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The company does hold treasury shares which have been purchased as part of its shareholder returns policy and these can be treated as if they have been cancelled; they are not entitled to dividends and carry no voting rights.
It makes no difference whether the shares are held in treasury or cancelled etc, it's just irrelevant to the intrinsic value, I see this all the time on here.
The only thing that matters is if they buy back shares lower/higher than the intrinsic value or issue new shares lower/higher than intrinsic value.
No sane board if just going to randomly issue 33m new shares for no reason unless their was a valid growth opportunity that had ROIC much higher than the cost of issue.
Exactly! The market cap is lagging previous highs, so we must have further to run. The market cap should be higher to reflect all these positives, but still remains lower than it was in 2022. Ridiculous.
Which gives you some idea of the trust lost in Plus by the big institutional buyers, because of the previous shenanigans by the Plus BoD in the past. Re-locating to London or New York from opaque Israel would be a good start imo. Others may differ in viewpoint of course. And those shares...........there's previous with the BoD handing them out to directors. Much better, for all concerned, to cancel them.............otherwise they're still there, however tortuous to re-issue, to be re-issued......
And in addition, as time continues, an ever increasing proportion of the intrinsic value of each share is backed up with cash. Not client cash...but owners' cash. With £1.23 = £1 yesterday, the cash pile must be currently worth a solid £10 per share.
Calculations:
Approx 77.78M shares outstanding at close of business today, assuming about 30,000 purchased today. (see RNS tomorrow)
Approx $1Bn cash held (it was $985M at 31 March). See RNS of first quarter trading update.
Assume £1=$1.25 and the $1Bn translates into £800M today.
That's more than £10 per share as a margin of safety when buying Plus.
I am a holder.
SeaTank that is an excellent observation. So the share price isn't keeping up...I should feel even more relaxed!!!
The more shares in treasury, the more value is concentrated in what shares are left in issue. They have been buying back shares at heavily discounted price levels, which is only a very good thing for all of us shareholders. Their EPS is enhanced purely by these share buybacks. Considering more than 10% of the shares have been purchased in the past year, the market cap of PLUS is actually still below the high at end 2022 and early 2023. To be precise, the market cap today is £1683m, vs £1730m in Jan 2023 and 1800m in Nov 2022. The share price looks like it is run up a lot, but the market value of PLUS is actually still lower than it was at the end of 2022, which is very odd considering they have created a sizeable and fast growing US business since then, not to mention opened UAE, Japan, etc.
If you think about it, if you couldn't cancel the shares, then what would be the point of buying them back, surely the shareprice would eventually tend to zero as you'd have all shares in treasury and having no real value, extreme example i appreciate...
I don't think anything can be done without a shareholder vote. I'm going to hunt out the detail from Israeli corporate law, give me a few days...
I don't think that you write is the whole story, SeaTank. If I look at the daily statements of the company, I see that on December 29th, 2023 they stated that they had 35,930,522 shares in treasury. A few days later, in the statement on January 3rd, 2024, they declared to have only 35,197,089 in treasury. So obviously they did take shares from the treasury and gave them to the directors and managers.
Personally I have no problem with the shares being held in treasury, and if they give some(!) to the directors, I can accept this.
Management have pointed this out a few times in calls
Hopefully you all will understand by now, the shares held in Treasury will always remain there, and can never be re-issued, which is a feature of Israeli law. They are unable to be cancelled or deleted. They are unable to be re-issued to anyone, neither to management nor to shareholders in an offer. They will just sit there permanently. In effect, they don't exist any more as shares. This is a feature of Israeli law and nobody can do anything about it, I'm told.
I’ve given a lot of consideration to those shares in the treasury. I think they’ll either simply cancel them at some stage in the future to create some additional upside when PLUS is somewhere close to fair value or I they’ll float them when they IPO on the NYSE or following the NYSE IPO. Nobody has a better understanding of clueless trust fund retail traders than Plus 500… I have absolutely no doubt that they’ll make the right call on this front
It's these little peccadillos that Plus could eradicate so easily. If those shares in treasury are so difficult to reissue then they should cancel them imo - it then stops argument about Plus potentially giving them out to Directors or them being reissued. If what you've written is true (that they are v v difficult to re-issue). It's a small thing, but as another poster has written - the shares would re-rate immediately. Right now you've got 37mill shares just sat there not doing anything but fudging people's calculations/true value/skewing people's views on the value of the company (via it's total shares). Just a thought.
I believe it makes no odds to cancelling the shares, in israel law they are effectively cancelled already, they can reissue them no easier than just creating new shares from scratch.
Imagine if they cancelled the shares in treasury - this would rerate 50% in a flash, £30 target for me…
Quite a week all in all. Possibly some profit taking next week (down to high 19's perhaps?) with a slow rebound back up to £23-£25 depending on investor sentiment etc imo.
It feels like the next natural stop is £25 but with a slight profit-take/downward pressure - in between, as you say. You called the £21.00. nice.
I'm guessing we'll breach 2100 then consolidate for a while. I guess the market will be watching progression of CFTC data to observe how the US business is developing. VIX is up 40% since end March, so that is broadly supportive too.
That's a fair challenge gglvr. I thi k we are on the same page. My aim is not to precisely value the business but to fotm a firm view as to whether buying at today's price offers a margin of safety. I think so.
What institutions overlook to date but will appreciate in time is the diversity of the business today, by geography, regulatory oversight, and product. PLUS does not need to hammer one particular market, such as UK CFDs, with marketing dollars to squeeze growth out at any cost whilst eroding margins. PLUS can be seen as a technology and regulatory platform which is truly global, thus targeting niche markets and segments all over the place at the same time, eeking out incremental clients and profits without depressing profitability. The next legs are US commodity futures, UAE, Japan, but there will be more after that, such as European derivatives.
This is why this is a sustainable growth business and is worth an ex Cash PE of >10x, in my view.
On valuation, personally I look at ex cash PE.
The market cap is USD2,000m
Unrestricted cash (non-regulatory) is around USD500m
Net income will be around USD300m
Ex cash PE = 5x
What is it worth? My view is that this business can maintain the profitability of its legacy markets while growing some new markets, so it is worth a minimum of 12x PE today.
That would indicate a fair value of 12 x 300 + 500 = USD4,100m or £42/share
I don't think there are any complaints here. The business is growing, just ramping up in USA, UAE, and elsewhere, is throwing off cash, and enhancing EPS through buybacks alone (at a very low valuation). This share is going to £30 in my view. The issue has always been converting Institutions to the story, so the journey to £30 will be incremental wins.
I'm definitely guilty of that too (and I've written about it at length on here - to the utter boredom of others I think!) Taverham. I think its the fact that once trust is broken it's very hard to win it back - the move to nasdaq might mean a new start (as it were) with no previous history to cloud people's judgment/sway their investment decision/continue the reticence to invest by the institutionals. Mind you, god help them if they fudge it on the nasdaq. It'd be brutal.
With the FTSE100 down 1.5% this is very impressive up 2.8%
BUY LONG STAY HAPPY
GLA