Hi Anand,
MSTC annoys us no doubt. As I mentioned above, I myself had built a small position & sold, twice. Nothing’s changed but I have committed myself to this story as I think long term story is still beautiful. If you have found a better opportunity, no harm in moving out. I might do the same in the future. As of now, I think I am going to stay with MSTC at least for the next 5 years.
My rationale as of now (Because I have a history of not staying with MSTC):
- I had cash & MSTC at the current valuation, seemed much better than most of the other opportunities outside of what I am holding. Pretax earnings yield of ~8% + 2.5% starting div yield. 0 debt, doesn’t need much working capital to grow, negative cash conversion cycle, very high return ratios, decent moat, platform businesses have inherent scaling. What’s lacking right now is a laser sharp focus from the management & fire in the belly of the management.
- Very low charging on the GMV is an edge & creates barrier to entry.
- I anticipate that the stock may not perform upto my expectations for the next 1-2 years & I am OK with that. Rather the stock may decline from here by 10-20 odd percentage & I am also OK witht that.
- I think the recycling side of things should get sorted over the next 2-3 years. I am here to hold for at least 5 years unless there is a big negative event or I spot some other better opportunity.
- The extra cash in the business may get distributed which will even lower my purchase price.
- Low working capital requirements may mean growing dividends for a growing business over a very long period.
- This business has a potential to give BEL like returns over long term (5 years+. The story might be a multi decade story).
Of course, I could be wrong & might sell tomorrow but the business seems a quality business, available at a reasonable valuation, decent moat, big & ever growing TAM, optionality due to cash.
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