Both could be called “Value Traps” so far in 2023, unfortunately we can testify first hand holding Praemium PPS) in our Emerging Companies Portfolio, however after this weeks rerating’s on the downside its an ideal time to re-evaluate both stocks:
Praemium (PPS) 38.5c: Investment platform business PPS tumbled over 35% this week after downgrading earnings by around 30% at their AGM. The announcement sent the stock to 3-year lows as headwinds on both costs and revenues weighed on the business. We are reassessing our position and at this stage but are not considering averaging our holding – which tells you we are not seeing value despite the SP decline. Some funds that have remained patient on PPS capitulated and sold last week we think, with the companies share buy-back one of the reasons why the shares did not trade lower.
Bubs Australia (BUB) 13.5c: BUB fell -18% this week after the company sought to raise $28mn to fund its US expansion, consisting of a $14mn placement and $14mn SPP at 12.5c, a 24.2% discount to its previous trade. We like the sound of their strategy but after this raise we would rather see some runs on the board before considering the ~$100mn baby food operator, i.e. we would rather buy at a higher price once it starts to gain profitable traction in the US.