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Friday Beers with Marc & Stuart: Weebit Baby!!
September 10, 2021
AF Legal, AFL, ECS, ECS Botanics, Seven Group, Seven West Media, SVW, SWM, video, WBT, Weebit, Weebit Nano
Friday Beers with Marc & Stuart: Weebit Baby!!
0.29 Weebit Baby!!
3.12 Research out on ECS Botanics (ASX:ECS)
4.46 Conan the Contrarian loves Seven Group (ASX:SVW)
7.51 The Love Doctors help Margot from Maroubra
11.05 Belgian Rainbow beer
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Stuart: It’s Friday afternoon in Sydney and that means it’s time for Friday Beers with Marc and Stuart. I’m Stuart Roberts and over there is Marc Kennis, and we’re the founders of STOCKS DOWN UNDER, Australia’s leading investment publication. Marc, you look a little distracted there and you’re having a bit of fun. What’s going on?
Marc: Just a little, Stu. I’m just celebrating all our, our little call on Weebit Nano.
Stuart: Weebit Nano. A lot lower than what they are now I take it.
Marc: They finally came out with their announcement. So for the people that didn’t see that, last week they came out with an announcement that wasn’t supposed to come out because they had talked about a deal with SkyWater in the U.S. The first commercial deal, but it wasn’t signed yet, apparently. So some idiot at their IR firm sent out that announcement. They went straight to trading halt because it wasn’t a deal yet. So what happened, it was in trading halt for the whole week, and just yesterday morning, it came out of trading halt. And guess what? Stock went up by, was it 40, 45%. So that’s why I’m celebrating. Yeah, so you gotta love Weebit Nano, it’s the gift that keeps on giving. So anyway…
Stuart: Okay, so before we get on a roll, so tell us what Weebit have actually announced.
Marc: So Weebit announced first commercial deal with a foundry. So that’s a company that manufactures chips for third parties. So they use their own technology and third-party technology, in this case, Weebit’s technology, to build chips for customers. This can be, can be anyone, anyone that wants certain kinds of chips in their products. The interesting thing about SkyWater in Minnesota is that they also are cleared for highly, you know, secure defense applications for the U.S. government. So there’s a lot to like about this deal. It’s not a huge foundry in itself but it’s the first one for Weebit. So, yeah, investors logically are very excited about it.
Stuart: So after the deal came out, you sent me a picture of Joe Biden holding a chip from out of that very foundry, right, and said, “How do you like the president now?” And I’ve changed my views quite markedly on Joe Biden. Right? Joe?
Marc: Exactly, yeah, so all of a sudden, you’re a Biden fan. Donald who? So that’s the good news, and that’s why we’re celebrating Stu. And I didn’t have any champagne here but…
Stuart: I’ve got some Veuve Clicquot here. So when the New South Wales government finally lets us visit each other at houses, we’re gonna break this open to celebrate. Well done to Coby Hanoch and the team. Coby’s been a great friend of our firm. In fact, in his spare time, he took us around the city of Jerusalem when we were in Israel a little while ago. So Coby, thank you for that. I’d spent my entire life wanting to visit the… well, not just the Holy Land, but the Holy City, and Coby was our guide for the journey.
Marc: Yeah, exactly. So that’s, well, that’s Weebit Nano. But we probably should research this week, Stu, on ECS Botanics. So time to get serious now, I guess.
Stuart: Right, okay. So Alex Keach, at ECS Botanics, is building a pretty formidable offering in the whole cannabis and hemp space. He started in hemp. Now, Alex is a native of Tasmania, and he’s got some relationships with some good hemp growers down there. So building out hemp, which then sells into various categories, then the transition into cannabis with the acquisition of Murray Meds. Now, there’s endless ways in which Murray Meds can grow out. As the name suggests, it’s got some cannabis growing facilities on the Murray River in Western Victoria. And that company’s now in big expansion mode in terms of where they’re taking approved products into medicinal applications.
So all the way from seed through to patient is where Alex is going for this. We’ve done some valuation work on this company, and we think the valuation range is about triple what the stock price is now. So take a look at our ECS Botanics research at pittstreetresearch.com. For those of us who have been following our story for a while, you know we’re big believers in cannabis and hemp, and this is one of the better quality offerings that are available. By the way, you probably noticed I’ve got my Dutch flag here. You Dutchies tend to like the cannabis and hemp stuff, right? So I thought in honor of you forbearers of that sector, I’d wear my Dutch flag.
Marc: Right. Yeah, I didn’t want to make any silly jokes about the Dutch and their weed but, yeah, it’s well documented, I think. All right. And that brings us to Conan.
Stuart: I love looking for stocks that are way out of favor right now. And let me tell you, one of the more way out of favored top 200 companies I’ve come across recently is Seven Group, SVW. So what’s Seven Group? It’s Kerry Stokes’ empire, basically. It’s the west track French company which owns all the heavy equipment built around the Caterpillar franchise. It’s various other investments, in particular, investment in Seven West Media which was the old Seven Television Network with Western Australian newspapers. So it was Kerry Stokes’ chance to move away from old media exposure, and give the investors a chance to benefit in some really strong growth franchises.
Now, I tell you what I really like about this is they just bought 70% of Boral. Now, Boral’s got a hammerlock, basically, over all the decent quarry positions in their Australian construction materials business. And Kerry, Brian, and his colleagues at Seven liked this one so much they paid $7.40 a share. He could hold it. He could because they weren’t buying the whole thing. The stock is since eased back. So suddenly, Boral’s back at $5.80 which makes Seven Group look a little bit silly. At a time when Boral is firing all cylinders, West Track’s firing all cylinders and Seven West Media’s going through a serious turnaround in terms of being able to reap the benefits of their investment in digital right now.
Marc: So you’re being all serious about these stocks, Stu, but it’s, I think it’s just, you know, you’re hot on Gemma Atkins. That’s the whole reason.
Stuart: Well, Marc, let me share with you some of the background research I’ve been doing, research on Seven. A while ago, I got sick of watching all of the tree-hugging lefties on the ABC News brainwashing me every night. My wife said, “Stuart, let’s go back to Channel Seven, where we can watch normal people report the news.” And I’ve really been enjoying the change. I’m actually getting the news, without the propaganda from the ABC. Marc, let me ask you. If you want to watch someone give you the market report for the day, who are you gonna choose? Jim Rakuten at 7 or Alan Kohler on the ABC? Okay, I thought so.
Marc: Old man, hot lady.
Marc: Probably Alan.
Stuart: Right. Well, not only that, Gemma knows her stuff. She’s actually passed all three levels of the CFA qualifications. So she’s smarter than both of us, neither of whom got through level one of the CFA charter holder thing. So she’s actually got a pretty strong finance head on her shoulders. And we’ve both had the privilege of being interviewed by Gemma. So she knows to get the good stuff from the guys who really know what they’re talking about, right?
Marc: Absolutely. All right. So that’s Seven Group Holdings.
Stuart: Seven Group. There’s a reason why Kerry Stokes is a billionaire, and it’s called the Seven Group. So go take a look.
Marc: All right. Well, that brings us to one of my favorite items which is… [music]. So we’ve got a question from Margot from Maroubra. So she says, “Dear Marc and Stuart, I recently divorced my husband because he bought Afterpay stock, based on your recommendation at $28.00 about 18 months ago.” Which is very clever of your husband.
Stuart: Yeah, yeah, that’s when you started talking about it quite seriously on this program about a year ago.
Marc: Yeah, but she says, “He sold it at $52.00.”
Stuart: Oh, my goodness.
Marc: “And that was pretty dumb, obviously, so I’ve divorced him.”
Marc: “And so I came in touch with the AF Legal, I liked him so much, he helped me so much, that I bought some of that stock, at 42 cents.” Could be clever. It went up to 64 cents, so she was pretty happy with that. She held onto it, and it fell back to 46 cents. And so the question now is, she says, “So yeah, I really didn’t make any money out of it, after we take out the brokerage fees and all that, so really not any richer than I was before. So the question is should I go back to my husband?”
Stuart: Yeah. Well, okay. The answer is Margot, you’re actually almost as good an investor as your husband is. So let me talk about the AF Legal. Edward Finn has spotted a big opportunity in the market for family law. So there’s about 40,000 to 50,000 divorces in Australia every year. And someone’s gotta handle the legal side of most of both of those transactions. But family law is operating, pretty much as it was back when the Family Law Act was passed back in ’75. So you’re talking a bunch of dinosaurs in terms of the technological support behind the family law practitioners. So what he could see is the opportunity to bring some 21st Century smarts around managing the clients in family law matters, as well as aggregating other family law practices.
Now, I’m predicting that before a great deal of the chairman and his colleagues are through, I think Ed would step back to non-executive director. Before they’re through, there will be quite a formidable offering in that sector of the market. Now, it’s fair to say that the number of divorces is trending down, but not markedly so in society. So there’s plenty of underlying business for what they do.
Marc: Well, probably with these lockdowns, you know, people are sort of, spending too much time together. Could actually trigger a whole bunch of divorces.
Stuart: Right. So then if they go longer, business is gonna be wonderful for AF Legal. But the key is how you pick the clients. The good ones will settle quickly, not cause the practitioners too much time in terms of having to spend billable hours and income the fees without hassle. So it’s the client selection tools that you use to bring those on board. It’s the backing infrastructure behind that, that I think will prompt this company. AFL is the code.
Marc: So what’s the answer to her question? Should she go back to her husband?
Stuart: I mean, basically, Margot should realize that her husband is actually quite a talented investor. I mean, he was listening to us and made a pivoted make. She should go back to her husband and recognize that he actually had a lot of investment talent.
Marc: You heard it here first, Margot. Go back to your husband.
Stuart: And hold on to that AF Legal stock because the two of you, when you get back together again, will be a lot richer at the end of that.
Marc: All right. Well, that brings us to the beers, and we thought we’d mix it up this time around so I took care of the [crosstalk 00:11:06.613].
Stuart: I’ve been locked down so long I forgot to buy beer. So I’m drinking red wine there as you can see.
Marc: Yeah, so this one, you probably know this one.
Marc: From Belgium.
Stuart: It’s a white beer, right?
Marc: It’s a rainbow beer. We can’t say white anymore. We can’t say white beer. This is a rainbow beer.
Stuart: But do we like Belgium or do we dislike it as a country?
Marc: As a country?
Marc: I love Belgium. The Belgians don’t love the Dutch so much for some reason, I don’t know why.
Stuart: Go figure. I mean, how do you bring two different language groups together in one country and keep them together as one country and build them into a first-world economy with two groups of people that don’t like each other? I mean, that’s a remarkable achievement for the people of Belgium, right?
Marc: In any case, I thought we would get this one because it’s springtime and this is typically a beer for when the temperatures rise. So this weekend in Sydney, I think it’s supposed to be 30 degrees, around that level. So this beer, a rainbow beer, not a white beer, a rainbow beer, this is perfect with a bit of lemon or lime and sitting in a normally, in Belgium when it sits over somewhere, you know outside of the pub. Of course, we’re in Australia where they don’t have that sort of thing and we’re locked down. So basically, enjoy it in your backyard or take it to the beach, and enjoy the sports cup.
Stuart: What’s the alcohol content of that beer? Is it the same?
Stuart: Yeah, okay. So you’re not gonna get totally hammered?
Marc: Don’t ask me about the hops and the gluten and all that sort of stuff, I don’t know. I do know that I like this one, so I’ll have one once we’re done here.
Stuart: And that’s all we have time for here at Stocks Down Under. So I’ll say it before and I’ll say it again if you’re not subscribing to STOCKS DOWN UNDER, do yourself a favor, and more importantly, do your portfolio a favor, and subscribe to STOCKS DOWN UNDER.
Marc: Weebit baby.