Tips from a friend: GB Group (GBG) and Tremor (TRMR)

Company Discussions
#1

While chatting on holiday with a friend who has considerable experience as a CFO in innovative companies, he tried to sell me on the virtues of 2 companies I have not before come across - GBGroup (GBG) and Tremor (TRMR). I did a quick search on Sharepad. GBG seems intriguing for its record of share price growth and cash generation but it seemed poor in terms of ROCE. TRMR, on the other hand, looked downright alarming - a PE >500, and something that you might expect Baillie Gifford to invest in. On enquiry, my friend said blithely that it has an innovative model that the market doesn’t understand!

Just curious to know if anyone has “kicked the tyres” on these companies

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#2

Hi Diogenes,

I think I’d plumb for GB over Tremor, but that may be just me!

Re Tremor, I think it’s worth checking the history of the exec directors. From memory there is something wrong there.

Used to be called Taptica.

If you subscribe to Stockopedia there is a stockpitch article by Jack Brumby here which explains the business a little;

Rebekah Brooks is a non-exec. Make of that what you will!

Also, ROCE falling off a cliff. Depends what sort of an investor you are as to whether that matters, but worth looking at why and whether the counter argument of US multiples is a valid one.

Re GB Group, it’s a great sector but ROCE and CROCI have been declining, as you say. Is 8% roce enough for you, personally? I guess people invest because it’s a growth company.

Capex has been declining. Does that mean underinvestment for the future, or just that the platform has been built? If underinvestment, that pushes up the free cash flow artificially, maybe?

Gross margin slightly reducing year on year and ROCE definitely on a downward trend. Suggests market competition?

I think it’s a case of whether you believe their growth can continue indefinitely and can outstrip the trend in the loss of roce?

Regards,

Ben

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#3

Thanks Ben, you have confirmed my first impressions. I think I need to do a lot more digging to understand my friend’s enthusiasm