SkinKandy Deep Dive, Labor Revolting, More Budget Woes, and Is the UK Racist Against White People?

28:07All this spending, and you've got a really inefficient tax system that effectively taxes income, not wealth. So that's inherently unfair. And we've got so many younger people effectively carrying the can for older people through the greatest tax rule of them all that nobody ever talks about, which is superannuation. Which so, it's the biggest sacred cow because Paul Keating's done such an incredible branding job on this super. And you've got all the super funds who have the snares of the trough and all the fund managers who get paid billions of dollars. So you've got all these people feasting on this superannuation tax rule, which essentially costs Australia$50 billion a year for no benefit.

28:40So you've got a tax problem, you've got a distribution problem, and you've got a public spending problem. And the super advantage has been further increased with this budget because it's untouched. And so super is untouched. The family home, the primary residence is untouched. I invited people on LinkedIn, like as politely as I could, I think I'm very polite on LinkedIn, as politely as I could, to try and get people to say, tell me what I've gotten wrong about this. And there were people that wrote and talked to me about, you know, there's that overwhelming view that things should be fairer and that homes are too expensive for young people.

29:19We both completely agree with that. I think the challenge has been, in my view, that there's been no data-backed rebuttal of the issues with this particular budget. It's not an issue of, you know, do we want rich people? like this is not the US where rich people say, I just want to get richer, I don't take my money, like, you know, this is the land of opportunity, which there are some major issues with that line of argument. But that's not the argument that we run at least. I think the argument we run is you can be well-intentioned. Let's say you even took away the politics of this, which is impossible.

29:51But you can be well-intentioned and want things to be fairer. But this is just a road to make them less fair, not more fair. And I think that's been the problem. One of the discussions I've had with people, so you tell me what you think about this. One of the discussions I've had with people is how could you make housing less expensive, which we have to just be blunt about this. If you're going to push down housing prices, you are going to have a massive effect on consumer consumption in Australia because one of the key drivers of consumer confidence in Australia is people feel like they're getting richer as their house goes up.

30:25So pushing down house prices might drive a recession. I think this budget will drive a recession anyway. But I actually don't think that's an issue. Like I think I agree with the need to drive. We're going to talk about the second order effect of that in a second, which is really unfair. But I think the general principle that house prices are too high is right. We all agree with that. I think the issue is more on the CGG assets, the business side, not the real estate side. I want you to critique this, okay? So how could you – so you said a very smart thing some time ago. You said one of the main drivers of high house prices is banks are lending large amounts of money to people to buy houses.

30:59So what if I said this to you? In the US, this is what happens when you take a loan. They're mostly fixed loans. And we saw this in the financial crisis. This is what happens. If you hand back the keys to the bank for your house, no matter what your loan is, your loan is paid off when you hand back the keys. It's the bank's problem to sell that house and to get back as much money as possible. In Australia, if a bank lends you a million dollars and you can't service it and they repossess your house and they sell it for$800 ,000, you still owe the bank$200 ,000 and you've got no house to secure it against.

31:39It's called a full recourse loan. In the US summer, it's not all jingle mail. There are some recourse loans. And so what if in Australia that was not permissible? What if in Australia you said a bank lending money against residential property, if you hand back the keys, that's it. The loan is gone. My guess is it would make the banks much more conservative in the LVR, loan-to-valuation ratio. They would lend less of a percentage and less money, and that might be the way to deflate the property bubble without having to do a twin. That's not bad, right? I haven't thought about the second-order effects, but prima facie, I think there's some sensibility behind it for sure.

32:18Because I think you can say build more houses, but the problem is, you know, it's very expensive to build houses. If you believe there's a housing bubble, then what you should also believe is that any new property that gets built is going to get snapped up. And so if they could build them cheaply enough to make money when they sold them, you'd get tons of new houses being built. The problem is building costs, not just like labour, materials, red tape, so expensive in Australia, it's very hard to make money on new builds. And so just making them more tax effective doesn't solve that problem. So I'm trying to think about other ways to solve the problem.

32:51It's good. I'm glad you brought up the whole housing issue because we've both been very critical of the 5 % home loan deposit scheme. This is actually originally brought in by the Morrison government in 2020, but it was small. It was like 10 ,000 people a year. It was expanded in 2022. And then the Albanese government really expanded it in 2025. That's when we talked about it, obviously, last year. It removed waiting lists and really wound back increased eligibility levels. And the government has since trumpeted the people who have been able to enter the property market sooner as a result of this policy.

33:20So there's 99 ,000 regional buyers. There's 60 ,000 key workers including teachers nurses emergency personnel all very important people there's permanent residences which is actually interesting that non-citizens could access this there's single parents obviously really important 6 000 single women with dependents have used to secure family housing that's a big big tick and young bison women uh also really great uh some remained uh just remind listeners though how this harebrained scheme works so whilst all those people really worthy recipients of benefits let's see if it actually has is going to help them uh so the government under this scheme doesn't actually lend the money the government actually is guarantor for 15 of the purchase price that means uh buyers don't need to get mortgage insurance which is what you need if you're sort of below 80 if you haven't got a 20 deposit you've got to pay this thing called mortgage insurance it can be 20 to 30 000 uh so the borrower still has to make full payments and in fact they have to make bigger payments because you now owe 95 not 80 of the property so So it's actually a much bigger commitment now for the buyer.

34:21And obviously, it's obviously more risky as well. So essentially what happens is if you can't pay back the interest in this situation or any situation, as you just talked about, the bank will foreclose on the property. It will sell the property, pay itself. There's anything left over you keep it. But often there's nothing left over because the bank isn't trying to push the price. They don't really care about you, the owner. If you get nothing, big deal. So if the property price drops 5%, then generally it's fine, no issue. Bear in mind, Sydney and Melbourne property prices dropped 2 % last month, and they could drop 10%, 15%, 20%.

34:55It certainly wouldn't be out of the question for property price to drop 20%. There are more properties listed in Melbourne and Sydney than there have been for many, many years because things are not selling. And so there is one sure way to drop the price of something. Check the supply side relative to the demand side. So I think that's absolutely going to be happening. So what happens if, let's say property prices drop 20 % and you've got, we talked about nurses and single moms, always really worthy people. Suddenly they're underwater on the mortgage. If you then lose your job, what's going to, if one of two things happens, either the government, so the taxpayers are out of pocket because we've just lost money on that insurance policy, or the government will sue, this is what mortgage insurers do, will sue the poor single mom who got suckered into this dodgy loan by Elbow and co and Morrison.

35:43So we're going to have really good people, hardworking people potentially getting slammed. And who's causing this housing price drop, which we're in Venice. We support house prices being more rational. But so the government's suckered these people into, so suckered nurses and teachers and single mums into buying these dodgy 5 % mortgage loan things. And then they're going to smash him in the face with this tax policy that's just going to cause prices to drop 15, 20%. So is this the greatest bait and switch done by the government you've ever seen? This is just horrific. We're going to see stories of either nurses being sued by the government or more likely taxpayers funding the government's stupidity.

36:19And if you do the numbers on this, so, like, I know quite a bit about this policy. Different locations have got different maximum prices that you can pay based on the average price in that area. I think in Sydney it's a million dollars. I think it's 1.5 in Sydney. Okay, and a million Melbourne? Like, it's something kind of like these kind of numbers. But let's say no one is buying 1.5 mil, okay? So let's say, because if you're going to buy 1.5 mil, you don't need this 5 % thing. Because the thing is this. Let's say you buy... People are using it. It's not as if no one uses it. Hundreds of thousands of people have used it.

36:54I know, but what I'm saying is I think 1.5 mil is not going to be the typical amount of money that people are paying for a property. But let's say like 850k small apartment in the city. I know a lot of it's regional, but let's say in the city, 850k. So firstly, you still need to come up with a$40 ,000 to$50 ,000 deposit, even with the 5%. That's a lot of money. Like that's$40 ,000 or$50 ,000 after tax, after punitive income tax in Australia. After 40 % or whatever. Yeah, that you've managed to save. So how the hell do you do that? But let's say you do that. Then you pay that as a deposit. Then you've got an$800 ,000 loan.

37:32that loan could easily be costing you$45 ,000 to$50 ,000 a year of after-tax money to pay that loan. That is a lot of money. You have to earn a lot of money. That is just, you know, if you say more than one third of your pre-tax income going towards repayments is mortgage stress, I think that's the measure, that means to pay$50 ,000 a year of a home loan, you have to be earning more than$150 ,000 a year as a salary to not be in mortgage stress. Now,$150 ,000 a year, that's a good salary. That is 50 % more than the average. You kind of need two people. You absolutely need two. Yeah. Because$150 ,000 is 50 % more than the average Australian full-time salary.

38:16And the real salary is probably closer to$80 ,000 because there's lots of people. And that's average, not median. Yeah, that's it. Yeah, because there's a lot of people who earn a lot that bumps up. Yeah, and so also this is full-time salary. There's a lot of people that are not working full-time. I think that there was some research that was done. I think the ABS actually did this that said if you factor in all the people that are not working full time, like it's more like$80 ,000. So this is like a lot of money and like we don't know which way interest rates are going to go. They're possibly like are not going to keep going up now because unemployment is rising.

38:43But like who knows where they're going to go. I think they're going up. They can keep going, right? And so you're just going to get these people that really can't pay. And I'll give you a case in point. so um so there's a guy that i spoke to recently he's got a good job his partner works as well they managed to buy a house like early 30s like their own property i mean that's a big achievement i mean you know like that is a big achievement and um and as we were speaking what i came to understand is um there's this deep anxiety sitting just below the surface which is if either of us gets sick or loses our job, we don't think we would be able to keep making the loan repayments.

39:27Now, if that is the way you're going through life and that is the way you're feeling, that is a high baseline anxiety to be experiencing in life. And I just think we agree property prices need to go down to let people in because there's lots of social cohesion problems with young people not owning their own properties. But like, you cannot put people in the situation where that is their baseline level of anxiety in life. And so I think that that is one of the reasons I oppose that 5%. Yeah, yeah, I think it's horrendous. And it's going to be a lot worse with the property prices dropping. So this is just a Labor Party and in fairness, Liberal Party is far from excused on this, but really elbow massively increased this scheme.

40:08And this is just before he smashed property prices. So it's outrageous. Before we take a quick break i want to just move on to i'm sure you've seen the horrendous police racism happening across in the uk and we actually got to give a credit to the soon-to-be first trillionaire elon musk for giving the story prominence because it was really sort of kept under the under the no one really knew much about it till musk jumped on it and last week we saw england experience its very own george floyd floyd moment uh when brutal murderer vikram digua was sentenced 21 years in prison this of course was no regular murder but rather the death of 18 year old student henry Nowak happened after he begged police for help while lying on the ground.

40:46Of course, rather than save the 18-year-old's life, apparently racist British police shockingly arrested the 18-year-old instead of applying first aid treatment. The actions of Digwa and his immediate family, and I think his mother's in jail now for the cover-up, who falsely claimed he was the victim of a racially motivated crime, and the reaction of police was blinkered potentially by anti-racism training, who unhesitatingly accepted their word and has been led to widespread anger and protest last week. Chilling police body camera footage documented Noack's last moments in which he pleaded with officers nine times, I can't breathe, of course famously what George Floyd said, and told them four times he'd been stabbed as they roughly dragged him across the ground and handcuffed him.

41:26I don't think you have, mate, one officer said dismissively. The Independent Office for Police Conduct, the body that investigates police wrongdoing in the UK, is treating the disgraced officers as merely witnesses at this stage of the investigation rather than suspects. Of course, this is very completely contradictory to the very justified action against Derek Chauvin, who received a 22-year sentence for the second-degree murder of George Floyd. The three officers involved in the Floyd murder, one of them who kept other people away, one of them sort of helped him pin him down, got three, three-and-a-half-year jail terms.

41:55So we've seen some widespread anger. This is just a horrific tragedy. I hear your views on what we're seeing in the UK. Well, what's Nigel Farage's party called? Reform. Reform. He's not even going to need to hand out how to vote cards at the next election at this rate. I mean, basically, this action has just sent hundreds of thousands more voters towards Nigel Farage. This is what happens. Like, this is the problem. Like, we've spoken about this for a long time. You run further and further to the left, what ends up happening is you shift people to the far right. That's where the backlash goes.

42:31The pendulum, I always say, like, in democracies, what's sad is, Like the pendulum often doesn't spin in the middle. It's just passing through on the way to the other extreme. I don't even think it's going to stop in the middle in this cycle. It's going straight the other way. I think it's going to go straight to the extreme right. Well, there's even just on that, Farage's got a competitor who's even further right, Rupert Lowe, who's actually been very strong on the Iran staff and the Israel staff. He's taking votes from Farage ironically because people are accusing Farage of not being right-wing enough.

42:59You know, increasingly people advocate Pauline Hanson to me. I don't know if you have the same experience. And they advocate. And I say, why? How can you vote? Like, it's racism. It's just racist policy. How can you vote? And their view is, well, who else are we going to vote for? Like, we're not going to vote for Elbow. We do not want this Labor government in power. Obviously, they're not going to vote further left to the Greens. The Greens are an extreme fringe party now. And they would want to vote for the coalition, but the brand is so damaged that they think they're going to be ineffective and they don't have any chance of winning the election.

43:35It's a wasted vote. So they think the only chance they've got of getting rid of the Labor Party is by voting for Pauline Hanson. Now, in fairness, she hasn't had a good week this week. Things did not go well for One Nation. Has One Nation softened a bit in their, call it, racist? Oh, they all soften, right? This is the way this works. Like, Marine Le Pen, I mean, she basically got prevented from running by lawfare, we could call it, right? And Maloney in Italy has become far more centrist than she was elected on. She was effectively a Farage candidate. They start on the fringes and then they realise, I can't just get 15 % of the vote.

44:12If I want to get 40 % of the vote, I've got to just move in a little bit. And so, well, if you look at Maloney, she got elected as effectively a younger, better-looking Pauline Hanson in many ways. Pauline's obviously a bit older now. I think she's in her 70s. But Maloney, since being elected, has become much more centrist. She's still on the right, but much more centrist. I think that's right. And I think that's the general direction of travel for all of them in order to kind of win more votes. And then you can say, have they really moderated or do they just want votes? But I'd say the same about Tanya Plibersek.

44:45And maybe you'd say it about Elbow as well. I mean, these are people on the extreme left. I thought Elbow was elected as really a centrist candidate and he's gone left in the last year, like horrifically. left he's done the reverse but what i'm saying is if you say well is maloney in italy has she really moderated or is she still a far right just pretending to moderate you could say the same thing about tanya plibbersek and elbow because they were far left people that said terrible things in my view previously but now they've got i mean elbow yes he's moved left again now but they they kind of softened their image dramatically once they came into power even just a little bit before so i don't know like i can't read people's minds but i definitely know that the direction of travel when parties that start as an extreme protest vote suddenly see well we might be able to get some power actually is they start moderating their views to be more widely acceptable you are yes you are seeing that with one nation we've got the reverse just in the uk there's the reverse and that and they've got the elbow issue so the uk's so starmer's been pincin starmer was elected as a like an elbow centrist type character.

45:51And he's been sort of pincered by Polanski on from the Greens, just like Elbow's been pincered by the Greens. And they've had to go left to cover the left flank and they've left themselves really exposed in the centre. So both, Stammer's almost exactly, follow the exact same trajectory as Elbow. Well, the centre, you can just put your arms out as wide as you can and swing them and if you're in the centre, you won't touch any political party. Like no one is anywhere near the centre right now. But the difference in Australia is the Greens party is, at the moment, they're a largely spent political force.

46:24Like they're on the decline in every election that they've run recently. I think you underate their influence in that they still, well, they're obviously effectively in coalition with Labor now. So Labor, if you look at Labor's asset tax, CGT, I think that was a gift to the Greens, essentially. Yes. And the Greens want them to go harder. So effectively, you've got a coalition. you could have a coalition between Liberals, Nationals and One Nation and you've actually got a coalition between Labor and Greens on the other side. And so you've got those twos that you say, that's why there's no one in the centre because they've had to go further left and right.

46:56But let me tell you the other problem with the centre because obviously, like, I've thought very deeply about this. Like, why is there no centre party? I've thought about it in a personal capacity as well. Like, maybe I should get involved in a centre party. But this is the view I've come to. You can rebut this view, but this is the sad view I've come to. If you go and you say, I think we should just be reasonable, and then people start saying, what do you mean by that? What about this thing? What about that thing? What reasonableness means is that everyone is going to feel a bit aggrieved by what you're proposing.

47:30Like, everyone will feel a bit disappointed. What do you think about property taxes? Yeah, I think property taxes should go up a bit because, like, there's accumulation of wealth in passive assets and, like, I don't think there should be so much negative gearing. and then this is what happens as a result of that the people that own properties they don't like you and then the people that don't own properties they would rather the person that's jumping up and down saying yeah let's smash the people that own properties and because like the you know and so like no one feels passionate about calmness and reasonableness and in an era where everything is extremely emotional like I think we're exiting for the time being maybe for our lifetimes we're exiting the age of reason like science is now just seen as a now one of a number of equal competing opinions about anything you see that in the US right with COVID you know ibermectin I don't know if you know that drug that's an anti-parasite drug it's now approved over the counter because there was enough of a false movement that says it's effective with COVID because they dump like a mountain of it on top of COVID in a laboratory I mean I think you could dump a mountain of potatoes on COVID in the laboratory and probably get rid of it, right?

48:37And so science is now seen as just another equal perspective. I think we're leaving the age of reason. And if we're going back to the age of emotion, which by the way, caused both world wars, if we're going back to the age of the emotion, then centrism and reasonableness and rational argument is super weak compared to one line emotional fighting. And I think that is fundamentally the problem with being a centrist party today. I don't disagree. I think the other issue with centrism is you kind of need an economic downturn for people to really become rational again. At the moment, to our earlier discussion, you can keep hiring public servants and keep maintaining this$200 billion annual debt.

49:17Australia's heading towards$1.2 trillion in debt. The US is like$30 trillion. The US is even more far gone. Europe's gone. Japan, forget about. China's got its hidden debt in local government. So basically the entire world running massive deficits. And people don't care because there's been no government collapses, no confiscations like we saw in Cyprus. People haven't seen the impact of – we're starting to see it with taxes going up, but people haven't directly felt the impact of government largesse spending more than they earn. The centrist party essentially is one that says we're going to live within our means.

49:50We're not going to pander to the far left and farther away. We're going to tax you as much as we need to. We're going to reduce spending. That's essentially what we talk about in a centrist government. There's no – the reason why the horrific Labor government of 1992 was voted out and Jeff Kennett came in is because we had the state bank collapsing, we had the tri-continental. We had people really seeing the impact of this disastrous government. People haven't felt the impacts yet. That's why I think a centrist government can succeed. People need to see the impacts, though. It's not going to happen until we see some real pain on the streets.

50:16Well, I've heard my rebuttal of that. When things get really bad and the economy collapses and people get poor, lose houses and worse, what they love more than anything is not centrist reasonableness, we can fix this. It is extremism that says this is not your fault. You're not responsible for this. They are. Blame them. And when it gets really bad, let's go and kill them. And I know that sounds very extreme. That's why my republic. I'm not sure that's happened too many other places other than Germany. No. No, that whenever there's big economic collapse, I've said this before, like historically, if you look at all of the revolutions that have happened across Europe in the last few hundred years, they all involved some kind of famine.

51:05Basically, when people are hungry, they've got two problems. One is they're prepared to die to feed their kids. And two is they're not working. And so historically, it was farmers not working because there was nothing to work on, there was a famine. And so they've got time on their hands, they go in, get very worked up and spend their time plotting and arguing and whatever. And so I'm not saying that that is where this is going. And I actually think Western democracy today has got better institutions and stronger institutions in place that can prevent that kind of thing than at any time in the past.

51:34But we have seen, we have to say, there has been a politicisation of the bureaucracy and probably parts of the judiciary in Australia in ways that we would never have expected at 20 years ago. It is a worrying, worrying time. And, like, there's nothing I want more than your words to be true. But I do, maybe I'll just say this, I do worry when young people come up to me, students, and say, I make sure nobody knows that I'm Jewish when I go to university. I think to myself, in 20 years' time, if this country was aflame and someone found out that that was the emotion 20 years ago, and I was like, yeah, that's normal, would people just say, how could that moron not have realised where that country was going?

52:20I mean, I think that is alarming when stuff like that is happening. So I do, I am very worried and I think it's not too late, but it's getting there. That's a great point. We'll go to a super quick break, back with lots more real business stuff in just a moment.

52:44And we are back. And we had a very rare IPO on the ASX last month with Skin Candy, a 15-year-old body piercing and jewelry chain, more than 100 stores across Australia with ambitions to launch globally, completing a successful listing. The raise was targeting$146 million. This was upsized to$160 million. Shares were priced at$220 million and the business had an initial market cap of$245 million. The shares actually popped on day one, hitting$2.40 million and has since settled back to$220, implying that the IPO was priced absolutely to perfection. Following the listing, major investor White Oak retained a 23 % stake.

53:19CEO Dane Free holds a 3.2 % stake. And CFO Carl Lara Zabel holds 0.5%. Troncicleer wrote that the company has 100 stores, does more than 650 ,000 piercings a year, and will do almost$90 million in revenue this year. Its core product is trend-driven piercings for 20 to 30-year-olds. Think ear stacks. I'm not sure what that is, but it will just as happily pierce a six-month-old or their grandparents. Just over half its revenue comes from piercings and sterilized earrings, nose rings, or whatever it rings sales at the time of piercing. And the rest comes from off-the-shelf accessories and aftercare product sales at lovely 90 % gross margins.

53:58Skin Candy started with one store in Mooshdaw in Queensland before rolling out aggressively when White Oak invested just before COVID. New stores cost an average$278 ,000 to open and generate$240 ,000 in EBITDA in the first year. There's big asterisk on EBITDA. We'll get back to that later. Making for a quick 13.9 month payback with an asterisk, according to prospectus. Sales in EBITDA mature after two, three years. The average mature store can do a million dollars in revenue and$480 ,000 in EBITDA a year. We'll talk more about that soon. And the obvious comp here is obviously LaVisa, which sells cheap jewellery and listed with 225 stores and$210 million in market cap.

54:36And this was back in 2014. The business is now worth$2.5 billion. It's been an unbelievable story. Obviously, Brett Blundie, another huge win for him. Almost 1 ,100 stores across 30 countries. SkinCandy CEO, Dane Freese, spent three years as COO during LaVisa's global rollout. So he's the perfect guy to be running this business. Well, first I should make a disclosure, which is one of the people you didn't mention on the register is Trent Peterson, who has three quarters of a percent. And obviously I know Trent very well and have chatted to him about this business as well. He's a star. Like, he is involved in Adairs and Dusk and Universal Store and he's on the board of Shaver Shop.

55:17That's right. Shaver Shop is what I think he would change. Yeah, he's had a lot of big wins. Close to Brett Blundy, obviously. Brett and he had Catalyst, which was a private equity business that kind of focused on all this retail stuff. And I don't know if people realise this, but this skin candy is kind of getting the LaVisa band back together. Absolutely. He was the CEO, yeah. Yeah, Trent was involved in it. Dane Fries was the CEO of LaVisa. He's now the CEO of this. Mark Olyphant was the founder of this, still got 7%. So I think the way you could think about this business is a heavily founder-involved business by the looks of it, or at least founder-exposed business.

56:03Mark's on the board. He's clearly not running the business. So still founder-involved business run by the people that were very involved, not the only people, but the people that were very involved in LaVisa. Obviously, there were other CEOs, and Brett Blundie was heavily, heavily involved in LaVisa. so I think there's a lot to love about this business. You'll notice the two IPOs this year, the two ones that were like vertically integrated retail brands, Koala and Skin Candy. Yep. Like I think this is going to be, I've said this for like a lot of years, this is going to be a good place to play for the next 10 years is my guess.

56:42The next two years, this was kind of a bit of a caveat on all of the positives I'm about to say. I think the next two years for discretionary retail might not be great. You can see already they've had maybe not a recession priced in, but definitely bad consumer confidence priced in. If you look at something like Nick Scarley, his PE is at lows. So people are expecting that there's going to be pain, and I've got news for you. There is pain. Discretionary retail today is not a very lovely place to be. this is a bit this is impulse retail more than discretionary retail so if you look at la visa this is very this is very la visa there is one of the business there's a bit of a just just obviously this is a brand self as a as a piercing business which it clearly is but if you look at when it talks about it's tam piercing so the business does 70 million bucks in revenue oh sorry that's a bit high it's 79 so top line 89 89 million this forecast this year and this year's done so you can assume that's pretty close to incorrect but you look at the term it says piercing services 385 million fashion jewelry 1.1 billion and aftercare 77 so it's so la visa is the fashion jewelry stuff essentially this is more piercing related but it's got all sorts of stuff and that's the big growth area is the visa type stuff off.

58:03Yeah, absolutely. And I think this is a bit different because the piercings business, which is a services business, high margin, it's half their revenue. The reason I draw a distinction between discretionary – so I think that people say there's two kinds of retail. There's stuff that you have to buy and stuff you can choose to buy. And stuff you have to buy is groceries, for example, and stuff you can choose to buy is a sofa. And so the stuff you can choose to buy, they call that discretionary retail. but I think there's this other category called impulse retail, which is stuff that it's a subset of discretionary, but it's a very low value purchasing where you walk past and you say, even if I don't have much money, this makes me feel better about myself and it's a little trick.

58:49Historically, people called it the lipstick index. But I think LaVisa and Skin Candy probably fall into a similar category with that kind of stuff. my guess is they'll be less affected by an economic downturn. I think that's probably almost in the form of semi-discretionary. And you can always put travel in that as well. People will still try and travel, for example, even if – so travel's not a sofa, but nor is it a grocery. There is this category in the middle, and I'd say this probably falls in that as well, lipstick falls in that. It's stuff that you don't really have to buy, and it's not a pure want.

59:23It's not like a – usually a sofa you can just hold off. But travel, for example, where you lose the time, you're not going to get that time back. And we saw that during COVID, obviously. So I think there is this third or even a fourth category that doesn't fit neatly in the full discretionary or non-discretionary. I see that with flowers. So the interesting thing about flowers, if flowers feel super discretionary, and then what you realise is that it's all people buying it. It's women, basically women buying it as gifts. And so I thought there would be a reduction and the average order value as the economy got tighter, it doesn't really happen.

59:59And basically it's largely impervious to – I mean, I think if the economy got bad enough, maybe you'd see it. Yeah, to a point. Yeah, but it's largely – it's much more of this kind of – it's not even an impulse. It's like I need to buy someone – I'm not going to not buy someone a present, a gift, and I've got to get them something. And there's not a reason to buy – I think there's two different – I think there's two different non – There's the two key categories and there's two different categories. And I probably put daily blooms and luxury escapes in similar areas. And there's a big chunk of the population that isn't impacted by cost of living and that almost benefits from higher rates, for example.

1:00:36And they're the people who are going on lots of trips. They're the people who can afford to spend 150 bucks on flowers for Mother's Day or for a gift. So there's definitely a big segment of population that is in that category that actually has plenty of cash. And then there's another big segment of population that is struggling for cash and is looking for how do I, instead of buying an expensive ring somewhere, I can buy a piercing, which is a lot cheaper. So there's that sort of closure, call it the discount, Walmart, Costco. I need to buy it. I don't need to buy it, but I would really like to buy it, and it's quite cheap, so I'll be able to buy it.

1:01:07I think this SkinCandy business and LaVisa falls really nicely within that category. Well, so I can cut to the chase here, and I'll explain why. I love this business. I think there are so many things to love about this business. The way I think about this business is super simple. Like I love these simple businesses. I also love retail businesses because you can look at their net profit line and say, oh, yeah, that's a net profit. We can just multiply things by that. And so what I love is this business basically says, we'll pierce your ears and make a ton of money. And by the way, we don't have to employ extra people to pierce your ears because we have to employ that person anyway.

1:01:47So we'll pierce your ears and make tons of money. we'll sell you jewelry and make a 90 % margin on that what does it mean we buy something for two dollars and sell it for 20 on the piece of cardboard and and the ear care because my uncle had a business like this 20 30 40 years ago he was one of the first in australia so real trailblazer uh and the margins on some of that ear care stuff is just incredible it's incredible and then they say i mean this is a business it's hard to believe but this is a business that's basically running on 90 % gross margins overall as a business. Like, I've almost never seen that before.

1:02:20And, like, to be able to do that, so their first half revenue this year, which was a – they grew 25%, but it was a week less than the first half last year. So, like, the real growth rate was far. The 90 % gross margin isn't fully accurate because you've really got to put salary – Maybe. Because it's a service business. If you're piercing ears, you can't ignore salary as part of gross margin. So, I think that's actually foolish. Well, I can tell you the counter argument to that. The number of employees, like, you know, I'm not, just to be super clear, I'm not trying to spruik this. The reason I said I've got a relationship with Trent is so you know, like, that's my relationship.

1:02:55But independent of that, like, the argument that they would make, and you can make this for what you want, but I definitely think it's good enough to not put all the employee expense benefit into the cost of sales, is they don't employ any extra people than they would otherwise employ to do the ear piercings. If you didn't have any ear piercings, we'd need the same number of staff just to do the sales. So just to be clear, I like the business. I'm not critical of business. I'm just saying like the GP number. When you've got a GP, if you've got this year, GP is 80. So you've got top line of not caught 90, cogs of 10.

1:03:27So there's your massive margin. Then you've got salaries of 40. So half of it goes back in salaries. So if you include the salaries, your margin is 50. It's still a great margin. Don't get me wrong. Well, let me finish the thought. You can't ignore it. So if you were only selling the physical product in the store, then there is no way that you would say the seller is a part of gross profit. No way you'd put them in there. And so their argument would be, we basically run a store that sells physical goods and stuff for that, but actually the same staff that we would need anyway are also doing the piercing.

1:04:04So I take what your point is. At most, I take half of the employee benefit. and put it as part of COGS, but I'm not sure I'd take any. Ironically, in a sense, the narrative of this business is the flip side of what I've just said. They would say, we're a piercings business and the staff that work in here are staff that view themselves as piercers and also they sell physical product. But maybe I'd agree and I'd say, just take half the employee benefit expense and put that into COGS if you want to do something. But who cares? They run an 80 % gross margin. I'm not denying the double head up, which is great.

1:04:37We do the same thing in our stores. Our stores handle customers and also do phone sales. So I think that's an elegant... I think that's one of the really nice things about this business that Louise doesn't have, for example. But I don't think... Like, head office, fine, take that separately. But if you've got... You can't claim... If your budget or revenue comes from services, you can't claim that people doing those services aren't including cocks. Listen, I agree. And we have the same view at Daily Blooms. You can't make a bouquet without florists. And so we factor that in. I wouldn't exactly call it cogs.

1:05:10It's like cogs adjacent, but we are completely aligned on this point. It's kind of a side point, but yeah. So the thing that continue to be amazing about this business is, like once you have those gross margins, whatever they are, they're astonishing. Like you end up making money. Like you end up – and so their NPAP margin in the first half – sorry, their profit before income tax margin in the first half, including everything but tax, was like pushing 20 % in the first half, which is quite a astonishing. For FY26, they've got EBIT of 13.4 on top line of 89. So it's not that high. It's great. But for the first half, they did 45, and they kept a pre-tax profit of 7.5.

1:06:00So, yeah, it's like circa 15 % in the first half. I'll give you 15. And so that is a pretty good pre-tax margin. Like, I like that. It's good I'm a business that hasn't scaled for it yet. Well, that's the amazing thing. The amazing thing about this is that from FY25, so FY24 to 25, it grew 39 % and it grew its gross profit 1 % more than that. Like, it's actually still getting margin expansion at the gross profit line. God knows how they're doing that. And so if you believe that this business, and sorry, the last thing I'll say is and they do all of this from tiny stores. So a$250 ,000 fit-out cost for a store, that is absurdly low as a fit-out cost.

1:06:44A small store, like 40 to 60 square metres, right? Tiny store and what's in them? Racks to sell stuff and an area out there back to do piercings, right? I mean, this is like, you know, you compare this to a Nick Scali store, which is like 20 times the size and it does have a fit-out cost. You have to put nice floor, nice walls. Yeah, and the fit-out, I think it only costs 200, like a couple hundred K. 250K for a fit-out. Yeah, to fit-out, which is low. So I can say my preference for a store rollout is to say at the store profit line, we want to pay back the store in nine months. And that's real store profit.

1:07:27And so that would be, now that's hard to achieve. It's achievable, but that's hard to achieve. ironically Trent actually taught me that particular approach to life this is not quite that good but um god they make back there they recycle the capital to roll out these stores incredibly quickly one of the things I thought was kind of unusual is um one of the main ways that they got margin expansion from 24 to 25 is their occupancy expenses barely rose but I suspect that is more of a factor of like, like, you can't trust occupancy expenses on a profit and loss. Yeah, it rose a lot. It rose a lot this year.

1:08:09I was going to get into that. Like that, that, one of our favorite topics, because some, that flog who completely ruined EBITDA, the whole, the leases thing in this business makes EBITDA a complete waste of time. Yeah, you can't look at EBITDA. And you should, we can explain. It's because the accounting standards mean if you pay rent on a store, There used to be a line called rent on a store. I mean, it wasn't called that, but close enough, occupancy expenses. Yeah. And now it's broken up into three separate pieces and scattered all over your profit and loss. And really the only way that you can find it is looking at the cash flow statement.

1:08:43And so it, like, these people, I mean, I have to say, but these people are morons. It's moronic. It's dumb in multiple ways. It's moronic. So it's dumb because it's ruined the P &L. It's also ruined the balance sheet because you now got to put your lease liability as a debt when it's not really a debt because you pay it. A hundred percent. So they've ruined both the P &L and the balance sheet. If you look at these guys, it's pretty clearly in the note. So eventually, if you look at they've got lease, if you look at FI26, which is about to end, they've paid$8.9 million for what we call payment of lease liabilities, depreciated$6.8 million, and they had lease interest of$1.3 million.

1:09:19So it almost matches the depreciation in a way. It's not quite, but that's why the EBITDA number is inflated by around$8 million. So they report 23.5 million EBITDA, but 10 million in depreciation. So really the EBIT number of 13.4 is really a kind of proxy for the EBITDA number because there's no other real depreciation for EBITDA. Well, what I love, this is an honest business. If you look at their cash flow statement, in the financing cash flow, they very clearly write payment of lease liabilities, boom, there's your number. And so you can say like in the first half, We made$9 million of operating activities cash, but there was also$3.5 million of lease liabilities.

1:10:01And so just take that off because that's actually operating. The only sort of asterisk I'll give there, and I think you're right, it was pretty easy for us to see this, but they did talk about EBITDA a bit and I think they should call it do a reverse WeWork and say EBITDA after lease expenses. I think every retailer should do that. and we should say, yeah, you guys have stuffed up profit loss. We're going to fix the profit loss that is down in standard boards and stuff up. We're not going to talk about EBITDA. We're going to talk about EBITDA after lease costs. And if you did that here, that'd be completely – like no one does it, but that's what I'd love to see these guys do, just to just say people having to do the extra work because it just isn't unnecessary.

1:10:40It means EBITDA, they've stated, is a waste time. You shouldn't be ever referring to it because it's a completely meaningless number. It has no relevance to anything. So I'll say that if someone is looking at an income statement of a retailer, often you'll see something that says AASB 16 or IFRA 16 adjusted EBITDA or excluding AASB 16. That's the relevant part of the accounting code that ruins this. And what they'll do is try to show you, forget about this junk. This is what it would look like if we didn't have to go through this junk. And so that is the way they try to do it. They just say it's – Well, the reason why I find it really disappointing here, and it's so easy because they use – they give a really good – I don't know if you saw this chart, figure 17 in the prospectus, and it's got mature store revenue and store level EBITDA per store.

1:11:35I love this chart. Yeah, I agree. And it's got every store, and they own like this four franchises, basically all company-owned. So the Visa model, which is great as well because that means they're going to keep the profits. and also I think I just think it's a better model in this given the capex costs are so low so you look at the top store the top store makes like a million bucks EBITDA and then the second one makes a million as well and there's a bunch at 800 ,000 and 800 ,000 then you sort of get to the median the median is 400 and something then there's a bunch a couple that make basically anything and there's a bunch that sort of make 200 300 400 but this is normal right because you're giving a go and you don't know quite I'm not criticizing that I think the graph's great but it's got no lease costs in there.

1:12:13So it's actually meaningless. They should have done this graph after lease costs. Maybe the million bucks is a$500 ,000 lease. I don't know because every lease cost is going to be different. They haven't put it in properly, which is really frustrating. So what would be a really great graph is now actually misleading and useless. Well, this is the problem with accounting standards. Like this is a very honest – But they could have overruled that. They could have said – I agree with you. What I'm about to say is the problem with these accounting changes is this is an honest business, but ultimately everyone is going to try and put their best foot forward in some way in these things.

1:12:46And I agree entirely with what you've just said. But also I know what the world feels like on the public company side of these things. And, like, this is just inviting those type of graphs, these changes. And, like, I agree, like, it would be important to have the least stuff in there. but they got it they just got to get rid of these morons who are on an accounting crusade instead of trying to provide the core focus of accounting which is help me understand how this business is going yeah we agree on that my point is more we know these rules are ridiculous they but and i'm not saying these guys aren't an honest business i think this when they when i could have shown a graph that was really helpful to them.

1:13:31And now I'm now, and I think investors probably say the same, I'm now somewhat sceptical because why aren't you putting your proper occupancy costs in there? Like they know, they have this data. They know it all. And they could have told us, but they haven't. They've given us this meaningless chart that was actually misleading. So it's really frustrating. But anyway, it is what it is. So this is a bit, no, I agree. So we're in agreement on that. So this is, in summary, we can say this is a business that is going to make$8.6 million, according to its prospectors,$8.6 million of net profit after tax this year.

1:14:07Forget about the balance sheet. There's nothing on the balance sheet to adjust for. What's its market cap? Call it$250. $250. And what did I say? Eight and a half mil. Yep. Yep. Approximately. Yep. So 30 odd PE. And so you can say, yeah, do you think that a price-to-earnings ratio of 29 to 30 times net profit, do I think that is a good price? One thing I'd add is last year they paid$4.5 million of dividends. Yeah. It's pre-IPO. Presumably everyone knows there's a dividend-paying stock. Like they could pay, I don't know what their dividends are going to be this year, could be$5.5 million? It's actually remarkable it's paying dividends given it's rolling out stores.

1:14:53I tell you. And then the company stores. So this is what I think people don't understand about retail. A lot of retail, it's not just retail, but a lot of retail, the success of a retail business and how appealing it is, is based around the way that working capital operates in these businesses. And this is what I mean by working capital. you know what I mean, but this is what I mean by working capital. How much of your money as a shareholder does the business keep hold of in order to run? Yeah. And the beauty, and so really you want to run negative working capital businesses, which sounds terrible because it's negative working capital, but actually it's amazing.

1:15:36It means instead of you having to tie up your money in the business, the business actually has money that isn't really yours at all. There is a dark side to negative. I run one of the most negative working capital businesses in Australia, so I'm very familiar with it. There's two dark sides. One is you can unwind that working capital and go bust. But the other dark side is it means your competitive moats are much less because it means competitors can start up with no more little money. Well, on the assumption that you didn't spend 10 years building your working capital, negative working capital thing, because I think the truth is, that's what I see in retail, In retail, most founders on sub-50 mil revenue businesses, maybe sub-100, most founders do not understand working capital at all.

1:16:26They don't even understand margins, by the way, but they don't understand working capital at all and they have no idea how to optimise their working capital. I think I'd say most investors also aren't great with it. You've got PE guys who sometimes can be too aggressive because it's in their interest, and you've got other investors that don't understand it either, especially in our negative working capital context. They really struggle with it. And so the beauty of this business is as follows. Their inventory is only$6 million. Because it's such high margin. It's such high margins. Because that$6 million of inventory is$60 million of value to them.

1:17:00And so we can say probably it's$54 million of value because some GST, 55 mil. But like, so they need virtually exactly, or it's a great point, Adam. Like there's such high margins. They've got such little inventory. There is some – The inventory will turn fast as well, right? There's some amazing things about this business. And you were sort of touching on it. Look at the beauty of this business. There's a couple of beauties of this business that I really love. Let's go to first principles for a second before we go to powers. And you've touched on it really well. But the fact they've combined piercing and jewelry sales is such a beautiful mix of service and good.

1:17:35So you're in there. You're getting pierced. i might as well buy the products here as well because i'm here anyway and i trust this person and they're selling to me so that presumably they teach these people how to sell so you've got this you've got this captive customer who's coming for one thing and you've got this amazing margin expansion on this huge margin and you're not paying for it in this small store so it's actually amazing that these guys at the half my uncle started this 40 years ago couldn't execute like mark olifin who's an unbelievable job how has nobody else come up with this concept like this just so obvious that and even better they've taken a brand of piercing you think of a big big tattooed guy about to stab you in the ear like that's what that's what i think of a tattoo parlor in many senses here what these guys have done is turned into a much nicer beautiful retail concept they've mcdonnellized tattooing essentially or piercing which is think of piercing i think of blood streaming out of somebody's ears in this case you want to go to a place that's branded that's nice looking because you're getting a quasi-medical procedure it's not medical but why do you think so you think about that but that's not how i think about piercing i think about piercing as price line that's who does okay okay i don't think about that i think and so the question is why has price line not been able to execute this that's an interesting question right like you're going in there that is a pharmacy brand is more trusted than a piercing brand health-wise and whatever.

1:19:01It's usually done in pharmacies. That's what you want. Uncle Salto pharmacies. Yeah. They have a big floor plate relative to this, so they could stock lots of these things. I think they – and you look at – so I tell you which pharmacy doesn't do piercings. Chemist Warehouse. They do not do piercings. Which is interesting. But they're genius retailers, so there's a reason they don't do piercings. There's a reason. I don't know what it is, but there's a reason. And so that's what I found most surprising about this business. They've said there are actually naturally good places to go and get this done that could execute well.

1:19:39But if we create a brand, and so we'll come to Pounce, but if we create a brand that's super appealing to the target market, we think that we can execute this really well. And, like, we can do it in a way that doesn't tie up much investor capital, that when we roll out a store within a year or so, we can get all the money back that we invested in that store. because if you look at their, you know, they've got one of the things that's gone up cash-wise is investment in property, plant, and equipment. That's almost entirely investment in fit-outs for stores because they're growing so quickly. Well, their store count isn't growing that.

1:20:12Like, it's pretty linear, the amount of stores they had each year. It's linear, but they put another$5 million of additions of property, plant, and equipment. Yeah. And, by the way, there's basically no addition of property, plan equipment except property improvements, which is fit out. Yeah. There's very little – after you fit it out, you don't have to spend much on it. It stays. Yeah. It's not continued depreciation. And so, like, so they don't tie up money in stock, much money. They don't tie up money in property improvements, because it gets recycled so quickly. And so that's why they can pay all these dividends, because the business is not gobbling all of the money that's yours.

1:20:51And so you think about this. Well, they could be expanding faster. is expanding their dividends. Well, maybe they couldn't. I expect that will do. Well, maybe they couldn't be expanding faster. Maybe there are operational limits to how fast you can expand. How many stores they had last in 2026? I think they're adding like 10 stores a year or something. Okay, they can probably do it faster than that. I agree. Maybe even less than 10. They can do it faster. I don't know if they say whether they're going to pay dividends or not. I presume that. I mean, I don't know the answer to that. but what else there could have been a dividend payment because obviously the shareholder selling down just get some cash out for sure maybe that won't go on now you could be right I actually don't know if they're going to pay dividends what else do you you said there's a few things you like what else do you like oh that's the main thing I like I love the fact that really brought brand to you're right with Priceline but yeah it's generally but there are now I'm thinking about who my uncle sold to it was it was pharmacies but it was also those tattoo type places so I do get it but they clearly made it cool they've built this great brand that people recognize now.

1:21:53And that will continue to grow, obviously. The more you have that LaVisa scale benefit really starts kicking in, you start getting more power. Well, these guys are not a big power with landlords, but you get a better brand with landlords. So suddenly, I know when we went to our first store in Chadston, it was hard because we never had a store. And now we're on store three. It becomes easier because, you know, the landlord, they trust you better. And you've got a chairman. You've got a chairman and CEO that are associated with LaVisa. They know how to do leases. Yeah, exactly. Like, they know how to do leases.

1:22:20And they're trusted, yeah. So I think they've definitely got brand power. And, you know, LaVisa, I think one of the most interesting things about LaVisa, and we should say LaVisa is not completely analogous to this. It doesn't have the services component and it is different. And it's an international business now. It wasn't when it started. I know, you're right. Obviously, the big narrative on this is you missed LaVisa. I mean, you might say you didn't miss LaVisa, by the way, but you missed little LaVisa. This is little LaVisa. You can go back in at the ground level. I think that's the pitch.

1:22:56You know, the thing is LaVisa, when you go to a mall, you see a very unusual characteristic in LaVisa that you don't see in many other retailers. And that is they have multiple stores in a mall. Very unusual. I didn't know that. Yeah. And the reason is it is such an impulse purchase that the more people they have, the more foot traffic in their target demographic they have walking past the store, the more sales they make. And so a big mall, you might not walk past one of their stores. That's okay. We'll have two of them to make sure you do walk past. Like that is very unusual for a retailer. And I think that's – and so LaVise has a great brand.

1:23:30I think Skin Candy, they're going to build themselves a great brand. They're already starting to build a great brand. So that's a spree. I'm trying to think of who else has more than one store. I can't think of any store that would have multiple stores. There probably is, but like almost no one would have. I'm racking my brain to try and think who could have multiple stores. So a food store would be... Maybe a Boost Juice, maybe? A Boost has two in Chatty, for sure. Yeah, so a food store, any food store, would benefit from more than one because... But they don't usually have more than one. You don't see two McDonald's in Chatty.

1:24:01I don't really understand why. Like, maybe McDonald's thinks if you want McDonald's, you'll go to the one that's in there. Yeah, you go to the one. Yeah, yeah, go to the one. Do you think... I think food in a mall is very much an impulse purchase. Like, the food court that you're in is where you're going to buy something, the one that you're near, and sometimes you'll walk to a different one. But, yeah, there are not many. Well, it's probably – I think you know why. I think it's because the franchise thing, the Maccas, you need to have the same – otherwise you'd have a franchise problem if you've got two franchise stores, whereas Lovisa owns the stores.

1:24:28Yes. And so do these guys. They don't have that issue with franchise. They can just – and Boost, I'm pretty sure Boost own most of the stores. So that's another big benefit of the corporate model. You don't have that agency cost. Yes, you're right. So we should say these powers are like Hamilton Helmer's Seven Powers book. We won't go through them again. Now, go have a look at them. There are seven powers. So brand, yes. You think they've got anything else? What else? I think brand, yes, and definitely growing and will grow over time. They'll get scale benefit, right? Remember, the time to – where Hamilton Helmer's powers work really well, it's not in the Microsoft situation where you go, oh, Microsoft's got all the powers now, great.

1:25:05It's where you're starting to see a business develop those powers. Exactly. That's where it's really better. So here we see – here we see LaVisa. Here we see SkinCandy. You've got some brand power, but it's – they've got 100 stores. They get to 1 ,000 stores like the Visa. Then they've got more brand power. So what you've got here is the makings, the near certain makings of brand power. It's probably not there yet. So this is where you want to invest, where you've got brand power down the pipe. And will you say the same about scale? I think they're developing scale. Yes, 100 % you say the same about scale.

1:25:33And as you get more, actually, I reckon they've actually got scale because that gross margin of the 90%, well, it was 90 or 50, if you include the service people. There already is some scale there. They've got 100 stores with great buying power, for sure. They can buy the ear care in bulk. They can buy the earrings in bulk. There's definite benefits already from scale there. So they also would have scale in the sense that they've got processes and systems and money to go and roll out stores efficiently. And that beats other players. But they don't have scale relative to Priceline. Now, Priceline is not a head-to-head competitor today because for whatever reason, we'll get to that at the end.

1:26:14but they don't have scale relative to prospective competitors. Yeah, but a lot of pharmacies selling it at one or maybe there's a chain of five. Forget price line, that's one. But against everybody but price, they've got scale powers for sure. Yeah, yeah, that's true. And I don't think they need to bother about any other powers. You've got a counter position probably, but whatever. As a vertical retail business, well, their counter position is what you said earlier on, which is where would people typically go? They wouldn't go to a specialist location that focuses on this demographic to provide this product and service.

1:26:52And so, but it's not true counter positioning because I was going to like save this to later, but I'll say it now. Like, I don't know why Priceline doesn't look at this business and say, we should open a sub-brand called Priceline Piercing or something like that. And we should just go and replicate this model and roll it out. And like true counter positioning means if the incumbent tries to compete with me they'll damage their own business yeah where you've got yeah this is not that the counter positioning here is they can open a 40 square meter store price line stores are massive they can be popping stores in places price line can't that's a nice condition but price line could do this price line could say we've got a store in westfield bondi junction chatston wherever it might be we're going to open a second store price line piercing it's It's not a great name.

1:27:39I'm using it as a placeholder. But we can open a second 40, 50-meter store in the same mall. By the way, that will help our brand because we get a secondary store with some Priceline branding and we can replicate this model. And we think they're building brand, but we've already got brand with Priceline brand. Who owns API now? Is it Woolworths or Cole? I don't know. Remember some franchisee went broke recently? Yeah, but I think Woolworths own it. Who's the parent? I'm not sure. Yeah, because API got bought. It was a disaster for many years. Yeah. There's no network. There's no process power, really.

1:28:17There's no corner resource, I don't think. They've got something that's a power, but it's not a power. But it's powerful, okay, which is the people behind this, it's not their first rodeo. Well, that's a corner resource. The founder is a corner resource. Well, the founder's not involved as much anymore. But with respect to Steve Jobs, the corner resource. The chairman, the CEO and chairman, like there are other people. Do you have a cornered resource then? Yeah. Well, I would more say there's other people that know how to do this. It's not, let's say a three out of ten as far as cornered resources go.

1:28:50Well, it's the family's cornered resource, yeah, whatever you want to do. But definitely if someone decided they want to do this business tomorrow and compete, they'd be competing against people who really know what they're doing and have a head start. Yeah, massive head start. That's the difference. And so it comes down to do you want to buy this business for 30 times earnings? Yeah. So can I give you my two bull cases on it? So we gave sort of our – there's no real bear case really. It's all just sort of levels of bull cases. Well, the bear case is something happens where, I don't know, it would have to be competitive, the bear case.

1:29:29Yeah, it's Priceline does Priceline. Or Chemist Warehouse, who we know are incredibly smart, start doing it because they see this opportunity. That said, let's say you can build a billion-dollar business. Even Chemist Warehouse, they're now, what, 30? Like, Chemist Warehouse care that much about maybe$1 billion? I don't know. Well, you know what Chemist Warehouse's business is. What's their business model? It's a media business. Media business. Get people into the store and sell the media. Yeah. So there's a non-zero chance Chemist Warehouse do it. You're right. That's the competitive. but I think you look at the TAM is pretty significant here.

1:30:05I think they're probably not far off on the TAM, so you've got a massive TAM. Your TAM is also LaVisa's TAM in a way because you can start selling other jewellery stuff, so there's that TAM. Because once you get the customer in that door, you've got the customer. There is actually no reason you can't start putting LaVisa stuff on the walls. Yeah, I'm not a fan of piercings myself, but people love them. So clearly there's this. I don't think you're the target. I've got news for you. Obviously I'm not. In a way, it's hard for me to put myself in the shoes of a customer. In fact, I think the next bet, Mike, should be if Adam loses the bet, he has to go and get some piercings.

1:30:41Actually, you've got to sample a skin candy experience. There's no way I'm getting a piercing. I can't even collect from the two bets you owe me for. A ruby nose ring. That's what he has to have done. There's literally zero chance of having. I don't think skin candy is selling ruby nose rings, by the way. The biggest, my biggest bull case on this is, you go back to that graph I told you about, which I'm a bit annoyed that I didn't put lease costs in there, but is the EBITDA per store. And they've got stores that make, even if I'm assuming a big lease cost of call it, I looked on Gemini, I said, what's the average lease cost for a store?

1:31:13They're probably paying 100 to 200K in annualised lease costs because they're small stores, they're 40 to 60 square metre stores. And shopping centres do love this stuff. So they're a kind of destination. So your shopping centres give good leases and you can put them in a strip mall, you can easily get 50 square. So I think they've got stores making 800K and it costs them 300K. So you've got your payback period of four months. This is the best stores. And this is obviously a mature store. But what, and why I like my GYG bull case is their franchisees make heaps of cash. These guys don't have franchisees, but they can make heaps of cash from stores and that will get better as the powers grow.

1:31:50So clear bull case here is they have a really profitable business at a store level. That's great. And they don't need franchisees. They can do it themselves. It's hard to think why these guys aren't rolling out quicker. But all these guys need to do is just rinse and repeat. And not just in Australia. You've got UK. You've got US. You've got other countries. Nobody's done this really anywhere well that I know of. I'm obviously not deep in this sector. But as far as I know, these guys are – and same as LaVisa. LaVisa's global. So I think they can follow the global rollout. There's a massive TAM here.

1:32:23These guys are the best in the business. that's profitable now, I'm not sure what there is to not like about this. Yeah, and I don't think it's expensive at 30 times PE at all. Well, that's the only thing that people could have an issue with, I think, is do I want to pay 30 times PE for a piercing business? But not for a business growing like this with these margins. It's not only growing, it's got this huge growth potential. Yeah, yeah. Like I'm totally in agreement with you. One challenge is I don't know what the turnover of this is, because 95 % of the stock is held by the top 100 shareholders, I think.

1:33:00No, there's 65 % free float now. 65. Oh, okay. All right. There's a lot of shareholders. That's actually a bear case. I don't know why they sold down so much. Well, I can tell you that Trent got into this business relatively recently because he believes in the potential of it. Mark sold down quite a lot as well. Founders sold down more than I would have liked. He's been doing it for a while, though. Yeah, 2010. But, like, this seems to be a rocket ship about to take off. But he might not have made any other. He might not have made other money from other stuff. Who knows? I'm not denying that. But, like, this, to me, I'm bullish about this business, really bullish.

1:33:38I'd be holding on for Grim Life if I'm a shareholder. If I'm a founder as well. Maybe. But, like, I'm looking now at the last few days of trade, yeah? I mean, it's just two weeks or something. Yeah. So one day there was 2 million shares that changed hands. So that's$4 million,$4 million, let's call it,$4 million. But most days, there's a couple of days. One day that got to half a million. One day that looks like it got to$250K. Most days look like they're$100K or whatever. I think it might be hard to get in and out of this stock. Maybe I'm wrong. You can rebut me on that. But the current volume does not look very high on this stock.

1:34:17But having said that, it's a very small market cap stock. I mean, this is a micro cap stock. So maybe that's just how it works. I don't know. You know what? I'm kind of trying to find things I don't like about this, but I should shut up because mostly the criticism we get is, why are you so bearish on everything and everything is a short? And I can tell you definitively for both of us, this is absolutely not a short. Well, our last two, both SightMinder and this, we both really like. And SightMinder has been on a tear since we spoke about it. It was actually on a tear before we spoke about it, but it's been on a real tear.

1:34:47It's up 30 % in a few months and 15 % since we both liked it. I think it's similar. I think it's going to be a slow burn. I think they're going to have to prove to the market over the course of two or three years that they can actually roll it out. But I can't see why it can't be a billion-dollar business in five years' time. So I say my favourite kind of investment, I'm a bad trader of stocks. Most people are. I am as well. Everybody's a bad trader. You shouldn't be trading. Yeah. There are a few good trades. But, like, I can't – like, when something is crazy, I can't go near it, even if I think it's going to get crazier because, you know, we both have that problem.

1:35:28And so I look at this, and this is my favourite kind of business. It is a founder is involved, it's got good management, you can see a great long-term path. So I believe in the business, I believe in the leadership, and I believe in the TAM. This, to me, is a business where you can potentially invest. and say, ring me in five years and then ring me again in 10 and tell me how the investment's gone. Like, I think this is potentially one of those businesses. Yeah, absolutely. I think there's one where you buy and put in the drawer and you trust Trent and the team to execute again because they have.

1:36:02And this year, I actually didn't expect to like it as much as I did. I thought it priced more highly. I thought, I think the other benefit of micro caps is you just don't get the coverage you get. Like SpaceX, you get a million people covering it. whereas this business will have a little bit of broker coverage, but it won't have full coverage, not until it hits the billion plus like LaVisa did. Well, you'll have coverage from whoever did the IPO. Yeah, exactly. Because that's the kind of quid pro quo of doing the IPO. There's a couple of brokers that did the IPO, so it was dual mandate. And that was the catapult experience.

1:36:33I remember we had our IPO. I can't even remember who did the IPO, to be totally honest. And it was a long time ago. And we got coverage. 10 years, 11 years. You can get about them. Bell Potter. Bell Potter was one. Yeah. And I remember Canaccord declined the IPO because they were conflicted. It wasn't a great decision by then. But we've since become close to them. So redemption was there. And we were too small. It was like this was like, I mean, we say this is 220 mil. I'd have loved to be 220 mil. We were like 60 mil. It's like hard to get. That was years ago. 60 mil in your day was like 200 now.

1:37:12No, it wasn't. 60 mil was still tiny in, when did we IPO? 2015. It was still tiny in 2015. It was tiny. And so, you know, and gradually as you grow, like, you get more coverage. And there's only two reasons that investments banks cover you. One is because Chinese walls might not entirely be real, which means they're covering you because they want corporate activity, ECM, make money out of your transaction. Yeah, of course, they're charities. Yeah. And, well, they say got Chinese walls, so those things are separate. it and the second reason they cover you is because they think that um you're going to go up and if they tell the people that invest through them funds or wealth management like high net worths if they tell them to buy you they'll make money and then they'll get trade and whatever it is so and so i think yeah this will get more coverage every time especially with this this management team involved like they're a known team so yeah i i think we're just uh continuing to just be boring and say, we think it's great.

1:38:13We very much agree to agree on this one. Good suggestion by yourself. Actually, it wasn't me. I can't remember who suggested this. It was 100 % me. What are you talking? Really? I was thinking about it. I was actually thinking about it, but you did say it. This is what happens. I'll give you credit for this. I was merely thinking about it a few weeks ago. Well, this is the most work I do. I say to you, I think we should look at this company. But then you write it up and i understand why you feel like it came from you because you do 412 times the work that i do mike you know this you know this skin candy brand were you familiar with this brand or not i actually had never heard of it when you put it in the group chat i'd honestly never heard of it i'm shocked i thought you've got like 100 piercings mike you know i've always been adverse to piercings and tattoos because when you're clean when when i was a boy my dad used to tell me he'd get really angry at me if I ever got a piercing or a tattoo and I think it just lives with me now.

1:39:11I had a pierced ear as a kid. Did you actually? What the hell? Okay. This is you're talking about burying the lead. We need a photo of that for the LinkedIn page this week. It has to happen. I thought it was very cool. I'm getting Robin Schiffen on the phone. I'll be getting a myriad of photos from our dears youth. That is the new cover art, the new podcast cover art of the idea with a nose ring or whatever the hell you had and not only not only no an earring an earring and tongue wing as well and no just an earring and um and then i went to israel and like you know i was like 19 i thought it was i thought i was very cool with this earring and so i didn't just have like a little stud like i got like a pretty big sleeper and yeah oh yeah i can't believe this revelation has come an hour and 40 minutes into the podcast this is our our listeners will be furious here People have dropped off and missing the morsel.

1:40:09I should have asked this ahead. This is my interviewing fail. The thing about getting your ears pierced is if you look at my left ear, like there's still a hole there. Like it's closed up, but it doesn't go away entirely. So it's like, you know, a fossil. My left ear has a fossil of a previous life. Yeah. I can certainly say I've never had a piercing and never will. Unless somebody like pierces me or I'm dead. But thank you, guys. That was a great episode. Again, as always, we'll see everybody, of course, on Saturday for our Ask Us Anything episode, which has been back after a couple of weeks hiatus.

1:40:41We had an amazing, obviously, chat with Matt Hine last week, and we're back with our fantastic Ask Us Anything episode. So thank you, guys. Thank you, Will, for popping on. Don't forget, if you want to win that incredible$500 Luxury Escape voucher, and also, I think he has promised to get some other vouchers as well. I'll get vouchers. We will also – I might give the two Melbourne Tamale and return flights. the only way you can get to Melody is direct on Mushroom Escapes. We'll give two economy tickets. My God, that's a great That's the person who does the best ramp up on social. Could be LinkedIn, could be whatever.

1:41:12People actually do this anyway. So a very deserving person will get the two tickets and we'll get Will and Mike to maybe choose that. I'll want to stay well out of it, but we'll just supply the tickets and we're getting closer to announcing extension on that flight. So you'll be able to go hopefully next year as well not just this year. So we'll have those two economy tickets. We'll give it a bunch of different flights to choose from. So the biggest ramp up, how much you love the Contrarians, how much you want to see our dears nose ring, how much you want to touch our dears' bikes. I'll tell you that will count.

1:41:43And that will win the two tickets. So maybe we'll give a couple of weeks for this. So we'll announce this in a couple of weeks. That sounds great. Well, that's a great prize. Very good. I was going to give away your house, by the way, if you wouldn't have come up with a good prize. You saved your house. And I'll just say, guys, make sure you head over to thecontrarianspod.com for summaries of every episode as well as some exclusive writing from both. What's the URL? It's thecontrarianspod.com. Yep. And as well as that, you can head to the YouTube channel, just search The Contrarians with Adam and Adir.

1:42:13We're slowly trying to get full video episodes of each episode, as well as that there's just like highlight clips of the show going up as well. So however you want to consume the show, we're hoping to have a solution for you. Yeah, we're going to be very close. Well, this episode will be up. in full and we're going to get as many as we can up in full. I've got this fancy set up. I didn't bring this light up to the Gold Coast for not putting it up in full. So this will be up. I'm starting to feel a bit nauseous at the professional in this podcast. We've reached all new levels here. So thank you, everyone.

1:42:43We'll jump off, let you get back to your Tuesday morning or whenever you're listening and see everybody on Saturday.