The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Golfnut, you have explained it well, can i add, as we are 30% held by insiders, 60% by instiutes and venture capital funds and only 5% retail. as was pointed out we arent on ftse trackers, or any international funds , we are bound and restricted by those that buy AIM stocks, and many of these are now at max allocation of what they will own of alpha. If we still had a huge retail % followers, , they would certainly bid this price up when they seen the earnings. I am sure other funds would if we could get into ftse 250 or international funds etc. My point is will be be held around this share price until these funds get access to alpha when we move to the ftse250. and will money be better use into more better known stocks, who have access to more institutes, then buy back in when alpha moves to ftse 250, this is a dilemma i have.
I once a chat to another poster on another stock chat room, who said he had given up with UK stocks and prefer US stocks, cos that is where the volume is and that is where investors give higher values to stocks. Indeed didnt we read about certain UK stocks in the news that only wanted to list in the US as they said a premium valuation is always given by the US market.
One of my pet hates is fund manager cathie wood, she pumps all loss making stocks saying they will repeat the same formula that loss making stocks did in the 13 yrs old bull market form 2009 to 2022, what she went wrong is interest rates were put at 0.5% due to the banking crisis, The norm now for years to come is 3.5% steady rates, loss making stocks cannot raise capital and will dilute. that is why only profitable companies will survive and grow over the next 10 yrs imo, such as alpha. remember we are already up 700% since ipo. History shows 100 bagger stocks had a starting ave sales of $140 million a year then went on to be 100 baggers stocks.
I have said it before alpha is a growth stock it should not be paying out any div at all, every penny it makes should be put back into the business to land and grow model, the money it has in cash at moment and end of year, will and is being used to further enlarge the is business, such as fund finance as they said in last report.
All stocks in history that become 50, 100 bagger stocks, never ever paid a div, until they reached maturity every penny was reinvested into the company, the metric we need to find isnt ROIC It is ROIIC, this metric will tell you the exact use of alphas profits. and payback of their usage.
does anyone know our ROIIC?.
watched a video with chuck akre about the 3 legged stool, he said the returns on capital is the ultimate measure of a successful company, he said mastercard has one of over 30%, the norm for most other stocks is 10%
Yes, the stock market is not right at all, I looked at a US stock today Palantir, $35 billion cap its up 200% in 2 months, growing revs at 23% a year, it unprofitable and only forecast to make its first ever profit this year of around £80 million, it runs on a 5% net profit, ( alpha runs on a 37% net margin) yes it has large revs, but tiny profit margin and it does have $4 billion in cash but it has increased its share count 300% from 700 million shares to 2 billion.
even removing the $ billion in cash, does it deserve a $35 billion cap with net profits of £80 million growing 23% a year??
it will produce 5 cents per share for holders, alpha does 73 pence a share!
interest rates will remain around 3.5% at the lowest for years to come.
you then realise how undervalued alpha is compared to numerous other stocks, all they do is mention AI and the stock goes ballistic.
@ShearClass I think its unlikely the market doesn't give ALPH any credit for the >£70m they will earn in interest in this year. Whilst its frustrating they don't declare this in the headline revenue number it will still there in black and white in the P & L under "other operating income". imo Institutions running the slide rule over ALPH are going to identify this and rightly conclude that interest earned is very much related to the principle activities of the company. Any fund manager or serious analyst is going to identify the discrepancy between the reporting of interest income Vs WISE and adjust accordingly. The appointment of a new broker will get more eyes on this share plus the move to the FTSE 250 next year will really help. The average PI may not notice this discrepancy, but the re-rating of this share is most likely to come from institutional buying. In the great scheme of things I'm pretty relaxed about it especially considering I'm in ALPH for investment purposes and not a quick flip.
The company said it was on-track to deliver a strong year of revenue and underlying profit growth, in line with expectations, though it didn't provide a specific figure. Two analysts from FactSet predict full-year revenue of GBP118.2 million, up from GBP98.3 million in 2022.
reported in marketwatch site
Cheers rango1. And exactly, this doesn't fulfil the role of a hedge if it's getting no credit for higher interest rates. I'd sooner hold WISE who are recognising interest income as a separate revenue stream but including it in gross profit, operating profit & EPS calculations. WISE reported operating profit of £157.2m for FY23, of which £140.2m was from interest income! Their shares have nearly doubled in the last year as a result of them reporting ahead of expectations, driven by this previously unknown profit lever.
The other problem is that Alpha appear to be putting themselves in a lose lose situation. In my view the only way interest rates will be cut back to near zero in the next 3 years is if there is a huge recession & the economy needs major stimulus. If that happens then their wider business will almost certainly de-rate, particularly as interest income will quickly cease.
However, should things continue as they are, with record low unemployment, sticky inflation & resilient economic performance, then it appears their underlying business could struggle to maintain high growth rates. So they could end up with a compressing PE ratio & a growing cash hoard.
I'll leave this board alone until we get further detail in the interims. I'd say it's fairly critical that they evidence a clear plan for what they are going to do with the ~£180m cash they are forecast to have on hand at the end of this year & the forecast £250m at the end of FY24...
Ps. Everythingmoney, it is utterly pointless trying to compare the PEG ratio of an AIM company with NASDQ 100 high flyers. I'd also add that there is next to no chance that the CFO of any US listed entity would ever subscribe to ignoring £70-100m PA of interest income in the name of prudence
Another top quality post ShearClass - in effect the interest income is a hedge against the macro environment so when perform the other doesn’t and vice versa. As a result it should be included as part of forecast Eps and valuation.How can you ignore circa 100m of cash coming in for the foreseeable future when it’s significant part of valuing a company?
Error ---american stocks with PEG ratios over 3., not p/e of 3 !
Stocks coming off the lows of 2020 into 2021 would show a big bounce in earnings like alpha did, so when normality occurs 2022 2023 we see normal growth ratios. it is impossible to find a perfect 1.0 peg stocks . alpha said today this first 6 months was TEMP in slow down in deals, but they can still make good money even so. the market doesnt reward stocks growing at 5, 10% it gives them p/e of 5 or 10, but stocks growing 20, 25% normally gives them p/e of 30, 40, as growth stocks are bid up being quality.
WE havent even heard about the fund finance business yet and how much it will bring in. If revenue growth at min 20% and we keep the same net income model of around 37%, it is fair we should trade at a p/e of 30 plus. as its quality growth.
I have looked at US stocks this afternoon, many have p/e of over 3 with similar sales and earnings growth. and many have p/s of 15 and above.
@golfnut, the margin of safety certainly appears to be very high on paper. However, I do think they need to be careful about being too prudent / clever.
The PEG ratio + quality of the earnings have always ensured that the market cap makes sense; in September 2021 when shares hit £22 for the first time, EPS was forecast to be 55p so the PE was ~40. At that point in time revenue was growing at around 45% PA, so the PEG was 0.89, which is a positive metric.
Last years underlying growth slowed to just under 27% and is forecast to slow to 22% this year (based on FY underlying of £119.8). However, the 20% growth reported today fell just below that. Underlying EPS, which they are sticking with, is forecast to be 73p, so at £22 it's on a PE of 30. The PEG has therefore worsened to 1.5, which on the face of it is decidedly unattractive in the current market.
I'm not saying it's going to happen, however in the event they were to miss full year UNDERLYING expectations due to the wider macro environment, I'd predict a high likelihood of shares de-rating to a PEG of closer to 1. Perceived slowing growth does not tally with PE's of 30x in the current environment, especially not in the current UK market.
Now just to be clear, I absolutely don't think that Alpha should trade at 30x the forecast reported FY23 EPS of £1.89, however I do believe that if they had followed the example set by WISE and stuck to recognising all revenue as underlying, regardless of it's source, then shares would likely be trading at 18-20x the forecast reported EPS, so in the £34-36 range. In my opinion that would be a deserved valuation given their strengthening fundamentals & exciting future growth potential.
Instead, they prefer to treat their new income stream as a fluke & second guess where the global macro is going to head, despite their being zero evidence of interest rates being cut, never mind returning to pre 2021 levels...
Now you can absolutely argue that the above opinion is glass half empty, particularly compared to prior posts of mine, however I've seen so many companies get punished by the market for missing expectations due to unavoidable supply chain issues, worsening debt due to interest rates, increasing discount rates etc. So it seems rather frustrating for a quality outfit like Alpha to trade on a reported PE of 11x due to a desire to downplay a significant income stream that has resulted from negative macro developments!
Very solid performance given the macro circs. While a 20% pop in SP would be fun, I'm entirely happy that interest income is treated as it is: it says a great deal about the quality of management, their commitment to transparency, and their willingness to take the proper - sometimes harder - path.
In the share cast link i posted the ceo stated--“I am proud that the operational progress and investments that we have continued to make during this period remain very much long-term focussed.
sometimes you need to read the outlook and the views from the ceo and the words used to see negativity or positivity, and i have always think the ceo is thinking longterm. Markets tend to only look at quartely or half yearly reports.
Yes, I know the valuation of a stock to determine if it is under or overvalued is to add up all free cash flow earnings from today until the lifetime of the company discounted back minus the safe depository interest rates. Whilst we have a good earnings rates, the analysts will be looking at 20% growth as the norm, and a net margin of 37% to calculate all the free cash the company will generate in its lifetime. I dont think they will be looking at transitory income.
20% growth is very good in current market conditions but as @ShearClass points out not enough to push the shares higher. The £33m in interest is slightly higher than I was expecting so a pleasant surprise there. Brokers target of £120m revenues (excluding interest income) looks like it will be achieved especially considering June was a record month for the company. My forecast of c £100m PAT looks very doable assuming rates don't come down much between now and year end. All in all I'm very pleased with the update. The value here is undeniable. Patience will pay off in spades.
In my previous posts i look at comparable stocks with similar sales, earnings in the US, we should be a £3 to £4 billion stock if this was USA listed only. I do note that in the USA, stocks are rewarded more for sales growth ( even if they show no profits)as they say all the earnings are put back into the company in order to take huge market share and also pay no dividends or indeed no profits means no tax is needed to pay out either. I think alpha is a sensible company that needs more public profile raising in the UK market, then onwards to foreign investors too.
They are trading in line so they say, but earnings growth is trading higher, i ask do you prefer a company to increase sales faster then earnings or the other way around.
Frustrating. Whilst they are successfully battling macro headwinds, underlying growth of 20% isn't enough to push shares higher. On an enterprise free cash flow basis they are now criminally cheap though - back in September 2021 when shares first hit £22 their 1 year forward FCF yield was around 3.5% (£31m / £850m EV), today it's over 13% (£95m FY24 estimate / £705m EV).
One thing is for sure, if they had reported first half revenues of £88m inclusive of the £33m interest income, giving YoY growth of 91%, shares wouldn't be trading flat!
Nice summary here--
https://www.sharecast.com/news/aim-bulletin/alpha-group-ends-challenging-first-half-with-record-month--14112162.html
Good half year report, now with extra broker, revenues up, earnings up, some large trades today £ 1 million ones going thro, Business model working, company growing. cheap on a p/e basis., whats your opinion
I suspect the delay is connected to them deciding what to do with interest income - i.e. accounting policies need to be changed & guidance updated. Could be wrong but that seems the most logical reason for the lack of an update so far. Highest volume for a couple of months today - the usual incumbent II's offloading to each other I presume - it really is incredibly tedious!
Surprised we haven’t had our usual July TU by now. Hopefully get one this week.
Motley fool did a best stocks to buy and said alpha was one of them
https://www.fool.co.uk/2023/07/21/what-are-the-best-stocks-to-buy-for-the-second-half-of-2023/
Really interesting bit of insight on ABS posted by Citibank on LinkedIn & shared by Alpha;
https://www.linkedin.com/posts/citi_by-leveraging-citis-global-network-and-our-activity-7087140225218449408-yhh2?utm_source=share&utm_medium=member_ios
“Partnering with Citi to leverage Payer ID and its global capabilities was the last piece in the puzzle and has been instrumental in our success.” Adam Dowling, Group Managing Director, Global Account Solutions, Alpha.
Is anyone a member of investors champion site, I registered, but it costs either a yearly subscription or a one of fee of £3.20 per article. This was from march 2023, what was the "but "???
Stonking Small Caps: fabulous results, but…
The latest results from this founder-led business were excellent. With a growing product offering and expansion overseas, it remains an exciting prospect and continues to merits the title of a Stonking Small Cap. As a beneficiary of rising interest rates, management has decided to bring forward investment to supercharge growth.
We are always impressed when a fast growing business manages to overcome a serious flaw in its business model, especially when a pandemic is causing havoc to its market. This was the case with an AIM high-flyer covered here, which still managed to deliver a meaningful increase in profits in a very challenging period. It's another innovative founder-led Stonking Small Cap delivering strong growth, attractive margins and high returns on equity.
While this business has delivered impressive growth in recent years, its position still remains tiny in a huge market that is ripe for disruption.
Alpha Group International (LON: ALPH), the provider of Foreign…