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Thanks for the nice, and witty, reply John! You’re clearly serious about your research which is admirable.
I think Soraya and Lars are keen to pay themselves through dividends rather than big remuneration packages. This is great alignment with the minority shareholders, of course.
There has clearly been a recent drive to improve profile in the investment market (social media, vids, etc.) I’m not sure if this is an attempt to attract institutional investors for expansion capital or PR to increase profile and potential client base, or both. I do suspect the goal of Soraya and Lars may be to sell down a chunk of their position in the future and eventually “succession plan” themselves out. I could be completely wrong, of course and I do not think there is anything wrong if this is their plan: good for them. I like this company and think it could significantly re-rate...but multiple returns are probably unlikely. My least favourite current observation is the growth of fixed assets: I suppose it goes with the territory when new geographies are being exploited and grown.
All the best!
Thanks Caution. Watched that vid and I have now read everything back to the Aimo listing doc. What's not to like? Pending Canaccord's awaited evaluation I need do some modelling. Agree your summaries and if were not for cons 1 & 2 (close control and key man dependency) this would shout "all in". The founders' postion perplexes me - a strange mix of altrusim making some pretty big bucks. I need to work more on that. Passed by their head office this morning (I live in Dubai) looked all ship shape and no rollers or lambos out front (which is unusual here). I am totally intrigued.
Hi John
The PIworld video attached below is well worth watching. Also my high level notes about half a dozen posts below yours may prove useful: some thoughts which aren't immediately obvious from the financials.
Cheers
on short-term technicals but from a quick read at the financials this looks like an outstanding company on the fundamentals as well. Really clean balance sheet. Homework for the weekend but I feel I may soon be adding more for the long term.
I agree: well done PIworld. You let them explain without getting in the way.
I think Soraya in particular is extremely impressive here.
PIworld, thanks for posting the presentation below - it really helped me a lot in explaining what RAI actually do and their recent transformation.
(2 of 2)
...
12. Price/NTAV = 1.4.
13. Institutional shareholders are in (despite the huge ownership by management.
14. Management highly aligned with other shareholders, but see A below.
15. Take sustainability and integrity seriously. Good... and also, this will be good for winning tenders too.
Cons
A. No control at all by IIs/PIs given founders own 79%.
B. Key man risk on founders.
C. Geographies in which they operate, but they are diversified.
D. Potentially lumpy contract awards and potential delays could make for lumpy revenues and volatile earnings. Virus has obviously highlighted this point in 2020.
E. Margin under a little pressure, but I suspect this isn’t a big issue, especially given barriers to entry and (hopefully) virus exit in 2021.
F. Share liquidity given tightly held.
Surely they'll plan to grow it and sell it?
Constructive thoughts most welcome. DYOR of course.
I hold, of course!
(1 of 2)
I’ve updated my very high level notes from February. Market cap now ~GBP74m, ~2,000 employees. We’ll see how well my forecasts on cash balance, net profit and PE estimates stack up after tomorrow’s call with Soraya.
79% owned by wife (CEO) and husband (COO) team. It does construction, facilities mgmt and supply chain & logistics mgmt in places such as South Sudan, Somalia, Mozambique and the CAR, also a bit of middle east.
Revenue for 2020 likely to be USD64m-ish - lower than last year’s USD69.1m. Gross profit margin also lower (29.1% estimated versus 31.7m in 2019). Given sales and admin costs and tax (my estimates), I’m guessing net profit will be around USD9-10m (2019: USD12.9m). This gives a PE of 10 or 11 at current prices. I think the price is likely to stay in this region until more of the order book starts to come to fruition and they can show they’ve got through the virus relatively unscathed.
Pros
1. Founded 2004 and has geographical diversity in its projects and is expanding its regions and countries.
2. The management team are ex-NGOs and international development bodies. I suspect this is their life's work. They take modest salaries for directors of a listed company.
3. Barriers to entry in the areas they operate are very high - great as competition for tenders (especially by experienced parties with a proven track record) will be low. Presentation says competition is much larger companies who bid much higher prices.
4. Clients include the US & UK govts, aid agencies (eg UN), NGOs and corporates. High quality counterparts - credit risk managed.
5. Listed since June 2018, now have liquidity and structure which allows them to tender for bigger projects.
6. Significantly growing their order book: latest reported is now USD187m (latest in Feb 2019 was USD166m), up from USD119m previously. If they can start translating this into cashflow during 2021, I’d expect a fairly significant re-rate.
7. Targeting bigger, longer term contracts with services revenues.
8. Prior year PE is 7.8 (lifted from Stockopedia). Even my guess of, say, 11 is pretty low for a growing company with a cash pile an a decent contract pipeline.
9. Cash pile at 31 Dec 19, USD21m: I suspect that this will reduce by USD2-3m at this year end since FCF (i.e. after Capex) is likely to be marginally negative.
10. Dividend yield 2.9% more than four times covered. I wonder if they might cut it to conserve cash. Possible, but counter-argument is that it is easily manageable a virus-related problems (and thus cash drag) should resolve in coming months. And cutting the div looks terrible.
11. CFO bought over GBP60k's worth in Dec 2019.
Ctd...
Today's H2 trading update looks pretty encouraging, both historically given the pandemic and even better looking forward.
2020 revenues will be at least $63.4m, which is only around 8% down on the prior year, and gross margins are only a couple of per cent down on last year.
RAI had over $20m net cash at H1, so should still be well financed going forward.
The order book is now terrific at $187m, and the commentary is bullish with the prospect of new and larger contract wins to come:
"Soraya Narfeldt, CEO of RA International, commented: " We exit 2020 encouraged by our financial performance during the year, our contract momentum and growing order book.....
...We are growing with our customers, with clients recognising our global reach, and we are bidding on large, high value contracts, including a number of potentially significant bids in the commercial sector, a key growth area for us which is building real momentum."
RAI's valuation is the same now as it was in December 2018, yet since Dec 2017 the order book has doubled from around £90m to around £180m now.
2020 results will be “materially impacted” by CV19, but this is surely all in the price now and porspects are transformational at this m/cap. Threre have been trading updates in mid-December int he last couple of years - hopefully this year's will continue to reflect the progress being made.
There's been an overhang recently, which now appears to have been cleared. Back to 60p soon if all goes well.
Seems like a promising company, but the founders own over 75% of the shares, they are at liberty to do whatever they like e.g. award generous share options to themselves which will not benefit ordinary shareholders. Don't think the price will move much till they sell down their stake - ideally to some reputable institutions.
I've been holding RA for 18 months now, and it's not really doing much. Understand there's not much liquidity and even a buy-back, reducing liquidity even more, but what's the view? Happy to continue holding - the reinvestment from dividends in July is showing a bit of a loss, but nothing to worry about, and I really like the principals and principles of the business, but I would have thought that RA would have advanced more, so slightly disappointed.
for RAI:
Https://www.africaintelligence.com/central-and-west-africa_politics/2020/10/06/emirates--remote-logistics-group-ra-international-is-to-advise-car-general-staff,109611578-ar1
"Issue dated 06/10/2020
Emirates' remote logistics group RA International is to advise CAR general staff
The Dubai-based contractor is to train the Central African Republic's armed forces under the supervision of the US Army. [...] (269 words)"
Interesting closing comment that RAI expect to see "significant more work coming our way from similar clients", i.e the likes of Total and Danakali:
Https://www.proactiveinvestors.co.uk/companies/news/928885/ra-international-winning-larger-contracts-and-broadening-its-customer-base-928885.html
"RA International's (LON:RAI) Andrew Bolter caught up with Proactive's Katie Pilbeam on the back of its interim results to June 2020. Among the highlights the company was awarded what it's described as a landmark $60mln commercial contract to provide services to a new global client in Southern Africa. The two-year contract is their largest deal since coming to the AIM market. They've also been appointed by Danakali Ltd (ASX:DNK) (LON:DNK) as the preferred supplier to construct a 1150-person camp facility and other infrastructure during the construction phase of its Colluli mine in Eritrea."
I've been buying a few more on the dip.
This new article from Stockopedia reads well:
Https://www.stockopedia.com/articles/ra-international-passes-this-3-point-stock-market-strategy-126463/
"Choose high quality over junk
Some of the most influential stock market studies have found that Quality is an important factor that tends to show up time and time again...
Companies with a track record of profitable growth, high efficiency and solid finances, have been shown to be better bets on average than low quality, loss-making firms.
By our calculations (which use a range of financial quality metrics) Ra International has a Quality Rank of 75 (where zero is poor and 100 is excellent).
Opt for cheap over expensive
Another well-research observation is that attractively valued shares tend to outperform expensive shares on average over time. So it's important to look at Value and whether a company is being fairly priced relative to what it earns, owns and what it pays out.
By our calculations (which look at several valuation metrics) Ra International has a Value Rank of 71.
Look for a positive trend
It's easy to think that Momentum is only a measure for technical traders, but research once again shows that recent trends in both price and fundamentals can be a strong hint about the future. In the market, trends tend to persist, so it makes sense to look for stocks that are on an upward trajectory.
By our calculations (which look at both price and earnings momentum) Ra International has a Momentum Rank of 86.
Overall, there are signs here that Ra International has above-average exposure to three very important drivers of stock market profits..."
Hi Ldonald
I think it’s just market disinterest to be frank. I’ve posted in reasonable detail here in the past on the pros and cons of investing here. Since there aren’t many posters, you wouldn’t need to scroll very far to find my views.
One of the main reasons for the illiquidity is the fact that the management team holds the vast majority of the stock which, ironically, is also a great reason to invest.
Anyhow: maybe watch the Soraya vid I posted some time back and read the other comments (even mine, if you like).
I think it’s a great company if one can stomach the illiquidity.
Best wishes
What’s happening here? No news, v low volume. No price flux... I’d have thought that RA are well placed to take advantage of the current Covid situation. Aware of last big contract but nothing since.
Value any opinions . TIA
This morning's August newsletter just out from the highly successful River & Mercantile UK Micro Cap trust shows that with the recent rise RAI are now in the top ten holdings, at 3.2% of the fund. And they have this to say:
Https://microcap.riverandmercantile.com/Portals/0/Documents/RandM_Factsheet_UKMC_20200831.pdf
"RA International, the leading provider of integrated facility services in remote locations, also made a strong contribution over the month with a 28% gain in the shares. The company reported two large contract wins with one, a $60m two-year contract, the largest contract the company has even won. The contracts should, alongside the estimated $200m order book, support earnings over the next few years. The company trades on a historic FY19 P/E ratio of less than 10x despite a strong, net cash, balance sheet."
Today's H1 results were better than I expected, and surprisingly are much better than last year's. They provide a good platform for the year. I just wonder whether the naturally weaker H2 which has been flagged for ages due to COVID may actually turn out better than expected.
The order books are bursting at the seams, and RAI has over $20m net cash so is nice and secure.
Very pleasing.
This set of results will be very interesting, the last set were (as previously posted) pretty spectacular but didn't lead to the leap in share price they should have.
The decision to do a buy back which is restricting the liquidity even further may be behind that. It would be nice if the company would come out and make its stock market strategy clear. The risk is that they choose to delist at a price not advantageous to the minority shareholders. It would be god if they made clear their intentions, whether to stay on the market for x years or what.
Still, decent rise over the last few months, hard to believe my April posts are still on the first page of the chat boards.
Key reasons to buy
The company has a strong balance sheet with little debt and large cash balances.
The revenue backlog stands at over $188m and it has won a number of important contracts recently.
As the company grows, it is focussing on winning larger contracts.
As the UN and other development agencies are its major customers, the group has initiated a Corporate Social Responsibility strategy.
It has been diversifying its customer base by winning contracts with developed economy governments.
The group's business model is based on crisis management, the Covid-19 outbreak presents some opportunities for the group to be involved in providing medical and isolation facilities.
Nice slow burner rather then a big jump and then retrace really like this share.
RNS - H1 results will be out next Tuesday 8th September:
Https://www.londonstockexchange.com/news-article/RAI/notice-of-results/14673735
Ticking up once more already today - this is looking well supported now.
Brief update by Mark Watson-Williams on Master Investor last night FYI:
"RA International (LON:RAI) – order books up and still buying its own shares
Less than two weeks ago this provider of services to remote locations in Africa and the Middle East announced a $60m contract with a global engineering and construction group for a project in Southern Africa. That took its order book up to an impressive $188m.
Then at the end of last week the company declared that it had been appointed as the preferred contractor to Danakali and its partners on a $20m plus contract in Eritrea, in East Africa.
The company is still buying in its own shares, the last purchase was of 800,000 shares at 56.1p each, taking its treasury holding up to 2.62m, representing some 1.53% of its own equity.
The shares closed last night at 57.25p."
imo seems like they get hurry, they are victims of their own success.