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New note out today - Equity Development increased fair value calculation to 165p/share after latest deal.
That is equivalent to a 18.7x FY22e PER and a 1.9% prospective yield(covered a healthy 2.7x): so still only in line with UK listed professional service companies.
Free access to full note here: https://www.equitydevelopment.co.uk/research/upgrades-after-drp-acquisition
I agree with both you; yes administrators always get paid, and that unbilled revenue is a reflection of cost built into WIP. What I'm highlighting is the timing mismatch causing a squeeze on cash. You have staff that are paid monthly regardless of the outcome of cases and you have previous selling partners entitled to £7m deemed remuneration. On the other side cash from WIP is only realised when assets sold or disputes resolved, layer on another 12 months of delays due to CV19 and cash begins to get tight.
I'm not saying its purely a Begbies issue, you can see it with similar listed peers and also why I suspect these larger private companies are willing to sell on lower valuations as they don't have access to the same level of funding. I'm not saying its a fundamentally bad business, especially if you feel insolvencies will accelerate. I'm just saying for a business that does £11m of adj EBIT and needs £10m of equity capital for general corporate purposes looks rather odd to me, and looks to me as though they needed to pay deemed remuneration and staff.
However, what stinks is management will do nicely as adj EPS will progress on the back of acquisitions, even though the earnings aren't cash backed and from my point of view were bailed out by shareholders. Like I said I hope I'm just being overly pessimistic, but thought I would highlight what I thought was a rather big concern
thank you - so if you get an allocation and have an ISA with jarvis can the PB shares go straight in the ISA?
I got a disappointing 271 BEG shares on the Primary Bid offer. This was my 25th PB purchase, the better ones I have kept and added to. Some went for a small profit, some a small loss. A couple did really well.
You need to be quick, a loud notification on your phone helps. Offers tend to come through just before the market opens or after it closes. Quick research is essential, no prevarication, a yes/no decision and get your debit card out. Theres little point going large, allocations are often small and it just ties your cash up,. Avoid Investment trusts.
I will add to BEG, but one of the PB drawbacks is that the balance return is not always rapid. Primary Bid is run by Jarvis Securities (JIM.L), they also have the share dealing site x-o.com. I switched my ISA and Nominee from H&L to X-O, deals are just £5.95 with no other charges. On the downside the website is basic, but at least they answer their phones.
For anyone interested in PBs in future. A few people have actually incredibly made contact with the other side. 'We are working on making all primary bid's available on the web and yes Beg was only available on the app.' Wow 21st c technology, something that doesn't quite work yet
Begbies Traynor Group plc (AIM:BEG) entered into a conditional agreement to acquire the entire issued share capital of David Rubin & Partners Ltd from the shareholders for £25.2 million on March 11, 2021. The Acquisition is for a maximum consideration of £25 million payable to the shareholders of DRP on a cash free and debt free basis with normalised levels of working capital, comprising: initial consideration of £12 million to be satisfied as follows: £10 million in new Ordinary Shares which are to be placed for cash on behalf of the Vendors pursuant to the Vendor Placing,and £2 million in new Ordinary Shares calculated at the average mid-market closing price of the Company's Ordinary Shares in the five business days immediately preceding the date of this announcement, being 1.92 million Ordinary Shares, contingent cash consideration of up to £8 million subject to maintaining financial performance in the four years following completion of the Acquisition and earn out consideration of up to £5 million in cash subject to fee income exceeding the fee income targets required for the Contingent Consideration over the five years following completion. The individual Vendors are joining the Group as members of Begbies Traynor (London) LLP with minimum notice periods of 5 years from completion subject to two exceptions where their notice period is 3 years. Completion of the Acquisition is conditional upon admission of the Vendor Placing Shares and the Consideration Shares and there being no material adverse change to the business of DRP between the date of this announcement and Admission. In the financial year ended 30 April 2020, DRP reported Net assets of £4.6 million.
The “unbilled revenue” is of no concern at all.
Quarterly WIP reviews will be conducted where every single case is reviewed. Expected future billings and expected future time costs will be adjusted at each WIP review with revenue accruing as time is recorded against the case.
Contingent billing where there are for instance investigations and/or legal action will be recorded as “contingent” and no revenue will be accrued until it is moved to non-contingent i.e. when they are sure they’ll be able to bill it.
I think it sold out in about an hour or two. A couple of guys got very small allocations on Stockopedia, and that was using an app. Obviously the stock exchange can't run to the expense of getting a website that works properly. LSE overhaul is a mess too. I spent an hour trying to get some last night and it got down to about 4 minutes left I gave up. I did buy a few this morning after a bit of hassle. They tried to rush me for £1.12 first thing but I kept getting quotes till it dropped back to 1.06 and 1.07. No stamp duty and got a load more than I would in the allocation. Fair enough really. They need to raise the cash as quickly as possible. Don't think its worth loosing sleep over because in most placings in the last 12 months shares have dropped below placing level at some point. Hope that doesn't happen here. Well judged Imo. They didn't need to offer at a discount. The trouble is for investment companies to get a decent holding on the open market would push the sp too fast and there wouldn't be enough stock available. Win win all round and great to see such a strong response from the sp rise. A lot of momentum here, strong chart signals and positive analysis forecasts. Gl
The administrators always get their money, they are first in line for payments, it's the other creditors who lose out. Just takes time to realise the cash as they cannot get it until they have completed the liquidation process.
Agreed. Wonder if MagnusWalker (1 post) is invested here or just trying to "help" PIs.
No suprise that shares in @Begbies have reacted well to the deal and the management video today. Updated research note just published, reaffirming 140p fair value, with link to video. Read it here, free access :
https://www.equitydevelopment.co.uk/research/acquisition-boosts-scale-and-market-share
did any one get an allocation in the primary bid plscing?
Company and in turn investors concentrating on Adj EPS but why is no one looking at the cash (or no cash) that this business generates in the insolvency business. HY results £37m revenue but £27m of UNBILLED revenue and prepayments! Thus cash management think they will receive but have no guarantee they will as all tied up in contentious asset recovery and liquidation cases. Earnouts of CVR and DRP based on key wins in such cases, so cash may come but clearly an issue across the sector with CV19 delays and had their own cash crunch so happily sold to Begbies. Why sell out when you think record trading could come through as insolvencies accelerate and you could get a much better valuation? They need the cash that's why!
In terms of Begbies throw in £7m of deemed renumeration (i.e. deferred consideration) and basically no cash on the balance sheet is the "general corporate purposes" part of the raise. Look at restatement of operating cashflow in 2019 from £4.6m inflow to £2m outflow.
But as long as this WIP and acquisition costs miss the P&L then adj EPS keeps increasing so management get their bonuses and LTIPs, and also allowing further equity raises. Some cash might start to come in but no one knows at to what degree, and two BIG acquisitions in quick succession and an equity raise looks like trying to gloss over this and keep things moving along until some cash can start coming in.
Call be overly pessimistic but I think if this equity raise didn't get away then we would have seen a very different RNS coming out.....
institutions who were scaled back looks like to be buying retail now.
"We are pursuing a restructuring arrangement to be agreed with our stakeholders including most importantly, our community. We are preparing this through an administration with Insolvency Practitioners Begbies Traynor to seek the best outcome for customers with the goal of continuing the platform in a restructured way" - Should bring in a few quid.
Yeah similar here.... hardly worth the hassle with such a large scaleback.....
Got only 25% of what I applied for.
70+ staff in London.
With that and the acquisition of CVR, turnover in London alone expected to more than double in value.
I am buying. This company will be busy and this is a profitable growing business. This fundraise is earning enhancing. Straight to the bottom line.
Yes it’s the shame about the ISA thing. I asked for £2.5k. I await!
I already have a holding, curious as to why it was set above current share price.
Another reason for wondering, not mentioned here, is that you can't assign PrimaryBid acquired shares into an ISA. To anyone who is concerned about capital gains or dividend tax ceilings, that would be a no no.
RNS today - the fundraise was SIGNIFICANTLY oversubscribed
Seems the placing was fully subscribed (at least). Expecting a modest rise tomorrow and it’s also put a bottom on the price for a while.
Plenty of examples of a placing price being above the SP. depends on demand and how much value is being added. It must have been priced at 105.5 for a reason - they believe the SP will react positively
Immediately earnings enhancing would be one possible reason. I. couldn't get any anyway. Anyone else have any joy? There is no stamp duty to pay because they are on AIM. Looks like a great deal and probably what has pegged the recent sp . They knew was coming just needed the price. Doubt their will be cheaper tomorrow but never know. As for 'never hearing the placing being higher the the sp" obviously missed the RTN placing last year which was double the sp that day. Its only placings and furlough holding them up . Now they are going for another placing at 10% discount! 57% fall in revenue . Two placing and a rights issue. Obviously a lot more money than sense around