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The initial funding is from cash reserves (£850k). Longer term capex/opex is from the revs of the contract itself which is profitable from day 1 in July.
There seems to be some intermediary funding needed which is going to be via debt. The CEO said he had lots of offers and term sheets ranging from ones that are pretty good to wonga style rates. They are just picking whatever suits the company in their T&Cs.
There seems to be another sizable contract that is ready to sign but they don’t want to in this DRC setting up period but will shortly after July. I guess that will need some Capex so likely picking debt provider that can also finance some capex of that before it starts and then pays for itself.
The CEO on the call last week said “that would be silly wouldn’t it” about placing at this SP after avoiding one for 3 years
To correct myself from earlier, on a placement at this price PF said “that would be silly wouldn’t it”. So there we go
Well said he is just not human. People on this site try to calculate and have logic but not aiming low
There he is. Loads of reasonably articulated posts for people and asking you specifically what’s been fooled but you are incapable of it lol.
Don’t be fooled by Aiminghigh2021
Don’t de fooled by the Fooler.
😂😂😂. Down she goes captain
Do WSG need for equipment upfront etc?
are we sure they dont look at debt as CLN? Or was it asked that they are solely looking at conventional debt
its alarming when they say wonka style rates and they might just go with it??
if the contract was that tight surely a factoring company (high street) could fund the invoices etc
interested in taking a position here but funding is a little concern
any sensible view would be super!
cheers
As crack pots like the poster below you keep crying placement. Just like they have for 3 years but there’s not been one.
Fowler said, and I quote “I’d have to be crazy to place at this price” - from the investor call I was on
...not sure anyone has ever described as being part of the holy trinity!!! But I'll take it!
Yes a very holy trinity we were
Dr M.... I was the other PI on that call!
Best, M
December 2024 and is expecting to show a profit for the full year ending in June 2025.
It’s been years of waiting and years of pain for shareholders.
And for those who piled in at 30p and higher it’s a long way back for them to breakeven.
But for new investors.. opportunity? I think so.
I’ll be watching for the financing to be secured and following the company’s progress on getting everything ready for revenues to formally commence in July.
From Michael Taylor’s website (@shiftingshares) newsletter.buy the bull market.com
Posted with permission. I was one of the other PIs on the call with him
That said, management acknowledge that they will need to raise some capital to fund initial equipment to go out there.
They wouldn’t rule out an equity placing (which is sensible) but did say that Westminster hadn’t raised funds since June 2021 and has been trading breakeven through this harsh economic climate.
Management are in various discussions for debt finance, some with better rates and some with Wonga-esque rates, and given that this finance is needed sooner rather than later I don’t expect management to hang about (although they stressed that they will review these thoroughly and won’t be rushed).
They believe that this contract is worth 10p per share based on the NPV. The discount rate wasn’t given, which means the NPV is completely meaningless because we have no idea of the cost of capital, and so I asked for the discount rate and was told it was 10%.
As an aside, do management not give discount rates because they don’t understand how NPV works or because they want to hide something? Perhaps I should’ve also asked this!
But I was told this models on a small growth rate of 5% with no extra benefits factored in. So there is clear upside.
And the reason for the delay between signature and ratification?
When the contract was signed, there were documents getting lost, blockages, and all sorts of shenanigans. It was never anticipated but a lot of politics to play too as the airport authority had elements of different parties in it, and so the opposition parties didn’t want to let the president have a win there.
However, the president was re-elected at the end of last year with a much bigger majority and so the effect of the opposition was massively diluted and this has accelerated the process.
There are no broker notes available for Westminster and nor will one be available immediately. Peter Fowler’s preference is to delay until management has existing passenger numbers, and he would personally rather put a note out based on fact that is achievable and beatable, rather than on historic numbers.
So far, Westminster hasn’t been speaking to any institutions but Simon from Zeus mentioned that a number of institutions had left the shareholder register in the last few years and that they’d be re-engaging those as well re-initiating coverage.
In terms of upside from the contract, there is another multi-airport contract that was “on the cusp” of being signed last year that is hopefully being signed this year. Management don’t want it tomorrow because they want to deliver on this one first, where margins will hopefully tick up to ~40% after the capital expenditure intensive start up years. And after 6-9 months Westminster can start looking at cargo screening to add onto that too.
What’s important to note is that, assuming everything goes well (remember this is the DRC), then although there will be no financial impact for the year ending 30 June 2024 it is hoped that the company w
Embarking passenger numbers are around 400,000 and this is based on historic data, so it’s likely that the real number is higher than that, and it’s likely that it’ll grow significantly as the airport security improves.
Air France is looking to move to eight flights per week from seven, Qatar Airways is looking to start flights, and British Airways are being requested to start because the UK has the third largest diaspora of DRC people in the world.
Obviously, these are not guaranteed, so it makes sense to use the historic number as a conservative base, and if we model from $10 million then each passenger generates $25in revenue.
We also need to consider that the ICAO (International Civil Aviation Organisation) grades DRC airports poorly, and though the next audit is in November it’s going to be impossible for Westminster to get everything “tickety boo”. But ICAO look at the direction of travel, so this could be a start. British Airways won’t fly to the DRC because the grading is too low and this is also the case for Emirates. But the UK government is keen to get a UK carrier flying there and so is likely to be supportive as it has been so far with the signing.
It’s worth noting that Westminster will create a separate company in the DRC that will hire the employees as well as train them to operate the equipment, and because these costs are fixed then once revenue passes through (the contract is profitable from day 1) the additional numbers trickle down to the bottom line.
An example given is that if WSG puts through another $100k in passengers, no new extra personnel are needed and so no extra costs.
The way the contract works is that there is a security fee attached to the embarking passenger’s ticket (regardless of where booked) and they pay that tax to the airline through the ticketing system, and WSG collects that tax directly from the airline through the IATA (International Air Transport Association) system directly into the company’s UK bank account.
This is a huge positive because I assumed monies would be collected in the DRC and therefore there was a payment risk.
I quizzed management on this further though and they admitted that it may take some time initially to collect the money as it’s a new system, but this shouldn’t be an issue given that it is dealing with big airlines.
Whilst it’s certainly not guaranteed, it’s hard to imagine that Air France is going to default on payments.
So far though, the contract is only talking about the charge on embarking international passengers.
There is huge potential growth because domestic travellers are far higher than international - the DRC is the size of Western Europe and has a growing middle class.
However, it’ll take between 12-24 months to get all of this equipment into five airports.
And a lot of capex is going to come from the revenue stream down the line.
Westminster Group (WSG)
This company has been a complete crock over the years. The fabled big airport contract that would be transformative for the company has been in the pipeline almost since I started trading (I remember then CFO Ian Selby talking a multi-airport contract at The UK Investor Show 2017).
Here’s the chart in that period.
It’s a clear stage four downtrend over time.
The contract finally landed and was announced in June 2021.
But it’s taken almost three years for the contract to be ratified and start commencing.
As can be seen in the chart, the market expected the contract to be signed and we can see that in the rally.
However, I was invited to a management call and decided to see this was worth looking at further.
It’s easy to write off companies that have historically been dogs. And a lot of the time, these companies are often still dogs with little to offer.
The alpha, or the outperformance, often lies where the market believes a stock to be a dog that is no longer so.
These have often been my greatest trades where the stock has had strengthening fundamentals, long consolidation, and is hated by the market.
Westminster Group is certainly hated by the market (again, this is not too difficult to understand given the absence of the hoped for contracts).
With me on the call were the chief executive Peter Fowler, the CFO Mark Hughes, Simon from Zeus, and two other private investors.
There was a brief slide deck given (the same one on the Investor Meet Company) then we got straight into what everyone cares about: the signing of the DRC contract.
Eagle-eyed RNS readers will spot that in 2021 this was announced as being for 20+ years. It’s now 10 years with a potential 5-year renewal. This was due to some legal issue in the DRC called the PPP (the Public-Private Partnership - I have no idea why this is but this is the reason given by Fowler).
Mr Fowler says he’s not worried about this because Westminster will own all of the equipment (“many millions over the period of the contract”) and at the end of the 15-year contract (“a five-year renewal is pretty automatic”) the client either has to renew the contract or buy all of the equipment from Westminster within 30 days.
The contract also has international arbitration so any disputes will be independently dealt with.
A 10-year contract still has the potential to drive the share price, so I’m more concerned about this going forward, hence my question about what can stop this happening.
Mr Fowler told us that nothing can stop this now as boots are already on the ground getting everything set up and ready for operations and revenues to formally commence in July 2024.
Added to that, there is a contract termination clause that is 5x the annual contract value, which, at the expected first year revenue is estimated at $10 million (USD) within the first 12 months. So $50 million to cancel
Anyone know what's going on with this SP? Why are people selling off having just secured a major deal ?
3 months b4 any real rev from this contract if all goes plan, placing along line I'm sure.
Some one on another board has just pointed out that we are paid in $'s the airlines,.. hence why would inflation in DRC affect our sales revenue. Which is a fair point.,..... and could be right.
However... whilst we are being paid in US $'s... we will be paying for services and staff in local currency?-- 400 odd staff across the five airports? Could EWSG have linked the costs associated with these elements of the contract to local inflation in DRC?... it would make sense to do that, especially when inflation is so high over a sustained period?
I guess time will tell.
DrM...
Not necessarily,... as I understand it from the Investor cal it grows in line with inflation, reviewed annually. Perhaps someone else on the call9s0 can confirm if I have got that right. I certainly asked the question about whether there was a review period within the contract to renegotiate the fees, and PF replied, there was an annual review. My recollection is that he said words to the effect that worst case situation it would rise with inflation. But I didn't record the call so I can't double check.
So if I have it right, the rate of increase will depend upon what the inflation figure is. The government target is 7%, refer to link below.
The average inflation over the past 10years to 2022 was 10%. It is forecast to fall to 6.4% in 2024.
It just shows how the contract could grow substantially, just on the inflation fluctuations.
The government target is 7%.
https://www.afdb.org/en/countries-central-africa-democratic-republic-congo/democratic-republic-congo-economic-outlook
https://ycharts.com/indicators/democratic_republic_of_the_congo_inflation_rate_outlook_end_of_period_consumer_prices
That’s actually incredible
So the base contract grows at a minimum of 10% a year even if there is no increase in passenger numbers
Dr M,...
Inflation linked revenues....
Yes... security fees will reviewed annually,.. and lowest rate of increase will be in line with inflation.
Q: Anyone hazard to guess average inflation rate in DRC over past 10 years?---
A= 10%
So, if inflation cine on that trajectory, and you compound that up,. the contract near double to $20M/annum ( paid in US dollars via IATA.) in circa 6-7yrs. That is if we do noting!--- no growth in passenger numbers,... no additional domestic passengers, no freight, no extension of the contract to include additional airports.... etc., ( they have over 30-ish)
Note: --- I'm sure PF said the return or payment for the kit we install, which will be owned by WSG,... happens if the contract is terminated at the ned of the first 10yr contract period,..ie making it highly Riley that they will extend to the 15yrs...
There is many inbuilt security features (if you pardon the pun) in the contract. They will be putting a good few million of equipment into the airports over the life of the contract, paid for from the revs of the contract. If at the end of the 15 years, DRC doesn't want WSG to continue, then they have to buy all the equipment off them within 30 days. Quite the golden handcuffs to keep renewing it.
The $25 per passenger can be renegotiated every year with the lowest amount it can increase if there isn't an agreement is inflation in DRC
If the contract gets unilaterally canned, not only do they not own any of the equipment so airlines would likely immediately stop flying there, they have to pay x5 yearly revs in an international arb court.
Basically they have done a bloody fantastic job at trying to mitigate risks within their control and to be fair, they've actually done a brilliant job here, credit where its is due. I have a large holding and have been critical to their faces over the past 3 years but they've hit this one out of the park and i truly believe this contract alone will be worth north of 30p/share in 3-4 years. I continue to hold
Just stop this nonsense it's your fault you to a risk leave real investments to the professionals for the sake of us all
Agree . Look what people should be focussed on is that this company is now going to properly profitable . If there is £10 million coming in From DRC airports in 12 months I would be surprised if costs are much more than £5 - £7 million. WSG to my knowledge have never been properly profitable and being so will be a game changer as to how they are viewed . So by all means carry on your negativity about Fowler but watch others profit from the turn around.
I mean, there is literally a signed contract that starts in less than 90 days. It's a minimum of $10mil in its first year and likely to be multiples of that after a few years. It is profitable from the first day and profit margins rise thereafter. There was all sorts of British government lead trade envoys and ambassadors at the signing and indeed the ambassador co-signed the contract. Official UK government social media channels live tweeted it, but yea, "The Fooler has fooled again"
The cognitive dissonance to keep posting this tripe out of spite is mind blowing. It says a huge amount about you and your trading/investing history im afraid.
What specifically has been "fooled again" please?