I have built quite a large position in LPE in the SMSF and a smaller one in my personal portfolio. Entry has averaged about 0.024c overall. I added more today at 0.023c and my expectation is that the 4C in January will cause a re-rate based on the likely positive cash flow moving the business into profitability.
LPE basically install an electricity meter for blocks of units, the residents get up to 35% off their individual power bills due to the cost advantage LPE enjoys in sourcing electricity in bulk and having only one meter, LPE ends up with a margin of about 20%.
price maker to some extent, small competitive advantage comes from switching costs for contracted customers, further advatage is network effect, aggreagated demand with fragmented customers.
FY 2018 results were disappointing, cash burn continues and another quarter of negative cash flow, they will need to raise debt or go to a CR very soon to stay solvent. Hope I haven't got this one wrong, I don't have nearly as much conviction following this result.
H1 19 - Its been a rough half for LPE, some awful management decisions have severely damaged shareholder value, the folly of the consolidation being the worst, poor communications, poorly timed and very little contrition from a board that has underperformed mean one of my pillars of investment is totally undermined. I have no confidence in management's ability to execute. I have not sold because despite their incompetence the business has still managed to grow and remain cash positive - which given the slump in revenue due to wholesale pricing changes, was quite a feat. Loss is less this half and all I can hope is that management lift their game and some value starts to flow back to shareholders. Unfortunatley my private communications with the directors made my concerns greater not less, they lied to me about process and showed little interest in engaging with a retail holder.
