The next focusIR Investor Webinar takes places on 14th May with guest speakers from WS Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Another fact based post. Thank you Happy
UPDATE to EVs based on net proceeds set out in the prospectuses. No material change to prior analysis but useful to clarify.
CBX (total net proceeds £8.05m, noting that gross proceeds were £13m)
Product costs: £1.84m (of which £0.12m in year one)
Operations and head office costs: £2.72m (of which £1.2m in year one)
Marketing costs: £2.60m (of which £0.69m in year one)
Development costs: £0.83m
Working capital: £0.05m (of which £0.2m in year one with negative working capital in year two)
Accordingly, I update the enterprise value (EV) with the figure for net proceeds from the IPO as this will roughly equate to actual cash on the balance sheet on day one. Neither company has any significant debt.
CBX EV = current market cap of £67.5m less cash of £8.05m = £59m
Kanabo (total net proceeds £5.3m and only year one spend is currently defined, noting gross proceeds were £6m)
Sales and marketing: £0.595m
Research and development: £0.385m (including the VapePod Medical Safety Testing and the Safety and Efficacy Study)
General capital expenditure: £0.5m
Ongoing listing costs: £0.26m
Balance of £3.6m to be spent in year 2 but is not broken down by line item.
KNB EV = current market cap of £94.3m less cash of £5.3m = £89m
It is striking that the difference between gross and net proceeds is almost £5m for CBX but and only £0.7m for KNB. I think the inconsistency may be a function of each company accounting for IPO fees differently i.e. KNB's gross figure may be lower because already excludes some fees. However, as there is no reconciliation in the prospectuses of gross to net proceeds, I am unable to ascertain any more information.
I’ll give you an insight. Both pump and dumps!
Thanks for the insightful analysis happy.
[Strong trading buy: target price 20p]
As both companies have floated recently and are at similar stages in their business development, it is instructive to compare them (sources of information include pathfinder prospectuses and RNSs issued to date).
Market cap at issue, current market cap, enterprise value and fully diluted market cap
Market cap at issue:
Cellular Goods: 504,750,000 shares in issue * £0.05 = £25.2m (First day of dealings: 26/2/2021)
Kanabo: 360,229,328 shares in issue * £0.065 = £23.4 (First day of dealings: 16/2/2021)
Current market cap:
Cellular Goods: 504,750,000 shares in issue * £0.13375 = £67.5m
Kanabo: 360,229,328 shares in issue * £0.262 = £94.3m
Gross IPO proceeds and enterprise value (EV)
CBX: raised £13m before expenses (gross) giving current EV of £67.5 - £13m = £54.5m
Kanabo: raised £6m before expenses (gross) giving current EV of £94.3m - £6m = £88.3
[Note: figures are for gross proceeds, neither company has published the IPO costs deductible from gross proceeds]
[Check: why has CBX been able to raise twice as much cash for use by the company than KNB from a similar-sized offering?]
Fully diluted market cap (if all authorised share capital is issued e.g. if options are vested and warrants converted into ordinary shares etc):
Cellular Goods: 544,250,000 * £0.13375 = £72.8m
Kanabo: 424,700,701 * £0.262 = £111.3m
I draw your attention to the following:
- at IPO, CBX had a market cap that was about 7.7% higher than KNB’s. If we assume that their respective IPOs were fairly priced and that the differential at IPO was correct then CBX should have a market cap that is 7.7% higher than KNB’s. KNB’s current market cap uplifted by 7.7% gives a market cap for CBX of £101.6m which equates to £0.2012 per share;
- CBX has raised just over twice the cash of KNB on a gross basis (£13m v £6m respectively) and this gives CBX a much stronger balance sheet at inception [to check prospectus for sources and use of funds if they are broken down];
- were KNB and CBX to settle at the same market cap (removing CBX’s premium at IPO) that would still give CBX a market cap of £94.3m which equates to £0.187 per share; and
- based on their respective prospectuses, in the years to come KNB could issue an extra 17.9% of shares whereas CBX could issue a further 7.3%.
In the next part, I will consider the strategies, operations and financial details of the two companies as outlined in their prospectuses.
Best
Happy