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Anexo will be at Mello2024 on Wednesday 22nd and Thursday 23rd May 2024, 9am-6pm at the Clayton Hotel & Conference Centre in Chiswick, London. The annual flagship in-person investor event will feature over 40 companies and keynote speakers such as Lord Lee; Christopher Mills; Georgina Brittain; Gervais Williams; Ed Croft; and many more! If you are new to Mello, you can get a ticket for just £30! Use code NEW2MELLO24
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"As noted when I suggested buying the shares, at 65p, in my 2024 Bargain Share Portfolio, the reason for holding them is the potential for a narrowing of the 53 per cent share price discount to book value of £159.7mn (135p) as more investors cotton onto the debt reduction programme and the changing mix in the group’s income stream. A current-year prospective price/earnings (PE) ratio of 4.2 and an enterprise valuation to operating profit multiple of 3.5 times highlight the value on offer, too. Buy."
Continued...
""Significant pipeline of demand
Credit Hire division provides an essential service to “impecunious” individuals who would be otherwise unable to fund repairs or a replacement vehicle. According to recent research published by the House of Commons Library, 11 million adults do not have a credit card (without which It is impossible to hire a car) and 16 million adults do not have the reserves to meet an unexpected bill of £300. In addition, the Money and Pensions Service has found 8 million adults are in need of
professional advice on their debts and 12 million people are “on the edge” of serious debt problems. These statistics illustrate the level of need for the services Anexo provides in our view.
We believe an increase in ‘gig-economy’ drivers, where access to a vehicle is essential, combined with the impact of the consumer crisis on individuals’ accessible funds will drive demand for Credit Hire in the near term. There are currently 7.2m gig workers of which 3.7m, or >50% are drivers, forecast to grow at 7% per annum. Rigorous screening means Anexo has a >98% success rate at trial, with most cases settled outside court.
High growth Housing Disrepair division: The Group’s Housing Disrepair division was established in FY20 following the passing of The Homes (Fitness for Human Habitation) Act 2019. An estimated 12% of social housing (480,000 homes) and 25% of private rented housing (1,150,000 homes) fail to meet the Decent Homes Standard, whilst an estimated 5% of social housing (200,000 homes) and 14% of private rented housing (644,000 homes) have hazardous levels of damp and mould growth. The HDR claims cycle is shorter (typically 7-9 months), more profitable and generates a higher return on capital vs. Credit Hire. Assuming c.25% of those eligible go on to
pursue a claim implies a total of 600,000 claims. Anexo has c.3,900 active claims at the 31 December 2023, indicating significant growth potential in this division.
Emissions litigation has potential to generate meaningful cash returns: the Group believes there is potential for further cash generative agreements through pursing additional, selective emissions litigation claims, with up to 11 million vehicles impacted in the UK. This includes the ongoing Mercedes Benz Emissions Claim, with a total of 12,000 claimants now signed up and forming part of the wider group litigation action. Mercedes Benz agreed to pay 250,000 American consumers an average of $3,290 each after a similar group claim in the United States. The UK
Mercedes Benz claim has been valued at up to £1bn by some experts. Further actions against Vauxhall, BMW/Mini, Peugeot/Citroen and Renault/Nissan is also underway with c22,000 confirmed claims."
Zeus have issued an update note today.
They forecast 14.8p EPS this year, rising to 16.4p EPS next year.
There's a 1.7p forecast dividend for both years, with net debt falling to £54.6m at the end of next year.
Here's the outlook summary, but it's the section on the significant pipeline of demand which is the most interesting:
"Outlook & forecasts: Our FY24E forecasts are unchanged, and we introduce FY25 numbers today. Our forecasts are underpinned by growth in vehicle activity, particularly towards the end of FY23, as well as the significant portfolio of claims within Legal Services.
Valuation:
Anexo trades on an FY24E P/E of 4.3x with a prospective dividend yield of 2.7% based on a conservative c.10% payout ratio of adj. EPS. We do not include any benefit from future Emissions Case agreements, despite reflecting the associated marketing costs within our forecasts, providing upside risk to profit and cash generation in the event that agreements are reached, which we expect could be in FY25/FY26."
Looks like a positive turnaround is happening here, led by much improved cash flows. An excellent summary elsewhere by Moathunter as follows:
"...a solid set of results.
Thankfully they are slowing top line growth and concentrating on cash collection to improve working capital.
And with such a fixed asset-lite/ capital light business model with a strong moat unique business configuration (legal aid + car hire), the result is significant free cash flow generation which is calculated as £28m this year (NOPAT + Deprec.- Capex -change in working capital).
Removing the one-off Emissions Case that resulted in a net positive cash position of £7m = £21m free cash flow **and this is a predictable cash flow going forward (stable industry, moat, proven model through downturns).**
So with a market cap £79m/£21m = 3.8x free cash flow multiple.
Or Enterprise Value £147m/£21m = 7x multiple.
£21m/ 10% discount rate (back of envelope) = 21/0.1 = £210m - £68m net debt = £142m valuation for the equity/118m shares = a conservative 120 pence and that excludes growth.
Cheap."
WH Ireland forecast 15.2p EPS this year, up from 12.8p EPS, for a P/E of just 4.2, with a EV/EBITDA of only around 3.4.
They conclude:
" Continuing in invest in attractive markets
The business looks all set to grow, having invested strongly in FY23 (£4.3m in Diesel Emissions lead generation / staffing, £3.8m in Housing Disrepair marketing costs, and vehicles at peak levels in Credit Hire as discussed). The large demand pool of impecunious motorists and motor-cyclists involved in no-fault accidents continues to be tapped. Housing issues on both sides of the private / rented divide remain a major issue. We view secured claims of 12,000 (Mercedes Benz) and 22,000 (others) as offering a very substantial future reward to this company.
• Forecasts:
Following inline results this morning, we leave our FY2024E unchanged, assuming a continuation of high levels of activity in the credit hire business and a positive impact from growth in headcount in the Legal Services division. Introducing FY2025E forecasts, we see potential for ANX to deliver further growth whilst at the same time achieving a reduction in net debt as cash collections improve. Crucially, we note our forecasts include vehicle emissions marketing costs as expensed, excluding the significant upside this promises."
Net asset value now at 135 p
Debt down, no divi increase though and profit down, probably as paid debt down. not the best of results but not bad
Sold my shares but always keeping a close eye. Interesting drop just before an announcement tomorrow. Makes me wonder if it will be a negative update? Wait and see moment...
Alan Sellers, Executive Chairman, and Mark Bringloe, CFO, will provide a live presentation relating to the Final Results Presentation via Investor Meet Company on 01 May 2024, 09:30 BST.
ShareSoc Webinar with Anexo (LON:ANX) 14/5/24 4pm. Nick Dashwood Brown (Head of Investor Relations) will present a full overview of the company and give an update on current performance and future plans. Register: https://www.sharesoc.org/events/sharesoc-webinar-with-anexo-group-plc-anx14-may-2024/
Come on ANX, lets have some decent rises upto results
Share price drops!!
Shares go up and down. Dont read too much into it.
I'm buying more after watching this. Great viewing.
Will do, Thanks Pedro
Cbc
Read Simon Thompson Of Investors chronicle and see his bullish view. He has this as his nap for 2024. He gives many good reasons why this is so undervalued. If you read his ideas you would very bullish as well. Profits set to go ballistic.
I'm asking what makes someone optimistic to be confident in this company. I want to share that optimism.
What's negative? A 15% drop in a day.
Cbc
The Board is pleased to announce that the Group is trading in line with management forecasts and that pre-tax profit for FY 2023 is expected to be broadly in line with market expectations.
Whats negative about that ? Directors sell their shares all the time. They havent got money tree's just like the rest of us.
Hi Pedro, based on what information makes you extremely confident? I'd be keen to find an angle with your optimism. I want to believe, however, recent figures and RNS report lacked any content that would attract strong investment.
I'm just not sure personally, how they're running this business.
Cbc
So why the large fall yesterday?
I am extremely confident of big rises in the near future. Shares are being bought into at this extremely low s.p. Fundamentals are very good and this can be a multibagger from this level,in my opinion.
It's worrying times for this company and price. We'll never know the real reason the Director (or one of) is selling the shares but it speaks volumes.
I'm going to have to sell up on this one, I'm really sceptical about how this business moves forward.
I'm terribly confused by this share. What the hell warrants a 16% share drop on no news ?
?????????????????????????????? Whats up 16% in one day