thinking maybe we could just make a take over offer for the whole company. And so on top of that, it is most certainly got to be one of the most likely companies to have been hit by a combination of, you know, bias strike around the CGT stuff because they've never paid a dividend and there's no prospect that they will soon. And also just taxless selling, it's come down so far now that hardly be a shareholder in there that's sitting on a profit. So look, management, they are not particularly well lined. They do own shares, but they also like have been sellers and they get more shares as they pay and stuff like that. So I don't consider the alignment with shareholders particularly good. Although yes, they do have some skin in the game and you know, they're bored and tell you, "Oh, we've got a remuneration structure that, and it's true, it's attached to like options or whatever it is, performance rights." So like yeah, they management at some point definitely want the share price to go up. So they can sell again, I guess. But look, I just think it's gotten way too cheap. I do, I don't own it, and I definitely am not getting in this in like some sort of long term investment, basically, 'cause even though sometimes many times companies that I don't really like management or want to invest with them, they still succeed. So that doesn't mean they suck. But what I think is a good move is I would buy it now and I may well do this by the way, before 30th of June. This is one of my top taxless buying ideas, basically. I reckon it's being taxless or brutally. There's very good chance when I come across, I'm gonna do it, I do it most years. I'll come up with my six or seven stocks that I think are the most ones that have been beaten down by taxless selling. I'll chuck the ideas out to my mates, see, and you know, what are you reckon with these names? If they pass muster, I don't put that much work into it. I'll just like buy them and I'll hold them for like two to three months at most. And then I'll sell them again, and hopefully, and generally speaking, I make money by just picking the ones that have been hit by the taxless selling. So that's why I think it's a buy right now, but just with the caveat being like, yeah, I'd hold it like maybe a year at most or whatever. - So now I will say this is information only. This is not financial advice for you, Raj, but take what Claude says and add on that. - If I had already owned it, I would not be buying more. Like I lose as much average loses. Like don't do that. - Okay, Luke, what do you have to say about our donate? - No, I agree with all that, particularly the last point. I think this is the stereotypical tax loss victim of the ASX right now. Like this is completely unloved by everyone. It was a former market and fund manager darling, up above $20, $25, and everybody, everybody has turned on this business, has turned on management, and for genuine reasons. Like don't get me wrong, there's always a kernel of truth as to why these share price slides start, but they start to hit a point where it becomes irrational, it becomes emotional, it becomes tax loss driven, or whatever it is, and sort of the business and the valuation things get thrown out. Raj summed it up pretty well. The main problem with this business is it has an effective monopoly in its core segment, which is audio over IP protocol. It's a 70 to 80% market share of that segment. It should be highly profitable. Like the fact that it's not profitable, this perhaps a black mark against management right there. But the reason why is because they are spending very heavily to try and move from just audio over IP to audio and video. And that video means they're trying to capture a new market. They're spending a lot of money, and the market has not been obviously rewarding stocks that are lost making, and it's sort of hard to get visibility when profitability comes through. Couple of things for why I actually agree with Claude, this is potentially exceptionally interesting, as a shorter term tax loss trade. Two, first one is go back to the half year Port management actually has some guidance out in the market. We haven't heard from them. Now, you don't always want to imply that means that they're in that range of that guidance because you can always copy down grade-laden the financial year. But if you haven't heard from so far, you probably assume the business is tracking somewhat towards that guidance. And as part of that guidance, actually lower their expense cost guidance from 25% growth year on year, 20% cost growth year on year. It might just be the first signal that management has sort of seen the right on the wall and saying, "Okay, we've had the pedal to the metal with this sort of cost growth for a few years now. We need to start winding it back." Number two was Claude said, "When chair prices like this get to where they are, naturally M&A starts to come in." And there is a very natural M&A target for this business, which is there trying to attack this video over IP segment. And the leader in that segment is actually owned by a private equity business. There is a real synergy here for those guys to snap up, coordinate and have an effective monopoly over the AV, over IP space. So I like this one. Again, I agree with everything Claude said. Not one I'm saying that everything, every box is ticked and it's a long-term compound or whatever. But for where this chair prices today, and I think there's a few catalysts for that to turn around, I think this is potentially a very interesting tax loss trade into the early months of FY27. All right, so we've got some agreement there. So are you calling it a buy as well, Luke? Yeah, I'll say it's a buy as well, and I'll do it. Double buy on date. Not what I had on my bingo card for this program today. Love your work. All right, let me just review what we've learned so far. EOS, it is a hold for Luke. It's the right theme one of those battleground stocks. That's if you hold it and own it already. It's a sell though or take profits. You know, for Claude, demand is strong, but he, he reckons that you know, you could, if you're a momentum trader, maybe you want to hold on to it, but for him, he would, on valuation grounds sell it. Control by Onyx, a sell for both of my guests. Good technology, but it will take a long time before it's profitable. Dimmerix, it's a hold for both of my guests. Look, have it on your watch list, Luke Reckens, because it is doing some good work, and it's actually bringing in some of these upfront payments. Claude agrees. It's high risk, but potentially high reward. It will need to raise capital. It's just a hold right now, but he likes actually, you know, some of the moves that they're making. Monash, it's a sell for both of my guests. Kyro site, it's a hold, but a watch list for Luke. Yeah, a hold one for Claude, probably a large part, because of its illiquidity, and you just heard what they had to say about, "Odinate, no huge endorsement of the company or management, but does have good tech, tax law selling, makes it a buy at this stage of the game." All right, "Odinate" will be put to our committee, the investment committee. Fantasy portfolio has about 8% of cash. At last time around, they put in a couple small caps, so maybe the appetite is a little higher on that regard, heading into the month of July. You can still watch the June episode online. That's the breakdown of some of the stocks in there. The fund is up by close to 36%. Since we started tracking it back in 2022, seems a long time ago now, doesn't it? All right, keep the call switched on, and we will continue to find out if there's any of these companies that our committee will look at next. In a world of market noise and uncertainty, a disciplined approach to investing matters more than ever. Wealthy and Wise brings team invests value investing playbook to Osbeaks, unpack how the macro environment impacts business analysis. These are the conditions of major global bubbles. When you suspend this belief and say, "The earnings will come one day," just not now. Put similar stocks head to head and make a call on which one rings. "I think it's a good time to be a stock picker." What better time to buy than when the market is ignoring what is a wonderful company. Plus, ask team invest experts to deep dive into a stock or topic of your choice just to email us your questions. Live from 1pm every Wednesday. Wealthy and Wise is your guide to value investing powered by tame invest. Okay, Kinatico, X2M Connect, Premium, Energy One and AMA Group are coming up. Let's get right to it. And this one is Kinatico. Who would like to start on this one? I saw Kinatico coming out and putting out some news on CGT and how some of those changes might be taken. Do you like this one, Club? I do. So this was, well, first of all, I think the first thing I want to say is this. I never want to be one of those people who comes out and says stock picks and then never talks about when they get it wrong. I bought this at twice the price and called it a buy at twice the price. So like, I am, prima facie, wrong about this. Something you should all keep in mind. Having said that, I am also unrepentant. Like a big part of the share price decline you've seen since December last year. Has to do with the fact that there was this SaaS apocalypse kind of thing. People got very scared that software companies, you know, are basically doomed. And I don't take that view personally. I do think that, yeah, some will be impacted. Some perhaps impacted badly. Maybe Kinatico will be impacted. But at the same time, this is a compliance kind of software. And a lot of the reason, actually, for a lot of software, it's not people don't just want something that does the job. They want someone to blame. Like, I've got this system and it has to work. And if it doesn't work, it's your fault. And I think there might be an element of that with Kinatico. So for example, their platform is attached to various agencies such as police. So you can get police checks through it or working with children and stuff like that. So yeah, look, it definitely is replicable. It's definitely not a high-mote software business. It's not a super high quality like one, but at the same time. That it has some real positives. Essentially, in the most recent results, which were also probably part of the reason for the share price weakness. The overall revenue growth was a little disappointing, perhaps. But that's because they're in the process of transitioning from a sort of license fee and transactional pay as you go, thing to a software as a service, like subscription revenue thing. And as we've probably talked about in the past, when you go from sort of lump sum stuff to software as a service, revenue, you sort of get this situation where your revenue growth looks slower because you're losing out of one pile and winning from the other. The concern is always that you're only cannibalizing yourself there and you're not going to grow as much afterwards. That can happen and it's not without risk. I consider this a higher risk one. However, I also think that right now it's suffering from tax loss selling. And I also think that there are some features that should allow people to take a long term mindset to this and that is it is profitable. Now it's not on a low PE ratio, depending on what it profit comes in. It could be a peer ratio of 40 or 50. So it does need to grow. It is growing. And on top of that, it's free cash flow positive and it has net cash. So look, you can. It's got over 10 million in cash at the last report. It's not going bankrupt. It doesn't need to raise capital. Directors are buying shares on market. All of the signs say that yes, the share price is down, the sentiments poor. But there's no actual evidence that the story of them growing revenue, growing profit and ultimately rewarding shareholders. Perhaps in a few years even through a dividend since they've already got more cash than they need, that story is still absolutely live. Like that's completely real. So is this one of the ones you're buying for tax loss selling? It's complicated because I already bought this and I thought it made the offhand comment like loses average loses before and I'm always when I make like I bought, build the position at twice the price and that's half the price. Sometimes I'll still add to it. But no, it's essentially not a tax loss trade for me because those are like short term things where I'll buy it and so. Sorry to interrupt. I just looked at the car. Buy for yourself for Connecticut. It's a buy. But I already bought a fair bit of it. So I might not buy more. Yeah, no. Okay. Luke, buy for yourself for Connecticut. Yeah, it's a buy for me to do. I've spoken about this one before. So yeah, people can go back and have a look at that. But I think again, tax loss selling candidate here and it's just the market getting swept up in in SaaS, POCA lips and all that sort of stuff. I agree. It's a buy and yeah, I actually agree with everything. Claude just said. Okay, so X-Term Connect is the next on the list. Let's go there now. We interviewed X-Term Connect. I think it was Julia at maybe the week before last. So this is a tech company, a little tech company. What do you make of it, Luke? Yeah, look, they do like smart meters for water, light, things like that. But mostly in Asia, it's hard to get to enthuse about this one to do. I think it's like a six-mill market cap or something like that. Very small revenue base, very low gross margins. And so it's hard for this business to really e-cap too much of a profit. I think as well the balance sheet, I did jot this down. Yeah, I just jot a down. We'll need to raise capital soon. I think maybe it's like $400,000 or something like that at the end of last quarter. And so I never want to be in front of a business like that. So this is one I would just be exiting and going to the sidelines. That's a sell. Buy hold yourself for X-Term Connect. I wish them all the best of luck. But in fat Excel, tiny company, loss making and has debt, or it had debt and then they raise capital, but then they're going to raise more capital. So it's just they're absolutely avoid the fundamentals are just too bad. It's too close to you know ending it all. So yeah right okay. Oh my chart really tells a lot to definitely. Yeah definitely definitely so. Okay next on the list is premium. So So this one is for Abdul. Premium is an interesting one. It's up against Hub 24, NetWelfth, but by all accounts it does the job. What do you make of premium as an investment? I never invest in stocks like this for the long term. Yeah, look, you can get, you could trade it. Sometimes they get too cheap. A stock like premium can get too cheap because it's too unloved and it's a genuine business and it's capable of making a profit and eking out some growth. However, you just rule of thumb if you're a long-term investor in looking for growth. You never invest in the weakest competitor in a competitive market, especially one where scale is an advantage, which is absolutely true. These companies like Ron Thin margins or whatever. So scale is huge advantage. They're competing with each other. You named the big ones that are listed. Hard of word, I own Hub though, so full disclosure, which I've not calling a buy to Hub, I've actually been selling it. But I think the whole sector, the three of them probably got a little bit over. I sold some of Hub, which was the one I owned, but I think the one to own Clearly is Hub, which is clearly the best one. In terms of basically any way you could measure it growth, market share, popularity amongst the users. Any way you measure it's the best, I think it will keep winning. But the whole lot of them probably got over value. Over value. Yeah. So Luke, that's the thing. So that's a sell for premium. Luke, do you always want to be investing in best in class when you've got sort of that really competitive marketplace for my point was they I'm Hub 24 might be best in Luke's view, but they are doing the same thing. Yeah, look, in general across the ASX history will tell you that over the long term, you'll always do better investing and investing class. Now, that being said, there are periods of time, you know, over the short and medium terms where you can do well investing in a second or third tier provider, just on on valuation or a short, you know, burst of tailwinds for them or whatever it may be. I'll be more positive actually on premium. I think in the past premium, it's always been compared to Hub and net wealth. And I think the thesis a lot of times has relied on the fact it trades at a discount to those two. So you'd have Hub and net wealth on seven year, 80 times earnings, premium trades on 35. It's cheap. Therefore, it's not a premium. And to me, it was cheap relative, but it was never cheap on its own. And I can actually make the point now because we just had that longer term chart up on the screen. It's sort of gone sideways now for about five years. Underneath that, the, you know, the business has actually done pretty well. Like I jotted it down before. I'll do about 17 mil profit this year or something like that, 18 mil maybe. And so it's trading on about a 16, 17 times earnings multiple, which is pretty good relative to the market and the type of business that it is. So I'll say a buy on premium again, I think it'd be like ordinate longer term. I think Hub and net wealth and the winners. But there are times when you can do well out of these sorts of stocks when they do start to pull back, you know, on that valuation, it starts to look cheap from an absolute basis and not just on a relative basis. So yeah, be more positive on this one. Okay. So there you go. Bit of differing opinion. Now let's get to the next on the list. This is energy one. Look, sorry, Claude, I've been talking to you about energy one for a while. You're probably the first to put it on to my radar. Sure. What's the update of you? Yeah. So I won't repeat anything anyone can search on the Osby's platform. Here we'll find years worth of stuff on it. However, the update is we got an update from the company, the first one under the new CEO. Uh-huh. It really lengthy, missive from him that is great to see how he's thinking about it and taking ownership of the future. However, the AR, the bad news was the AR, I growth is going to be 13% and the market was expecting the company was expecting 15 to 20%. Now, the reason for the site's so growth was they say just delayed contracts into the next year, which is totally believable. It's one of the most common reasons that people miss on AR. And the final little tidbit is that I think Wilson asset management have been buying again and they traded it perfectly last time they boarded around the 11 or something and then they sold a bunch of like 18 to 20 and now they're back buying again. So look, if you don't trust me, trust those, well, trust them on that particular stock because they've got a great track record of calling it. So it's obviously undervalued for them. It's definitely undervalued for me. Look, maybe it's not going to work. But if you want to stock that I think is the closest thing that I can find on the market to what, you know, something like, ProMeticus looked like 10 years ago, like this is it's not going to be as good as ProMeticus, but at the point is it's a profitable growing sticky like it's got tailwinds like, I don't know what more you want. What more do you want? Do you want more from it? Luke, what would it need to make you buy it? Yeah, I think I heard Claude say what thousand bag of it. Look, I agree. Yeah, I won't blame too much. Mindful of time to Dean, but Claude and I we had this, we had a well come up not too long ago. So encourage people, jump on the website, type in EOL and you'll get out deeper thoughts on this one. But look, to me again, it's a classic sort of, this is how these sorts of opportunities pop up in the market. You've had a change in sentiment from a broader point of view with this SaaS POCA lips, you know, the whole space sort of gets a bit of negative sentiment to it. And then from a fundamental, fundamental point of view, you just get a small hiccup. So the growth rate this year is forecast be 13% instead of the 15%, 20%. But because of that negative broader sentiment, it all just gets exacerbated or gets magnified and share prices just tend to swing then too far the other way. And I agree, these are the sorts of opportunities I encourage people to go and try and find. Like it's easier to buy charts that are, you know, hitting all time highs and everybody's on Twitter and hop copper and talking about how well the business is doing and the stock's doing. But in longer term, you know, as we all know, the real money is made in the contrary in opinions and finding businesses like these when they're out of favor, but they're still good businesses, medium, longer term, you know, still performing really well. And I think if you zoom out and take that three to five year view, EOL is a buy and we'll do quite well from here. That is a double buy for EOL. Okay, let's get to stock number 10 on the list. This is for Jerry. Thanks for writing in Jerry. AMA group is it. So this is, yeah, it's actually car repairs. Is that I thought about that right, Luke? That's it. Yes, smash repairs. It's been around for a long time. They rolled up the industry, you know, a decade, 15 years ago, went in a quiet, a lot of sort of mum and dad smash repairers around the country. And you know, for a long time was a bit of a favor. The market likes those sorts of roll up stories until eventually you start to get a few hiccups, you've taken on some debt, you know, whatever it might be, the wheels start to fall off. That's a good pun there. And that's what's happened to AMA. So they had a big recapitalization about a year ago. Even today though I come back and look into the deal, there's still $70 million with a debt on the balance sheet, highly leveraged. And so what that means, there's a bit of excitement, you know, six odd months ago, because there's a good second quarter generated a bit of cash paid down a little bit of debt came out, you know, for the third quarter, not too long ago and said conditions are sort of tightened up a little bit. Even dar margins fell and, you know, sort of was negative cash flow for the quarter. And just for these sorts of businesses, because of that big leverage, any sort of hiccup in the operations, any sort of hiccup in, you know, how things are going from industry point of view, just gets exacerbated at a hundred fold and share prices get whipped around because that equity so leverage. So just not for me, I think there's so many easier ways to make money on the market than trying to play these over capitalized businesses. So that is a sell AMA group. I'll be selling the okay. Is there anything that would make you on it, Claude? Well, okay, so it was actually the first ever recommendation I ever did when I started my career. And I then also sold it two years later. I issued the sell recommendation for a good profit. I would not go in there again. I'm not going to be buying this one ever again. I don't think it's a good quality business. However, I wouldn't sell right now because all of the like heuristics right now, like, actually, maybe I probably would sell right now, but I just wanted to say I there was a there's been a fair bit of direct to buying lately. So I wouldn't be surprised if things like improve in the in the near term. But yeah, look actually, I still probably would never own this business now. Like I got to know it too well and I don't want to go back there. It's like very capital intensive. They're not controlling their demand. They're, you know, insurance customers are huge bigger than them people who can like have a lot of power over them and negotiate really hard margins, just a bad business and look at had to be recapitalized after 2009 as well. Just nah, I wouldn't own it. Yeah. So I think it may improve in the short term. What went well as we end this program itself from both of my guests. Hey, look, I'll just review what we've learned. Kinatico, it's a buy for Luke and for Claude X2M and in fat Excel for Claude. Really hard to get excited for Luke. It's a sell premium. It's a buy on valuation for Luke, but it's a sell. Claude on sub 24. Energy one, a buy for both of my guests. They reckon this one is looking great value with great prospects going forward. Good technology as well. And AMA, you just heard what they had to say, double sell for my guests. Luke, Luke Winchester joining us from Maryweather Capital. It's always a pleasure to spend some time with you. Thanks for everything. And Claude Walker from a rich life. Lovely to see you in studio. Thanks for coming in. Hope you guys both enjoy your weekend. Hope you all enjoy your weekend if you're watching live or on demand or listening to us in podcast form. You know, we've got tons of content as the gentleman just referenced on the Osbus website. We'd love it if you could visit it and we'd love it if you could tell your friends about us as well. Spread the word. Little old Osbus is still here seven years later. Stay with us. Funny where to come. And before we go, A bonus conversation for our The Call listeners. We know many of you are always looking for your next investment idea. So we're bringing you a deeper discussion with the leaders behind some of the ASX's emerging companies. Today, we're joined by Australian Vintage CEO Tom Düsseldorf. Great to have you with us Tom. Great to see you. So you've just secured refinancing through 2028. Tell us about this and how important it is to your success story. Yeah, I think, you know, I've been in the role now one year. When I took over a CEO, we had kind of a year to run on our financing with our partner. That whole strategy or that support was not necessarily aligned with the new direction. You know, we announced to turn around. We were focusing on our inventory innovation. But we need to bring our finance partners along for the journey. So for the last kind of six months, we've been working collaboratively around what those next one to three plans look like, what kind of funding do we need? How do we secure it? How we align all the covenants and all of the checks in line with that strategy. And so now that we've announced that we've secured it and we've secured it for two years with a one year option, we now have finance aligned totally with our strategic direction as a business. So it's a really big positive reinforcement reinforcement. Investors also have heard turnaround stories before how confident that can they be in this one? Yeah, I mean, it was all about the numbers. You know, the half result that we announced showed us in decline and we'd never spent more cash. And we said in the full year, we'd be in growth and we would save more cash than we've ever saved. So that was always my measure at the half was to say, don't judge us on the first judge us on the full year. And the pleasing thing is without refinance, we gave guidance for the full year to say, we are growing. So we're looking around four to five percent growth in the second half. So minus 1.7 to a four percent to five percent swing shows the directionality of the growth of the business, which is a big tick. So we are growing. And the cash turnaround has been massive. So we have saved roughly 20 to 25 million in cash in the second half, but it's the same time last year. So we're on track to hit our free cash flow target for the full year of this financial year, which was a massive check that the investors wanted to see that we could control our costs and our spending and at the same time drive revenue for the business. So those two metrics will, we guided that we would achieve in the full financial year. And how quickly do you expect that business to move from stabilization to that cash flow? No, I mean, that's the next step. So the first year was always free cash flow. So targeting neutral cash on an underlying basis, if we could show that we could do that, we are doing better than we've ever done since 2021 in COVID. So it's quite a big turner. It's probably a $35 million cash swing, which is facts. These are in our results. And so people were looking for that tangible demonstration that we were able to do it. And I actually think there's quite a lot more to come. I've been very active in the business, understanding every lever from how we order our packaging, which seems very basic all the way through to optimizing our grape supply, how we utilize our wine. So I now am clear on every lever within the business. And I think we're just at the beginning of how we can optimize that cash utilization and protection going forward. It's interesting you touched on COVID, because this week we saw consumer confidence at its lowest level since records go back 50 years. We know millennials, Gen Z, aren't drinking as much. As they use to, people have less cash interest rates, arising, petrol prices, arising. How does all of that and that gloominess kind of hurt your business? And how do you turn that around? Yeah, I mean, it's if everyone in senior leadership in consumer goods are not talking about all those things, you have a major problem. And so that's a big part of our kind of strategic plan is how do we address what is looking like a downward trend on our category or our sector as an alcohol industry. But then within all those macrochanges, always substories. Like yes, people are drinking less overall, but they're not drinking. So occasions are changing. The way that people are connecting over alcohol is more important than ever. So sociability, portability. So what you're seeing is people are making decisions about how they consume alcohol much more differently now than they did. So traditional forms of service, so standard 750 mil bottles of wine have their place. At home, with a meal is still a very big part of the wine industry. But it's declining. People aren't opening that bottle Monday to Thursday because they'll either finish it and not really love it or they won't and they won't love that either. So wine has really got to start to evolve and learn from other categories that are growing. So RTD, small format, flavoured cans, where you can buy one to four or six or case, what's up to you? Are doing really, really well. RTD globally offers smaller bases continuing to grow. Beers pretty flat, but still showing good buoyancy in some emerging markets, 'cause it's more social, it's more casual. So wine is a sector that we're in. We need to learn from all of these cues that are happening beyond our industry and adapt. And there is growth to be had. And I think the thing people forget is that wine out of all of the categories within liquor have emotional connection to people. I constantly reinforce its connection with food is unbreakable. Wine and food is a love that will last forever. And we all want to eat. We all want great meals. We've just got to be turning up in ways that people are looking for now more than ever. And I think that's been the big change in our business. - And part of that adaption has been these smaller bottles. So POCOVINO, somewhat the star of the turnaround story, how much of your successful future growth that Australian vintage require, I guess depends on this brand. - Massively. I mean, I joke, I've sat with every major customer in the world and I said, I bet my career on this. Like I literally bet my career on it. I said, with absolute conviction that format is one of the big souls for wine. Everything I articulated about why we do or don't open bottles of wine often are influenced by the size and the volumetric nature of that drink. We don't want a bottle of champagne. It's just a lot of champagne. And I think where smalls have lost their way in wine is that wine makers perceive it to be a lesser quality vessel. So it will make the wine not as good, which isn't true because technology and filling technologies, the way you get air out of bottles is so much more sophisticated than it ever was. And so what I looked at was said, okay, this is the opportunity, but it had to be executed in a way that solved problems for everyone. If you're going to solve or fulfill a need, you may as well solve all aspects of those challenges. And that's why Poco's so unique. It's skinny and flat. It merchandises on its side. It's helpful for retailers. It's aesthetically premium for consumers. It's portable for people that want to go. We've got a broad range. And the price point is not crazy. We're not asking people to pay two, three times what they would for a bottle of wine. It's slightly more expensive as you would expect. Smaller things tend to be because you lose the efficiencies of kind of scale. But it looks great. And I think what we're finding is that people don't want to compromise on the quality of the thing that they consume. Just give it to me in the way I want it. And so, so far, it's exceeded all of our expectations. And so how important to answer your question? It is absolutely critical. The question is not, will it be big? The question is, how big will it be and how quickly? And that's my focus. - So you don't think it's a niche market. You think this is a future of consumption? - It's the future. I mean, the UK and the great thing about our business, people think we're just an Aussie wine business. We do over 120 million revenue in the UK. We're at the forefront of some of the most advance and exciting consumer markets in the world. So we get trends coming in from all over the world. And so what we see is that that trend is being far more accelerated in the UK. So they have dedicated smalls base. Australia's just getting up to speed with that. They're starting to get destinations. If you see on checkout now, and all your favorite spirits are being sold in little bottles, they always were sold in little bottles. But we kind of looked at them like a gift or something we wouldn't engage with. Now they're becoming more and more the volumetric consumption of spirits because people don't want to buy a 700 mil bottle. So these trends are happening in front of us. And I think wine was just very slow at looking at at what they could learn and change because it is very traditional. A wine maker says a burgundy needs to be in a burgundy bottle. And no one questioned it. - Yeah. Well, you know, myself and my colleague Nadine Blaney like to say that we're journalists that do the hard yards, that we do our research. We tasted some of the poke of inner thanks to Australian vintage and yourself. But also we went looking for it. So Nadine lives on the Northern Beach. As she said that she found it in her local liquor store and it's quite popular. She asked the retailer. I have to say in mine, I couldn't find it. But that was because the small bottles were hidden. So if that's happening, you know, consumers can't see that. How much of that is a hindrance to people not buying things that they can't see? - It's massive. - You know, I think, you know, the challenge we have now is not a question of, you know, more exposure. It's about working with retailers to build destinations that service consumer shopping needs, right? This is what grocery does incredibly well. Licka in Australia has its own retail footprint. You go into liquor stores to buy liquor. In the UK you must go into grocery stores to buy liquor. In the vast majority of cases we don't have that in Australia. And so what that means is liquor stores have huge choice. You know, there's a lot of selection. It's quite overwhelming. And you can get lost in that space even with something as disruptive as Pocovino. And so we're working with our partners, with our retail partners who fully believe in this trend and this movement to create destinations, to sign posts for people, you know, here's where you can buy one or two, you can get a light or a red together. You don't have to go variety around. on the store, all of these things are inherent barriers to one consumption. When you see an aisle of just wine bottles that all of the same, except for their labels and price points and maybe a bit of originality, you don't know what to buy. You're guessing, or you go to things that you're comfortable with. And I think we've kind of really cracked that now in terms of simplifying the choice, but the job we've got to do also is to not just expand the range, but make it easier to shop and easier to find. But what I say is we're selling more than we've ever sold that we thought we would now, and people still can't find it. And people still don't know what it is. We haven't advertised yet. We haven't done any above the line. We needed to build a critical massive distribution, and then we're going to invest behind this brand and make it mean something to people there. So maybe in a year, everyone knows what Pocovino is. What about some of your other disruptors, LEMSECO and the like? LEMSECO continues to perform. Like there's two stories. Pocovino, we drove distribution. We agreed with partners and went everywhere. LEMSECO has just been growing organically. It's a good product because it's been made with just fresh lemon, concentrate, and Prosecco. So it's a very simple natural combination that just gives a kind of authenticity. And so we've now expanded across all of the Australian retail landscape. We're also now shipping into the US. So we're in 13 states in the US now with LEMSECO at $12 USD on shelf. And believe it or not, it is more economical for us to make it here, ship it there. And so then it is to make it there and ship it out from domestic production. So even with all this tariff torque and all of these macroeconomic issues, it is still quite compelling in terms of shipping into the US if you can get a really good kind of trade going. So LEMSECO is looking really positive there. We've shipped our first 10 containers into China. So that's going through Shanghai and Tier 1 cities. And so we're pretty optimistic about what that can do. But Pocov is still going to be by far and away our biggest bet. Yeah. Going back to the fact that people are drinking less and some people aren't drinking at all. Do you think the biggest challenge to your businesses potentially not another one company and other listed one company, but maybe the wellness culture? Yeah, I mean, look, we're all aspiring to be healthier. That is a fact. But that's been a trend going for a very long time. I mean, I worked in food for a number of years and the health aisle has now become just the store. You think about the growth of gluten free, of fat free, sugar free, that's been moving through food. And then as it gets into liquor, what we're seeing is yes, people are drinking less in total volume, but they're still drinking. And so even on premise out and about sociability, these occasions are growing at home with a family member partner over dinner. That's where the decline is predominantly taking place. People are choosing to opt out of drinking in those occasions. So there's still plenty of opportunity and just take one. The decline is actually being driven by Shiraz and Kavanaugh. So heavy reds. They're the one shrinking. Prosecco, Pinaigrigio, Rose, Sparkling, Pinot Noir, All in Growth. So at some point, wine actually on total is in growth again in Australia and the UK on the latest data by 1.2%, which is meaningful. But what we'll see is we'll actually see a faster growth once the shift between red and white kind of completes. They just haven't been big enough to overcome the sheer volume of red wine that Boomer's drank for so many years. Love the Boomer's. Look, there'd be companies have done a really good job with zero alcohol. There's some really good zero free spirits as well. Why has the wine industry lagged? Are you working on anything like that? Yeah, it's a big part of our mix actually. I mean, you probably would know where the number one still zero alcohol wine in the UK. We do half a million cases. Like it's a big part of our business, high margin. It's a good product. But when I say a good product, I judge zero alcohol and it's proximity to the real thing. If you're pretending to be something you aren't, you've got to get really close to that thing. Otherwise, it doesn't quite work. In beer, it's in the 80 to 90%. When you have a zero out beer, you can kind of convince yourself you're in that occasion with wine, it's still sub 50. It doesn't have the same palette. It's a bit sweet. It just doesn't deliver as in the way that beer is managed to really tap into that opportunity. So I think it's still going to be a meaningful part of the category, but not a massive solution. The things that are exciting the wine industry are lighter wine. So mid-strength, lower ABVs are starting to get a bit of traction, but still relatively small. My view is, if you want to have a glass of wine, let's give people one glass of wine, which is why Pocovino works. Don't cut out wine completely. Don't drink the whole bottle, just have one. And what we're seeing is that's bringing people back into wine because they're happy to have one glass and no stress of having to finish the rest of it. So that's where we're going to see, I think, the most movement. You'll start to see brands move small as we continue to try and invite people back to that midweek. Everything in moderation, as our mothers always say, are including moderation. If you were launching Australian vintage from scratch today, what would you do differently, Tom? It's a really good question. I mean, I look back on the legacy of this business, and I kind of thank the heavens that they did invest so heavily in infrastructure. People say, oh, to have big factories is a bit of a noose or a bit of a challenge. But actually, what it gives us is an incredible capacity to serve as huge volume potential. So Pocov, for example, we're now pushing nearly 10 million units. Like, our company, no other company could do that unless they were the size of us. Does that make sense? It would take them years of capital installations and investment to get there. So I kind of look back and I could criticize how big the company went, chasing that massive volume, but without it, we couldn't be where we are. But if I had a clean slate, I think what I probably would have done is I would say my relationship with growers was a lot more pragmatic. It wasn't like 10-year agreements that ignored how consumer trends can change in any other consumer goods industry. I think that's been a big learning for the industries that everyone went, oh, maybe a 10-year deals, maybe a little bit long in the volatile nature of the world that we live in. The good thing is we've got a handle on it now. Our wine supply is now in what we're calling a structural deficit. We're bringing in less than we need, which is a good thing, not a bad thing, because it allows us to get into what I call the spot wine market. So where it's finished and it's in tanks, we can draw on those at any point in time, freeze up cash and working capital. So I think that part of the industry has been, I think, the biggest wake-up call to every major wine company. And would be the thing I would have focused on if I could do it. So you know, I think Australia is producing too much wine now. I mean, there was a glut for so long. We definitely are. I think I've heard numbers of nearly two billion litres of excess supply, mainly in red wine. That's going to change over the next two years. It sounds like a big number, and it is, but we have capacity to hold nearly 200 million litres. So it gives you the context that there's lots of tanks and lots of space for this to be moved through the industry. We're seeing wine being pulled out. We're seeing growers make tough decisions to rip up vines. That's a five to seven-year investment. If you install vines, you don't see a product for five years that you can viably kind of utilise off that land. So to pull that out is a big commitment to go, right, I don't know longer in this industry. So that is happening. That's the sad part of a structural oversupply when consumers move away. And it's predominantly in charazans and reds, places like Barossa Valley. You're reading in the press around Bordeaux. I mean, there's not anything they can do about it. The flip side is burgundy's never been more expensive because pen and y is absolutely invoked. So there's still opportunity. It's now about looking to the future and saying, "Okay, where do we need to secure long-term supply of things we know are trending in the right way?" And will for a while. Prosecco and Pina Grigio are going nowhere. - Yeah. - You know, Saved Long and Shardinay go through this constant kind of up and down over the decades. Pina and Y is not going anywhere. There's a definite shortage. And so how we're doing those deals now are gonna be critical to the long-term, but I've been phenomenally beneficial from a cash flow perspective in the short-term. And so that's what we've been really focused in on. - Whether or not you like someone your long- or Shardinay is such a contentious issue as well or your mug's friends, can't it be? - Yeah. - What export markets excite you? - Do you know that's actually one of the bigger opportunities for our business. AVL never really went outside of ANZ and UK and Ireland. That's been the court that does 90% of our dollars and our volume. So when I go around Asia and I talk to them about trends in spritz, I show them small formats and disruptive self-solutions. They're a huge retailers very excited about what that will mean for the industry in the Asia region. And I say Asia region because every market has its local nuance when it comes to alcohol consumption occasions, route to market, taxation and legals, marketing and cultural relativity. What we're finding with POCO is we've launched in Thailand, we're in Malaysia, Singapore, we're about to go into South Korea, Philippines. We're selling way more than we thought we would because it is a totally new way for people that are not in a mature wine market to approach the category. It's fun, it's colourful, it's not complicated and it's bite-sized. It's not asking them to commit a huge amount of money and drink a lot of alcohol. And so we're actually getting quite a lot of momentum because culturally, they're really open to these changes in the industry. So Asia for me is going to be a phenomenon. I think we're targeting, we're going to roughly call around 20. 20 to 30% growth this financial year, but I think we can, we could double that. These are off small bases, like 20 million in revenue. Yeah. The other one is North America. You know, it's going through a phenomenal reset. Lots of declining consumption, lots of pessimism around the alcohol industry. Look at treasuries announcements in terms of their business and what, you know, Sam, who's the new CEO there has had to really re-shift the focus of treasury in the US because it's so big it can break businesses. But I also think it's, it's so dynamic that it can also make them. And so we're big enough to do something in the US, but small enough to do it quickly. Yeah. And so Poco will run off the line in California, in July, this financial year. And so that's a big part of our, our focus for next year. If we can get a viable Pocco Vino business in the US, it's a game changer for our organization. Absolutely. So yeah, ding, ding. They're exciting me. Now you are excited about Poco Vino and that's a big part of your leadership. But you took over during a challenging period. How do you think your team would describe your leadership style? Oh, wow. Well, to my face, very complimentary, I would say. But if you are seeing them in the back room, they'd say I'm very direct. Yeah. Very hands-on. So you're opinion in you? Yeah, I think look, very passionate. You know, you've got to believe in what you're doing. And I think that's a big part of leadership is you've got to be the one running over the hill carrying the flag and people who've got to, you know, want to follow you and believe in it. But also, you know, I think I'm super fair. You know, everyone's got a chance to execute on the agreed strategy and get a chance to be helped along the way. But if not, I'm pretty decisive. You know, we don't have the opportunity to, to make too many mistakes. We've got to execute kind of flawlessly. And so there has been quite a bit of restructuring going on through the organization. You know, a lot of it has been focused on potential kind of new ways of working. And so we're, it's trying to lead in a time of phenomenal change internally and externally. And I think just being transparent, totally clear and communicating to everyone where we're going and why. And I think the response has been pretty good. And leadership is a challenging role as well. What's the toughest lesson you think you've learned? Being leadership is you don't always know the answer. I think sometimes I would hold on to beliefs because I felt I needed in some ego-driven way to be proven right. But actually admitting you're wrong quickly in the face of unirafutable data is sometimes the best leadership trait. So I'm, I hold my opinions, but I hold them very loosely based on what data comes at me at any point in time. And I think in the past I've held on to things maybe a bit too long to the detriment of me and potentially those, those ideas. And just a final question. We'll just sort of bring it back to the beginning. Some millennials drinking last Gen Z, drinking last health conscious consumers reshaping the market. But you're still very confident that this is going to be a growth industry. Look, I look at, I look at our business, I look at wine, you know, where, where a 250 million revenue company that has huge potential globally has the right footprint to do new things and create scale even in the market that might macro be coming down on certain edge parts of the industry. What that converts to is a sustainable net free cash flow company that will be reducing debt and have mobility in a time of consolidation. Like I'm excited by that. I look at us and go, we could be a natural acquirer, a consolidated partner. You know, we could be the benefit of what is coming in an industry, you know, dynamic. And so that, to me, is really compelling. And if all we end up doing is spitting out really good cash flow and dividends to shareholders over a long period of time because we're a good, profitable business, there's nothing wrong with that. But I think we'll be part of a bigger game. And so that's the bit that I keep kind of looking to. So yeah, I think we've got a bright future, but we had to get the fundamentals right first. Well, cheers to that, Tom. Australian vintage CEO, Tom Dussordel. [MUSIC]