The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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Looking strong today
With just 15 days left to CAB Payments 1st full update, wonder what/when they will initiate the return of excess cash to shareholders?
Free Cashflows are staggering.
In H1 23, 52.8% FCF when compared to revenue (Revenue £71.8m/FCF £37.9m), it's unheard of.
Free Cash Flows:
2022 - £50m (ACTUAL)
H1 2023 - £37.9m (ACTUAL)
2024 - £73m (EST)
2025 - £106m (EST)
What are they going to do with over £70m FCF this year and over £100m FCF next year!
They simply have too much Cash if that is such a thing 🤯, for growth/expansion/investment. Surely some sort of returns to shareholders has to be on the cards.
They returned nearly £19m in dividends before IPO last year, or 7.7p a share.
DYOR
I found the reasons why Helios has to sell down their 41% in CABP before they can apply for USD
Clearing House Interbank Payments System. 'CHIPS'
Anti - competitive concerns & conflicts of interest
Helios Fund III At September 30, 2023 the underlying portfolio investments in Helios Fund III were primarily comprised of investments in: (i) a public
company providing cross border payment and foreign exchange services across Africa;
(ii) a public company providing electronic payment processing
services in Egypt
Helios Fund IV (ii) a private company providing cross-border electronic payment processing services globally (including Africa)
Indirect Equity Interest in Access Bank SA, listed on Nigerian stock exchange.
Also, the 2023 to 2026 exit range is to be considered normal.
It matches the the exit ranges length in the other Funds.
Small moves, there's a very good summary here and the author is also invested in CABP.
https://seekingalpha.com/article/4666496-cab-payments-pe-of-5-while-growing-more-than-25-percent-a-year
thanks smoothoperator , that statement is probably what's driving these sa and advfn posts which all seem to be a copy & paste of each other based off one persons view of what they think may or may not happen. they could of course be spot on, or completely wide of the mark. who knows?
my read on this is that there's nothing here though to suggest that helios' exit strategy on cabp is different to that of any other pe on any other company i.e. invest -> build the company value up -> sell and take huge profits -> repeat on next company. there's also nothing to suggest it's a pre-requisite to any license or approvals, or that any 3rd party has mandated they exit by a certain date. the dates they give are also somewhat flexible (targets not deadlines) and are not specific as to actual date (is it before jan 1st? before financial year end? before end of calendar year?).
the only pre-reqs i could find to get the us licence side of things through were a) have to be publicly traded (tick) and b) no one party can have overall control i.e. 25% or more of shares (not done yet). i may be wrong on both of these though, as surely there are privately held banks that are licensed? i'm not close enough to us banking regulations to work out how all their rules are implemented in reality, but i'm sure there's a well rehe****d process that cabp are following and helios are well aware of any potential impacts to their holdings and have planned accordingly, ensuring they obtain maximum value for their investment at all times.
one other point that interests me around this discussion is how all of this might also apply to the eu license? doesn't the eu generally mirror the us requirements around banking? i believe cabp were clear that they wanted (expected) to get the eu license sorted by end of 2023, so if there is a similar ownership requirement in the eu there must surely have been a plan to fix all of this before then? does the share price drop mean that the original disposal plan is now out of the window and we won't see eu or us license progress any time soon? i strongly suspect that won't be the case, as they specifically mentioned the importance of eu and us in their recent press release, which makes me think either plan a is about to be completed or they have switched to a very cunning plan b.
i'm really looking forward to results day where hopefully we'll get some clarity on where we are with both of these license application processes, and if there's any significant new markets they are planning to enter this year as i still think south america is a huge untapped area for them.
At 400p+ (Just 20x 2024 P/E) they can sell whatever they want 🤑
Est Free Cash Flow
2024 - £73m
2025 - £106m
Helios Fund III is a private equity fund domiciled in the Cayman Islands that was formed in 2014 with the purpose of investing in companies that operate primarily in Africa.
At September 30, 2023 the underlying portfolio investments in Helios Fund III were primarily comprised of investments in: (i) a public company providing cross border payment and foreign exchange services across Africa; (CABP)
Helios Investors III, L.P. (“Helios Fund III”) target exit year 2023 - 2026
Given the target exit year range of 2023 to 2026 for the fund, it suggests that the fund intends to exit its investments, including its stake in CAB Payments Holdings, within that timeframe.
Helios Fund III is a private equity fund domiciled in the Cayman Islands that was formed in 2014 with the purpose of investing in companies that operate
primarily in Africa. At September 30, 2023 the underlying portfolio investments in Helios Fund III were primarily comprised of investments in: (i) a public
company providing cross border payment and foreign exchange services across Africa; (CABP)
Helios Investors III, L.P. (“Helios Fund III”) target exit year 2023 - 2026
Given the target exit year range of 2023 to 2026 for the fund, it suggests that the fund intends to exit its investments, including its stake in CAB Payments Holdings, within that timeframe.
I've seen various people mention this requirement for Helios to exit their position to get CHIPS but is this actually true, and if so does it mean "fully exit" or "reduce"?
My understanding of the process CAB need to go through is:
1. US banking registration
2. Get clearance from Fed
3. Apply to CHIPS for electronic transfer license
So which one(s) of these steps is it that requires Helios to "exit"?
I've dug around and the admission criteria for CHIPS (basically the US version of CHAPS) which can be found here and can't find anything specific with their criteria->
https://media.theclearinghouse.org/-/media/New/TCH/Documents/Payment-Systems/CHIPS_Rules_and_Administrative_Procedures_03_01_2024.pdf?rev=2192b9738b3a4775b2f7f13a32bcc321
However, I believe the only important number is actually concerned with the US banking registration and the 25% ownership rule which once you go over you're deemed to have control, so this is the number that Helios (or indeed anyone else) has to stay under if CAB is to be a public US bank.
So if the requirement forms part of step 1 then it's a bit odd to be having a timeline of selling by end of 2025 and therefore only being able to begin step 2 at that point, let alone step 3, as this would not seem to align with their stated goals about getting this done as a priority. Unless the "full exit" by the end of 2025 is completely unrelated to the US applications and has been miscategorised.
There's also a big assumption here for the ownership clause requirement in that Helios would have to gradually/carefully sell their extra 20% of shares (to get their current 45% below 25%) at the current price on the open market, rather than just off-loading to one or more other PE firms at IPO price with a short RNS at some point in the next few weeks/months. If they wanted to do that, what's to stop them? And if those lucky PE firms had also recently been building a 9.99% stake below £1 then they would be able to average their holding right down so they would also have a fairly good deal...
Assuming the Banking registration is then granted soon after that has completed, then the fed and CHIPS stages should be straightforward and the SP should skyrocket, at which stage Helios would just sit on the remaining 24.99% as the SP continues upwards through 2024/2025, selling off in a managed way at far in excess of IPO prices be end of 2025.
Bottom line, I don't see any concern for LTH around this.
Correction *
Helios owned 41% (after IPO) and, according to their last investors presentation, they plan to sell down their fund III positions by the end of 2025. This poses a short to medium-term risk but may turn into a catalyst thereafter. It is necessary for Helios to exit their position so CAB can apply for CHIPS (Clearing House Interbank Payments System) access and obtain $USD clearing capabilities.
CAB is dependent on third parties clearing 75% of their revenue that is denominated in $USD. They are unable to begin the process of connecting to CHIPs (Clearing House Interbank Payments System), which would give them USD clearing capabilities, until Helios sells down their position.
Then you'll know Helios will have to part with their stake 43% for the greater good.
The USD clearing house status will transform the company expected around the end of 2025 , the additional revenues should make current levels look very small.
Just build a big position and hold.
Ha....trust me I have been tracking CABP since IPO and have been building a significant stake over recent months....but not a serial poster and do not like to repeat posts. Plutus1 has covered all key points....I have nothing material to add other than....no brainer :)
He hasn't explained everything there's a lot of selling that has to be done by the end of 2025 and then the company will be transformed.
Good to do some research.
For me, this share is a no brainer. Plutus 1 has explained all the detail :)
Looking forward to results...expect a significant rerate prior to results and post results. GLA
Friday's are usually blue here apart from last Friday
So we have 15 x trading days to go until Tuesday, 26th March 2024.
I am predicting a minimum average of 1p a day price rise to get to 110p.....as a conservative estimate.
IMO - DYOR
After today just 16 trading days remain....
Premium Listed Company ✅️
UK Banking License ✅️
Significant Growth - 25% in 2023 ✅️
A Truly World Class Management Team ✅️
Recently quoted they have the knowledge expertise and skills to be running a $100 Billion company ✅️
Profitable ✅️
FCF Positive - £37.9m in H123 ✅️
Consensus FCF est: 2024 - £73m/2025 - £106m
Cash - Should have £140m+ by end of 2024 ✅️
Clean balance sheet after IPO ✅️
Significant growth potential - 2 Licenses pending anytime ✅️, currently have just 1-2% of the total market ✅️
Types of Customers - High quality and growing customer base, made up of G10 government entities, some of the world's best known international development organisations, global remittance companies, emerging markets financial institutions and, increasingly, major market banks ✅️
Territories - Operate in 150 different countries ✅️
Significant Blue Chip Customers - 74 New customers between Q1-Q3 in 2023. Eg New clients in several regions, including Santander Group/PagoNxt. Signing client agreements with the three largest exchange houses in the United Arab Emirates etc ✅️
Super High EBITDA Margin - 57% in H123, is this one of the highest on FTSE ✅️
Recurring revenue - 96% 3 year retention ✅️
ULTRA low P/E - Less than 4x for 2024 ✅️
2024 EV/EBITDA Est - Totally disconnected to Fair Value - Current Market Cap £210m, Debt N/A, Cash £140m, EBITDA £83m = 0.84x 🤯 Yes 0.84, it's totally mind blowing ✅️
IMO Dividends/Share buybacks will come in 2024, then it's a full house, there will be no stopping ✅️
All about the fundamentals, speaks for themselves, and current market cap £240m 🤦♂️
DYOR
It's month-end today so typically closing auction will be in large volume as portfolios are rebalanced, so I would not read too much into it. Interestingly though the price was not hit in the run up to close as has been usual recently
Volume today turned out at over 3,300,000, so it looks like friday, is not the only day that additional volume is added, in an equity. Buy pivot break close, would have to be 97.1, or higher. Close is important , because I have seen occasional equity sp, inflate and deflated within the same day. DYOR.
Volume today i project will be 558,000 which is midway between previous two days volume.
Sorry, I mistakenly described Japanese candlestick 2 days ago as a doji, but strictly, that name applies , if the close-open, represents 5%, or less of the high-low. So the candlestick was a spinning top, but the interpretation is much the same as a doji, with the high and low treated as pivots. Yesterday high and low, were inside the high and low of the spinning top of the previous day, indicating price compression. Today broke the spinning top high by 0.1, for a high of 97. The previous pivot of 96.9,is now changed to 97. If the sp, closes above 97, on apparent increased volume, buy. Nb, the now spinning top low, less at least at least 50% normal spread, could be stop loss level.
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Good call Stargate, even against a large sell off of £311k UT. Very interesting. Maybe the shorters are starting to close?
SmallMoves - wise words
Total and absolute belief in the fundamentals and nothing else. Everything else is just 'noise'
2024 EV/EBITDA - Less than 1
H1 23 FCF - £37.9m
H1 23 EBITDA - £39.9m
H1 23 EBITDA % - 57%
Cash conversion - 95%
2023 Growth - 25%
What else do you need to know. Expanding in US and Europe, new licenses pending, huge competitive advantages, shift to specialist providers like CABP etc
CABP needs to go up by multiples to get to anywhere close to a realistic valuation.
The shenanigans being played here is beyond belief. Sells of probably £100-200k has wiped out £30-40m of market cap in the last few days. Total🤯, unbelievable how this is allowed to happen. LSE is not fit for purpose anymore, there is no liquidity.
18 trading days left until 26th March full update.
Agreed. However that may well be why the ATR(average true range), indicator was produced, which incorporates gaps, if any. The intent of the indicator appears to be to prevent the user from installing a stop which can be triggered by the average equity daily volatility. Often, the user will employ a multiple of the ATR, as a moving stop loss.