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Let's be honest, this is a company that is obviously going in the right direction, but to talk about millions of shares being traded is meaningless, when its a penny share. I am in for the long haul, but I also see the possibility of the likes of Rentokil, looking at the React Group as a possible purchase.
One of the institutions is selling out Jux. Every day millions get bought then 2 big random number sales appear but when added together they total 2.5 mil, today 2 lots were cleared so 5 million. My guess is Harwood but until the seller confirms and they should be by now that they have dropped through another 1% threshold it's a guessing game.
I've been sitting on the sidelines too but I can see what is happening here, seller is dropping lots and fast, they might still have 30 million maybe 50 million but if you are clearing 2.5/5 million a day it will not take long then whoosh and the more people realise it's close the more buy in then instead of 2.5/5 mil you might have a day where 10-15 million gets cleared
All these tips and good investor relations updates etc continue the very positive noise around REAT, but as I have said before nothing ever seems to move the dial - just stuck in a range. I remain on the side-lines, but tempted to buy back in. Any opinions / thoughts out there on what will get this moving?
tipped by malcolm stacey on share prophets with 50% upside (can't verify as subscriber-only):
https:// *************.com/views/73050/sewage-on-the-loose-who-you-gonna-call-this-polished-cleaning-outfit-is-on-the-way-up
..now warming to REAT after a bit of prodding. He discussed them in his small cap podcast at the week-end. Listen from 27:58mins.
https://podcasts.apple.com/gb/podcast/small-caps-podcast-with-paul-scott/id1642339156
Hopefully the tip has helped clear out any sellers. I spent an evening pouring over the results, I guess the top line numbers are impressive, but I didn't like seeing that the 2 smaller groups were loss making. Having looked at the REAT website I felt that these guys don't really have much of a moat - maybe too many offerings, however they do have some specially trained staff etc. I was also a little concerned that these guys will attempt another acquisition and there may be possible dilution. The last placing was at a 30% discount, and Iv had one of those already this year. The Vox interview tempered this acquisition concern (they say small acquisitions this year). I thought the finance director came across well in the interview. He also covered my concerns about the moat aspect of the business and the growth prospects. React are aiming at consolidating a very large fragmented market, and currently have about 2 or 3% of the market. The tougher economic conditions may even play to their advantage if smaller operators can not offer the economies of scale. I cant link to the VM interview, as it will just get starred out, but go find it..
The other bull point for me, is that all of the deferred considerations and previous acquisition costs will be paid this FY, so if they keep their word (no large acquisitions), then they should be more profitable in future years.
I bought some more today, as I already had a bad entry up at 1.65p. Its got it down to 1.5p which will have to do. Its not a large position of mine, and I may even sell if I can get out at a small profit, iv yet to be convinced of the share price growth here. Though fortunately can wait it out if need be.
As an aside, I wonder if Franchised Brands could take this and run with it..? They could take this in to Europe.
Https://masterinvestor.co.uk/equities/react-group-ready-to-clean-up/
Extracts:
"REACT Group Ready To Clean Up
By Mark Watson-Mitchell 12 February 2024
A Cash-Positive business and operating on 87% ARR"
"I know that I haven’t featured my favourite ARR investment criteria for any stocks recently, but as regular readers will know I just love Annual Recurring Revenues.
It is any finance director’s key number and this group operates on a very high figure.
To know that your company’s revenue intake has certain fixed levels for the year ahead, surely makes the assessment of future capital expenditure that much easier.
So, when I alight upon companies where their business has high levels of guarantee going forward, it makes me almost salivate upon the assumption that ‘risk’ is being severely reduced."
Conclusion:
"Analyst Views
Greg Poulton at Singer Capital markets rates the group’s shares as a Buy.
For the current year to end September he is estimating £21.2m of revenues and £2.1m of adjusted pre-tax profits.
He has a Price Objective out on the shares at 1.9p.
In the middle of January, the group appointed Dowgate Capital as a Joint Broker to the company, I now understand that it will be issuing a note on the group shortly.
My View – 1.60p Target Price Holds Firm
This little group has achieved excellent organic growth over the last three years, running at an average 24% per annum rate in that time.
And that long-term growth in its 87% annual recurring revenue will also help to boost still further its operating margins.
I consider that this little group has sensible ambitions in its future expansion.
It has a declared aim to grow to a £50m value within the next few years.
Against its £13.5m market capitalisation, a positive point is that it ended its 2023 year with £2.1m cash in the bank.
The recent bolt-on acquisitions that it has completed have all been accretive and I am sure that other smaller to medium sized targets are being lined up, certainly as the group steps up its M&A expansion phase.
The group has a good pipeline of potential business and as it gets its digitisation completed, I can envisage even more cross-selling opportunities being presented and being worked upon.
It would be sensible if moves were made to lose the current ‘penny share’ status, that could give it more investor credibility – which it certainly deserves.
The group’s shares, which closed at just 1.25p on Friday night, are a Strong Hold for existing shareholders and should prove to be a bargain for new investors."
Great to see over 11m shares traded - and now the bid price up again to 1.35p, with buyers paying the full 1.4p offer price.
This share price should be at (say) 1.6p-1.7p imo in a relatively short timeframe, and hopefully back up to Singer's 1.9p target price.
For a bit more meat on the bone, REAT are presenting today on investormeetcompany.com at 1pm.
Should make good viewing.
Great to see the write-up in the Mail's Midas column.
REAT are simply very good value at these levels:
- they produced £2.44m of operating cash flows in the recent results, against a £13.1m m/cap
- recurring revenues are up to a huge 87%, i.e around £17m. Company valuations often value ARR at anything from 2 times up to say 5 or 6 - even at the lowest level this would still value REAT at £34m - itself a multiple of the current m/cap
- I calculate Singer's forecast EPS for this year to 30/9/24 at 0.156p, so at 1.25p REAT are on a current year P/E of just 8.0, never mind going forward on increased EPS forecasts
- cash flows and balances are more than sufficient to manage deferred consideration and are predicated to allow for further earnings-enhancing acquisitions
Simon.lol..yep,i would imagine it'll be nt to buy on the open.
but there;s fair few shares in issue,so some may get in at a low limit order price,say 1.30/35
but the mm's will take the highest limit order,on offer.
anyway gl
That's annoying, was going to buy into this on Monday but price will probably bounce now!
..........................................
https://www.thisismoney.co.uk/money/investing/article-13068567/MIDAS-SHARE-TIPS-nasty-job-crime-scene-tidiers-React-Group-help-clean-too.html?ico=mol_desktop_money-newtab&molReferrerUrl=https%3A%2F%2Fwww.dailymail.co.uk%2Fmoney%2Findex.html&_ga=2.105433603.1485882036.1707598107-829466088.1679172563&_gl=1*j29bf5*_ga*ODI5NDY2MDg4LjE2NzkxNzI1NjM.*_ga_XE0XLFFF16*MTcwNzYwMTcwMy42Ny4xLjE3MDc2MDQwODIuMC4wLjA.
That the big lads are selling down after they reviewed the results
had thought 1.2p might be re-entry...now tp 1p
Hi test,
Yes agreed. I’m saying that it seems as though the rhs on the 5th may have been a mistake as it it has Harwood buying before then selling two days later.
Although if that was the case I’d expect them to have published a correction by now.
Florence
the 5pm rns is Harwood, a sale, the 5.45 is Premier Capital a sale of 40% of their holding. Rather more worrying.
Do we think that the holdings RNS from a couple of days ago was a mistake? Would be very odd if Harwood bought 0.3% to then sell 0.7% almost immediately.
Excellent set of figures. Baffling why sp has remained stagnant.
PE of 14.1/ 2.3 = 6.3. Peers are trading with PE of 15+. At PE of 15 sp would be 3.2p. FCC is 14% of MC. If ftse350 cos had that figure, it would be paying out 10% divis in cash.
With the CEO stating trading is robust, and expected to continue, very optimistic for the future. Would be rude not to add a few more.
Singer have a 1.9p target price. They have REAT on a current year P/E of just 9.8, falling to 8.5 next year.
They now forecast £2.5m adjusted EBITDA to this September, nicely up from last year, but reduced from prior forecasts by some £300-£400k due to additional investment in personnel, systems etc.
EBITDA is forecast to rise again at Sept'25 to £2.8m adj. EBITDA and then £3.1m the next year.
They say funding capacity could support a furher 26% of EPS increases via more acquisitions in 2024.
Incidentally, last night's holdings RNS hasn't been mentioned here - Harwood Capital/Oryx have been buying and raised their holding to 9.04%, or 96.5m shares in November they had 92m shares):
Https://uk.advfn.com/stock-market/london/react-REAT/share-news/React-Group-PLC-Holdings-in-Company/93207973
Bought in today as I had been watching these a while and waited for results first.
Today's results are very encouraging:
- 0.2p adjusted EPS
- £2.3m adjusted EBITDA is ahead of Singer's £2.2m forecast
- strong momentum since the year end with record trading this year
- £1.64m net cash at the year end, again ahead of Singer's forecast
- £2.44m operating cash inflows in the year
- no need to raise further funds, as current cash enough to pay for not only deferred consideration, but also investments in systems and even further bolt-on acquisitions in the pipeline
- a whopping 87% recurring revenues
- gross margins still increasing, to 27% (from 24%)
- multiple contract wins which will benefit this year onwards
Amazing results.
The recent sp activity suggest some SH's are bailing before the prov. results. I am expecting a very decent performance including contributions from recently acquired cos. Will be v v disappointed with a set of av./ Poor results. May take a punt and a few more, following Warren's advice, 'go against the market!', or wte
Why
Coming soon