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Small Cap Life just did a fairly balanced write up about the new joint venture:
finnCap announces that it has, today, acquired a 50% interest in Energise Limited ("Energise") a net zero and sustainability consultancy, based near Cambridge…
Mark doesn’t know quite how to feel about this one. It is clearly a big growth area where reporting etc. is now mandatory due to the influence of larger shareholders. Many companies will be struggling with this and welcome the help. I can see finnCap with their contacts driving lots of business in this area for the JV. On the other hand, the price they've paid isn't obviously cheap, and not all shareholders or managements value this sort of reporting.
We don't like JVs in principal, but today's deal is not the typical arrangement where the other company has a continuing business not part of the JV. The main concern is the price paid. £1.1m revenue / £0.1m EBITDA indicates it is subscale, presumably due to being early stage. An EBITDA valuation doesn't make much sense. Assuming 25% EBITDA margins at scale, EBITDA would be £0.3m, they are still effectively 15x EBITDA for 50%. So, a lot of the cost is option value on this growing strongly and has a sufficiently good outlook such that 6-8x EBITDA for the other half is good value.
Still, it aligns with the finnCap core mission of doing the right thing and helping clients to do the right thing. And it potentially looks very cheap having retained (in some form) the exceptional profits of recent years on their balance sheet and are now looking to use this to expand into complementary areas. Companies that do this well often get earnings growth and a multiple re-rating. We really need to see some 2023 forecasts to make any further judgement on this, though.
26p level is also the 0.618% fib retracement point (not that I am a trader, this is in my SIPP for the divi but in the accumulation phase).
Not much of a reaction at all really. Appreciate the price is almost 10% down today but that’s not a big move in this share, it looks to have shown resistance at 26p which it was at a few weeks back and I wouldn’t say volume is particularly high on todays selling and that’s probably Because at the current price it represents good value.
Growing revenue, growing profits, growing dividend yet the PE is at an all time low.
At 26p it’s now the same value as in 2019 when it only had £5mill cash, paid 0.5pence per share divi, and had op of 3 million.
It’s now got almost 5 times the cash, pays 3.5 times the dividend and approx 3-4 times the op. Yet pe ranged between 6-12 during 2019 and now it’s at 5.6.
Clearly we’re in a bear market at the moment but there’s plenty of upside here now
I also noticed the lack of guidance which admittedly was a little disappointing.
Having said that, I think that a return to more normal trading conditions is to be expected, and more importantly, already priced in at these levels.
I think the dividend payment this year will cost them roughly £3.2m. Profits after tax will be about £8m. That means that we can afford to make 60% less next year and still fully cover a 6% dividend from operations without having to dip into the huge cash pile.
All fair points, EOB.
As I posted over on t'other board, what is noticeably lacking compared with a very similarly-worded statement last year is any hint of an outlook. Last April we had comments on a healthy Q1 pipeline.
Similarly to what happened with SUP earlier this week, any hint of a single negative in an update results in a severe mark-down in share price. Given that it is almost impossible to avoid negatives in current times, companies must be wishing that they didn't have to release any news at all.
I’ve no idea why the market has reacted in this way to an RNS which has merely confirmed EXACTLY what the update on 10th March stated.
Even the good folk on here panicking about the ‘core business’ diminishing are missing the point. Cavendish is racing ahead, its contribution has gone from a quarter of total revenues to half, why not focus on that?
Total revenues are up, profits will be enviable and the dividend will still be outstanding thanks to the enormous cash pile that guarantees it for several years at least as Sam has stated. At this SP, you won’t find better value out there imo. I’m adding today.
Seems as expected to me. Last year was an exceptional year for IPO's and deals, while this year was always expected to be unrepeatable for everyone in the sector. The market will eventually change. The clue was in the low P/E. Take the dividends and wait for FCAP to grow into a larger company and able to take advantage of the next market boom. OR sell and come back when conditions are better.
Pretty poor performance yr-yr on core business. How on earth this is deemed as a good result is beyond me . and it looks like its beyond the market too.
I may sell
Selling could have been done or there is increased buying. Good place to put a bonus into.
TU within a few weeks (if previous years are anything to go by).
Read across to Cnks as stated by Florence - should be a good 'un for Fcap
Read across to NUMIS - Numis, another close competitor of Fcap appear to be doing good.
Also most recent TU was +'ve.
Fingers cross that it's more of a CNKS rather than a PEEL (Peel is larger and targets a different clientele base).
PE of 5ish per stockopedia - too cheap.
Did anybody see the Cenkos results and subsequent share price movement? Could be some interesting read across for Finncap… similar operations, similarly strong balance sheets, both have likely just had exceptional one off years but Cenkos trades at 9/10x that exceptional year’s profits whereas Finncap trades at 5/6x that number.
The only difference I can see is a bit of Simon Thompson backing, although admittedly I don’t know the businesses inside out.
One of their stated reasons for keeping the cash relatively intact is to be able to maintain the dividend policy, even if revenues and profit are disappointing one year for any reason.
Great results. Clearly, the share price is managed to be an investment for the long run rather than a rocket to riches. I too have copied the directors and bought a little in the SIPP. I wonder what they will do with the cash, invest for growth or invest it in the money markets and keep it for a growing NAV?
Nice
finnCap Group PLC
Trading Update
FY 22 Revenues to exceed £45-£50m guidance range
finnCap Group PLC ("finnCap" or the "Company" or the "Group"), a leading provider of strategic advisory and capital raising services to growth companies, is pleased to confirm that unaudited revenue for the year to date has now exceeded the top end of its £45-£50m guidance range.
Sam Smith, CEO commented:
"With further potential deals to close, the Group is set to deliver record revenue for FY22. We have seen the real benefits of diversifying our products and customer base with a particularly good performance in ECM in complex markets and another strong half year in M&A."
Almost missed this yesterday. Obviously not significant enough for an RNS?
https://www.finextra.com/pressarticle/91700/finncap-cavendish-advises-on-the-sale-of-bokus-identity-division-to-twilio
Bugger, thought it would be the trading update but it’s just housekeeping! Maybe tomorrow.
I have added a small amount with a vew to adding more on extreme moves.
Profit warning + Lots of liquidity on the sell-side allowing us to sell easily. Great move by those in the know.
Managed to pick up another £5k for 28.6p. Happy times. Poster on the other board thinks it’s related to a profit warning from Peel Hunt?
No doubt it will correct back upward in the coming few days.
Incidentally, there will most likely be a trading update in three weeks’ time. These have tended to be extremely positive affairs so anyone thinking about investing or adding here might want to work around this. I.e another positive update might raise the SP. Or vice versa.
In 2020 it was 27th Feb and in 2021 it was the first few days of March. They are always really predictable/punctual with their reporting and updates, unlike many other AIM companies.
Not a recommendation of course!
I can’t see it as anything other than a well considered “tax efficiency” measure. She can still buy and sell them as she pleases. But with a PE ratio of 6-7 and a dividend yield of 5%, she would be hard pressed to find a better medium term investment than FinnCap, even if she did sell some. I still can’t believe more people don’t want in on this at these levels. Absolutely baffling.
Does Sam smiths SIPP arrangements suggest she sees long term value here? Obviously transferring to SIPP probably provides some form of tax break for her? Don’t fully understand as I don’t have a SIPP myself. Is it as easy to sell your assets as normal shares if you need too or is it a sign that she intends to hold those as a long term retirement pot type investment ?
Just an apology for putting up the wrong dividend payment date of Jan 17. When it was in fact, Jan 21. Just viewed my account and noticed the extra shares (reinvestment) in there. Thank you finnCap.
I hope other investors have received their dividends also, and were not too inconvenienced by my misleading information.