This is interesting but, having worked at SE companies in Japan that essentially act as temp staffing agencies, I can attest that they're extremely pro-cyclical. It's a bit like selling puts on the economy as a whole: you make a bit of money consistently, and then one day, you're bleeding badly from every orifice and trying desperately to just stop the bleed and preserve life. What are the labor laws like in HK? In Japan, it's very difficult to lay employees off, so essentially, temporary staffing is something of a booming business in any industry as a way of having a flexible workforce that can be downsized when/if projects become scarce. Staffing agencies, and small companies that act as pseudo staffing agencies, kind of earn money by bearing this risk. It's not the best of businesses to own or work in -- risky for owners, and the pay is often lower for employees, with the best ones often getting poached by clients. So you're kind of constantly replacing talent, bearing a lot of risk, and don't have much pricing power or anything resembling a moat. At least, this is the case in the Tech / Japan.
Thanks for the tip, I will have a closer look. Based on first look it seems value is in (correct me if I am wrong):
-Pakistan business doing well in 2025
-German subsidiary sale. But not convinced it is worth 20m with only ~5m in revenue. That is a SaaS 70-90% GM revenue multiple, but this seems to be an above average service business with 30-40% GM.
-Management target of 40m of revenue with 14% EBITDA margin by 2030.
Yes it's not worth 20m but probably still a 20% upside considering that the ev/ebitda is at 5.5 and revenue is growing. I don't use valuation based on GM, thanks for the reminder !
Normally I also think using GM based on final valuation isn't greatest idea. But it is a good indicator as a lot of spending below GM line can often be cut by a larger acquirer. Above GM line not so much. So high GM businesses tend to fetch a higher revenue multiple.
This is interesting but, having worked at SE companies in Japan that essentially act as temp staffing agencies, I can attest that they're extremely pro-cyclical. It's a bit like selling puts on the economy as a whole: you make a bit of money consistently, and then one day, you're bleeding badly from every orifice and trying desperately to just stop the bleed and preserve life. What are the labor laws like in HK? In Japan, it's very difficult to lay employees off, so essentially, temporary staffing is something of a booming business in any industry as a way of having a flexible workforce that can be downsized when/if projects become scarce. Staffing agencies, and small companies that act as pseudo staffing agencies, kind of earn money by bearing this risk. It's not the best of businesses to own or work in -- risky for owners, and the pay is often lower for employees, with the best ones often getting poached by clients. So you're kind of constantly replacing talent, bearing a lot of risk, and don't have much pricing power or anything resembling a moat. At least, this is the case in the Tech / Japan.
Yeah good points. I sold all my shares friday. It was basically a trade betting on some kind of special corporate action like a special dividend.
thanks for the update, have you looked at Talkpool AG? A service networks operator that looks cheap.
Thanks for the tip, I will have a closer look. Based on first look it seems value is in (correct me if I am wrong):
-Pakistan business doing well in 2025
-German subsidiary sale. But not convinced it is worth 20m with only ~5m in revenue. That is a SaaS 70-90% GM revenue multiple, but this seems to be an above average service business with 30-40% GM.
-Management target of 40m of revenue with 14% EBITDA margin by 2030.
Yes it's not worth 20m but probably still a 20% upside considering that the ev/ebitda is at 5.5 and revenue is growing. I don't use valuation based on GM, thanks for the reminder !
Normally I also think using GM based on final valuation isn't greatest idea. But it is a good indicator as a lot of spending below GM line can often be cut by a larger acquirer. Above GM line not so much. So high GM businesses tend to fetch a higher revenue multiple.