Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
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Cheers - nice share price reaction so far today. Perhaps any overhang is gone now.
https://www.investorschronicle.co.uk/ideas/2023/01/10/four-potential-takeover-targets/
......Cyber security group Kape Technologies (KAPE: 271p) fits the bill, too. Shore Capital estimate that Kape’s shares are priced on a forecast free cash flow yield of 12 per cent for 2023, forward PE ratio of 8.5 and prospective cash profit multiple of 7.7 to enterprise valuation, the latter being a 45 per cent discount to the average rating over the past five years. Last year, rival Avast was acquired by NortonLifeLock on 19 times cash profit to enterprise valuation, and exit PE ratio of 24, highlighting the value on offer.
KAPE looking good again today - hopefully set for another run up to 300p in the short-term and then back up to 350p-400p.
KAPE are Jonathan Compton's top investment idea for 2023 - he "was MD at Bedlam Asset Management and has spent 30 years in fund management, stockbroking and corporate finance":
Https://moneyweek.com/investments/605628/investment-ideas-for-2023
"My pick is UK-listed Kape Technologies (LSE: KAPE), a £950m company that has been dragged down even as revenue and profits have blossomed and the outlook brightened.
It specialises in virtual private networks (VPNs) and cybersecurity. You probably don’t use a VPN on your PC or tablet today, but many of us will because it provides an encrypted server and hides your IP address from spammers, hackers and prying eyes.
In short, it keeps your data far safer than conventional security packages. Seven million customers already use Kape, while the market for computer privacy is huge and expanding fast; we’re all fed up with torrents of spam and hackers.
The forward price/earnings (p/e) ratio for 2023 is below eight."
Happy new year everyone.
A nice mention for KAPE in an article by i.i.i's Andrew Hore about AIM's £1 billion companies:
Https://www.ii.co.uk/analysis-commentary/what-2023-has-store-aims-ps1bn-companies-ii526422
"Kape Technologies KAPE has shown a good eye in choosing acquisitions to enhance its cyber security software range and that generate cash to pay off debt to fund the deals. In September, Kape raised $222.5 million at 265p to accelerate the reduction in debt and provide scope for further purchases. New bank facilities have reduced annual interest costs by $8 million. The prospective multiple is below eight and cash flow is strong. The shares appear attractive at this level."
Won’t be dipping back to £2.20 again by the looks of it. Had been a pretty sustained rise.
Normally goes back when it hits £2.65, then bounces again at £2.20. Let's see, as markets look weak going into Christmas
Looking like a breakout now to new recent highs. Maybe a quick run up to 300p for starters per the chart?
Not long to go to Jan TU - should be excellent.
Certainly is intriguing! Not complaining though. More of the same please!
There's been three uncrossing (UT) trades today, all at prices higher than the published offer price at the time.
The latest is a 10,200 share buy just reported at 247p, nicely above the current 245p offer price. Intriguing - hopefully bodes well.
For anyone who's interested or did some similar analysis, have been running through their operating numbers further and have a few comments which may be of interest
(1) Whilst the Express VPN acquisition was a material coup in my view and has taken them to another level, it should be noted that (a) its a lower margin business , resulting in 51.2% Privacy segment margin in H1 22 vs 55.8% (b) has doubled the level of employee share comp as a % of sales to 4.3% in H1 22 (and this IS a cost before anyone starts to pretend otherwise)
(2) They are playing around a bit with their numbers in two regards (a) they are not immediately expensing customer acquisition costs, but deferring them over an "expected life" including estimated renewals. Whilst technically you can argue for this, and they clearly did with the auditors, it is highly aggressive and absolutely not best practice particularly for a heavily B2C business where there are no long term contracts to back this up and things can change. It also overstates their earnings compared with comparable companies using a more conservative approach and may go some way to explain the apparently very low p.e. ratio they trade on (b) whilst they (correctly) make an adjustment to H1 22 segment results to reflect Express VPN pro forma acquisition costs, which highlights the segment revenue reduction I note above, they choose to then ignore this in the rest of the reporting. If one were to include this appropriate adjustment, then adjusted EBITDA margin fell in H1 from 42% to 32% - a quite significant margin compression. Moreover they then actually made a pro forma operating loss in H1 of $3.5mio and net loss after tax of $21mio. Admittedly the huge jump in D+A to $77mio contributes significantly to this, but the hammered EBITDA margin, hefty employee share costs also are a factor and makes me wonder how this is all going to look when they start reporting numbers without the benefit of technically not having to show these customer acquisition costs
In summary, I do think its an interesting company with a good position, but their numbers needed to be taken with a grain of salt and probably deserve discount as a result.
This is just my own analysis (as well as direct experience with Israeli tech companies who do tend to be fast and loose with their approach to reporting) and would be interested if anyone else has looked at this and has any comments.
Christmas dinner. The rest goes to their bonuses.
I just want to know where/when they’re going to spend the $222.5 mil they raised, over three months ago… This desperately needs a catalyst.
Yes, I noticed the same. There was also a delayed trade from Friday
698,359 at 214.04. Which I guess was a sell. They do say follow the price, not the trades though :)
Encouragingly, sells are achieving mid-price or above now at 225p or so (I just dummy traded to check), whilst buyers are paying the full 230p offer price.
Hopefully an indication that the price will continue to move back up from here.
Shore Capital view - ''At 223 p and 6 . 9 x EV/EBITDA for FY22F ( modest and attractive on both 6 . 6 x PER), the prevailing valuation appears extremely a relative, historical and absolute basis , reflecting tough market conditions for tech stocks generally. The recent interim results reiterated the full year outlook, implying 117% pro forma adjusted EBITDA growth at the midpoint of the guidance range, and the mediumterm growth potential for Kape remains high (including broader scope for acquisition opportunities following on from the $222.5m placing completed in September 2022). We believe earnings risk is low, and risk/reward is materially mispriced''
Hi guys – am looking at Kape shares potentially given their strong market position and apparently low valuation. That said, there are some odd things with their post Express acquisition balance sheet numbers which I cant figure out so wonder if anyone here has gone through the same process.
In short,
(a) intangibles looks insanely inflated given Express VPN was <$1bn but intangibles have exploded by $1.3bn (intangibles tend not to bother me too much provided all other metrics make sense, but they can also hide other shenanigans)
(b) the deferred contract liabilities , which I think represents Express VPN deferred income, increased by $119mio, but (i) are not backed up by equivalent cash upon acquisition, rendering it non-income and (ii) does not appear in the working capital movements in cash flow – which states only a $3mio (!) increase in this balance To a certain extent this is offset by deferred contract costs , whose $33mio change are correctly reflected in the cash. I note the only way the deferred revenue number could stack up and the balance sheet balance , is if they’ve stuck the equivalent amount into intangibles (see point (a).
I note that the argument can be made that deferred revenues can be ignored (as being worthless) to the extent a company continues to genuinely generate similar levels or (preferably) increasing levels of revenue, as long as you’re not having to also cover any costs/ liabilities incurred by such non existent revenues, but this isn’t clear to me and Im pretty uncomfortable at the lack of transparency and consistency on the numbers.
By way of background Im a qualified C.A. (from decades ago) and investment banker then private equity guy, so I do know how to read numbers and interpret them, and these ones don’t seem right (plus the change of CFO doesn’t help). I may be wrong and perhaps there is a good explanation/ analysis somewhere, so could anyone here help me find that if you had the same questions?
Cheers
cheers rivaldo...did you attend the event? I can't find online to re watch
Shore Capital have issued a brief update covering KAPE's 'Digital Privacy in 2023' event yesterday.
It's general stuff about the evolution of the privacy market, distrust of big tech and the cybersecurity threat landscape.
However, it's worth reiterating that their forecast is for 38.7c adjusted EPS this year, i.e around 32p EPS and a P/E of only 7.7.
And that they see year end debt of $84m, which turns around to a net cash pile of $78m at the end of next year (assuming no more earnings-enhancing acquisitions of course).
Indeed, £2.50 should be it's next support level
Nice start to the week - up 8.5p already.
Good to see the new issue of Money Week feature the recent Shares Mag tip:
Https://moneyweek.com/investments/stocks-and-shares/share-tips/605534/share-tips-of-the-week-25-november
"Kape Technologies
Hacking attacks on government agencies and major businesses are on the rise; hence digital defence budgets are too. Kape provides consumer cybersecurity solutions. It has expanded quickly through acquisitions. The company had been looking to raise between $100m and $200m of equity last month, but strong demand saw it muster $222.5m: investors have been impressed by compound annual revenue and adjusted Ebitda growth of 56% and 83% respectively since 2017. On a 2023 price/earnings (p/e) multiple of 6.4, the shares appear to offer “growth at an absolute bargain price”.
I know what you mean but I can live with any huge rises: it is any huge, or sustained, falls that worry me!
Slowly but surely up, best way to be. Not huge rises in a day