IRE

IRESS is down a lot, today, given the 2H skew required to hit guidance.

Here’s the update. $80M 1H, at midpoint of guidance requires $100/$180 = c55% 2H to meet.

However (and here we switch between NPAT and EPS, which isn’t perfect) the usual skew is 52%.

On it’s own, I wouldn’t have thought it worth -10%.

Also the 1H vs 2H uplift isn’t usually such an issue, given the history of growth, on whatever measure you prefer to look at.

But the CEO is also retiring.

The CEO retiring is well, anything you want it to be, depending on your view. Can be good, bad, or indifferent. The reality is the CEO shouldn’t make a huge difference, certainly not in the order of 10% of the market cap. But shouldn’t and doesn’t are two different things.

Going out on an upgrade perhaps, would be more universally acceptable. That would remove any ambiguity about future operational performance. Here, the fear is a high hurdle (the 2H stretch) that a new CEO won’t want to accept responsibility for, won’t want to accept culpability for, if missed.

As such, it is plausible (at least picturable) that they downgrade, and hence the market prices that prospect in, immediately.

In any case, we aren’t set to do anything. It’s a good company, it has pricing power, attractive in the current inflationary environment, and isn’t otherwise heavily linked to the economic cycle, and we don’t have any real reason to alter our thesis, or it’s likelihood of playing out.

Anytime uncertainty goes up, but our other estimates don’t change (for example, our long run view about the company) we tend to hold, neither buying nor selling more, relative to the position we already have.

We’ll wait for the result, see what new management has to say, and go from there.

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