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Nothing said at the AGM?
I agree.
I would imagine they absolutely don't want this to trip into the New Year, so I reckon it will be a busy weekend for the lawyers and I hang my hat on a Monday RNS.
Never mind, it was a nice timeframe to work to. It wasn't a case of linking it with the AGM, but merely using this date to announce something big. No doubt at the Q and As today almost every question will be on the potential sale so they will want to say something.
It's also not a case of holding back info, more a case of speeding it up, as for example drafting, reviewing and signing the final contract can take up to a month. So everything can be agreed but until the wet signatures are added, no deal formally exists.
Anyway, still think a deal is very likely - this side of Christmas is my next target
Shandy, I admire your optimism and it is tempting to think that the AGM and a deal might be linked somehow.
But Eenergy won't be able to hold that type of information back and would have to RNS it immediately.
I don't think there'll be much happens with the AGM - there rarely is - other than a few optimistic shareholders selling off afterwards after realising no deal is announced.
Still confident that this deal will go through - and the recent huge increase in volume indicates something is going on - unless this is Luceco cashing in on their 5p shares .
With the AGM tomorrow maybe we will also get a 7am RNS re the sell of the Management Division.
Potentially they may want to keep the two separate and announce it afterwards, especially if there are still a few loose ends to tie up.
Either way i think we are close.
I always try to be reasonably conservative with valuations, but i do agree.
In terms of the current SP very surprised this hasn't pushed up above 7p in anticipation of a deal being completed.
As 7.8p is a total valuation of £30m and we have an offer in excess of £30m for a proportion of the business the £30m level seems an obvious floor, even if the deal doesn't materialise.
Also, from the Nov RNS the deal with LUCE essentially ensures the expensive loan can definitely be repaid next summer and this uncertainty has been depressing the share price. I thought this news might have a more significant re-rate.
3m of volume across 139 trades before 11am.. given the previous few months of apathy, it seems like the deal is done and some are getting in ahead of the RNS.
Given the Energy Services adj EBITDA of £2.3 million in the interims, a multiple of 10x plus £30m in the bank should push this to the higher end of your SP projections imho and as you say,
Just as a guide, we have 387m shares so 10p = £38.7m valuation. £30m is 7.8p, £35m is 9p, £40m 10.3, £45m is 11.6 and £50m is just under 13p.
Based on what we know under 8p seems a gift.
Some chunky trades went through late Friday.. I suspect they were buys .. usually a good indicator that news is a foot in small cap shares .. let’s hope the deal is done before Xmas could be a nice gift
After an impressive 25% rise on Friday based on a pretty standard deal it is clear that many are thinking this was merely to lay the foundations for the sell of the energy management division.
We already know we are in exclusive discussions and i have previously said i suspect they will want to announce this on or before the AGM on Thursday.
The deal is supposedly in excess of £30m.
Based on 30/6/23 12 month EBITDA the management division is c double the size of the remaining business (i appreciate this is only one measurement and the remaining business is growing at a significant rate, but let's keep it simple).
So if we sell 2/3 of the business for the minimum £30m that values the whole business at c£45m.
£45m is c 12p per share.
I'm not saying we will hit 12p immediately, but i'd be very surprised if 10p isn't reached the moment the RNS drops.
Don't forget the broker value (before a sell was announced) was 13p so this valuation is not excessive IMHO.
Looking good and only 19% of shares in public hands
Today's RNS is intriguing. UDI appears to have been a service provider for an eEnergy acquisition for a number of years, yet they are only formalising the relationship now. I suspect this was identified as a risk in the duedil and they are tidying up loose ends. Positive news if that is the case and a deal imminent, likely before the AGM on the 14th?
Nice insight, thanks Shandy. Your 10x multiple example is why I pitched a final possible sale price being closer to £40m rather than £30m. I will hang my hat on £36m.. :)
SP is rarely a good indicator. EAAS hit 28p when they weren't making any money! We will. Good luck all.
From Sit's earlier post - "As per the interims, the Energy Management division has revenue of £13.6 million and an adj EBITDA £4.4 million. A sale of this division of £30m represents quite an average multiple (whether of revenues or profits), and the statement suggests it is a price in excess of £30m."
To support this i am in a small company called Croma. Despite making a profit and paying a dividend the SP hasn't done well and until recently the valuation had slipped to c£7m.
It announced it was negotiating to sell off its security division. Whilst this was a large % of overall revenues the EBITDA was less than 50% of the companies total EBITDA. In 2022 EBITDA for this division was £0.8m but with staff costs rising this was reduced to £0.28m in H1 2023.
It was sold for £6.5m - so based on EBITDA is was between 8 and 11 times based on whether you use the 2022 or 2023 figures.
So i think a sell in this range, c10 x EBITDA, is both reasonable and realistic.
Agreed, a premium is almost guaranteed with every takeover/part sell.
recent example is OTMP has recently been sold for 110p yet was c50p only a few weeks before.
In terms of valuations - just look at twitter. Musk thought a loss making app was worth c£40bn.
MCap is only but one valuation method. There are plenty of examples where listed businesses have been bought for much higher valuations than what the SP denotes. As per the interims, the Energy Management division has revenue of £13.6 million and an adj EBITDA £4.4 million. A sale of this division of £30m represents quite an average multiple (whether of revenues or profits), and the statement suggests it is a price in excess of £30m.
Remember, the acquirer might not be listed so it is how they value the book that matters. If the client base is loyal and super attractive to the buyer, I suspect the end sale price might be closer to £40m rather than £30m.
Can I ask why anyone would acquire the Energy Management division (only) for >£30m when the entire group is only valued at £19.94m. Surely under rule 9, should an organisation wish to aggressively purchase the business, they would have to at a minimum, match the highest share price over the the past 12 months (which was 7.55p). This would value a group acquisition (not just a division) at £29.24m. This obviously is based on acceptance by 90% of the shareholding.
Perhaps someone can enlighten me,
I agree sitandwatch - a lot of due diligence will have been undertaken before an offer was even made as for example last year's full accounts are in the public domain.
EAAS would not have agreed to formal discussions with a preferred bidder without the bid being serious and 'agreed in principle'. The bid is over £30m , not £30m BTW.
Clearly there are a few further hurdles to jump over, but on the whole i am reasonably confident that we will get a favourable deal in the next few weeks.
I would imagine that duedil is largely done for them to publicly confirm a sale price of £30m, and that they have entered in to a period of exclusivity. To me that shows both sides have confidence in the deal crossing the line. We will see.
Possibly, but Due Diligence will take considerably longer than that, and as far as we are aware no firm offer has been made yet. Lots of hurdles before any sale is concluded, but ever the optimist......
With the AGM about 3 weeks away, i suspect the BOD will want the sale to be sorted on or before that date.
I agree the Energy Management division will be sold off. Firstly there is more than one interested party and the RNS states discussions are at an advanced stage. I think the loan repayment due in May 2024 is predominantly covered by the money just received from Luce so this is not a fire sale.
At H1 Energy management was growing slower than the services division but EBITDA was higher at over £4m. Always difficult to value a growing company, but i'd like to see minimum 5 x full year EBITDA.
As EAAS as a whole is currently valued at c£20m this looks a good spin off.
However, the devil is in the detail - will it be full cash or cash plus shares? Will all/most of the money be paid upfront or will some of the money be linked to future performance etc.
Even if 'only' £10m was returned as a special div that would be c3p a share.
If we do receive £30m upfront difficult to see how the whole company is not valued at c£50m - c 15p a share.
This will be sold! They need the cash and loan due next year. The cash will be good for the business, use that to finance new customers rather than getting finance solution at 15-20% advance. Bottom line up over night, quick win. That said, 30 million, shareholders should get a special div...? I'm still in, Lets wait and see :)
The only caveat I would add is that it seems SO obvious that maybe it's too good to be true
Why are you not convinced? Are you just a glass half empty person? The RNS excerpt below says they have entered into a period of exclusivity with one party - so that shows things have progressed considerably. Also later on it states that discussions are at an advanced stage. That's a massive tick in the box IMHO.
During the first half of 2023, the Board received a number of unsolicited approaches expressing interest in acquiring the Energy Management division (the "Division"). The Board engaged professional advisers to conduct a strategic review of the Division, following which the Board received a number of indicative cash offers which valued the Division in excess of £30 million. The Board has now entered into a period of exclusivity with one of the interested parties.