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Please see resolutions 5,6,7 below. Does this mean ITX were planning to make an acquisition but are no longer proceeding? They never have explained why they needed to make such a large capital raise last year. That’s a lot of money just sat in the bank at the cost of shareholders who suffered the dilution.
5. To grant the Directors authority to allot shares.
Special Resolutions
6. Subject to the passing of Resolution 5 to disapply statutory pre‑emption rights in relation to the allotment of equity securities.
7. Subject to the passing of Resolution 5 to disapply statutory pre‑emption rights in relation to the allotment of equity securities for the purposes of financing an acquisition or a specified capital
investment or making a follow-on offer.
As highlighted by Elsol
In particular point (6), possibility of a European plant?
I have managed to get hold of the new Brokers Note entitled "FY results: strong cash flow".
Key points:
1. Valuation target retains at 325p with BUY rating (currently mkt price today is only 47% of Broker price target).
2. Broker valuation rationale :
“Our target continues to be based on two arguments:
a. the multiples applicable to a mid-cap chemicals company, and;
b. the value which we believe is applicable to Itaconix's differentiated market position and which would be relevant to an industrial third party." (so Broker is considering full opp. pipeline market value/+DCF going concern value to possible acquiror). "At our 325p target the stock would trade at 5.1x/3.7x 2025E/26E EV/revenue, which we believe would be highly attractive to an industrial buyer looking at markets with gross margins in the hundreds of millions of dollars annually.”
3. More discussion of underlying customer portfolio growth WITHOUT the 'low margin' customer - Observations:
Underlying revenue growth of post loss “core” business is v. large: “Excluding the major North American detergent merchandizing customer, we understand 2023 revenue was $3.6mn, and therefore growth from other customers in 2024E (largely derisked) is c.70% for 2024. We expect this growth to be across Itaconix's end markets, in cleaning, hygiene, beauty, and in various new industrial applications. We also expect growth to continue in 2025E at above 50% y/y."
4. Cash on Balance Sheet is sufficient until after FY 2026 when ITX business transitions to op. cashflow positive
5. Manufacturing building facility lease renewal for another 10 + years (confidence?): "In December 2023, Itaconix renewed the lease on its existing building to 2034, resulting in the recognition of a c.$2mn asset and c.$2mn liability under IFRS16."
6. Possible asymmetric Broker treatment (revenues v’s plant capacity) – the capex is still quite high during 24E/25E/26E => aggregate of $4.0m (about 2x a plants worth?) and ave recent depreciation is c$0.2m. So looks like we are replacing all the plant assets plus adding another one unless there is considerable re-tooling going on. Unless I have missed something there appears to be a mismatch since when we heard in the management call the other day – a denial for any new plant at this time for the foreseeable future. I’m scratching my head a little on this and can only assume the revenue line is light or the capex line is heavy. You can DYOR on this but makes sense not to over commit to possible upside revenue and be full on the cost/capacity area so perhaps that is the theme here - forecast prudence.
7. John said on the call that there should be some "news" in the short term (RNS) for diversification wins so I expect we will know more when that disclosure is made (leather/paints)
ATB
AJP
AJP please can you re-read resolutions 6 and 7.
It uses the word “disapply”. I took this to mean they are not proceeding?
Hi Smart
Unless the articles or shareholders’ agreement contains provisions to the contrary, companies can disapply pre-emption rights in certain situations by passing a board resolution or a special resolution of the shareholders at a general meeting – this requires 75% approval from shareholders who are entitled to vote, either in person or by proxy. Companies may choose to do this to raise capital from third-party investors. Importantly, this is a regular request on the AGM agenda for UK listed companies and is split into two resolutions, a resolution for an unrestricted authority and a resolution for authority specific to acquisitions or a specified capital investment only.
Think that this is to give them the power to make that decision without having to go back to the shareholders?
That is if I am reading this correctly
ATB
AJP
Hi SI - re: "They never have explained why they needed to make such a large capital raise last year. That’s a lot of money just sat in the bank at the cost of shareholders who suffered the dilution." THEY HAVE EXPLAINED IT FULLY.
In fact, the additional capital raise was amazing - it was placed at c.250p so "they" rather than "us" appear at the mo. to have taken their shirts to the cleaners rather than the other way round - great to get so much dosh on BS at such a high price per share (+40% premium to the present mkt cap? )... also the added cash is a great risk mitigation safety blanket and allows us to value maximise all our IP extensions/development pipeline/marketing leverage in EU and wider market diversification/investment for web site and possibly flexible added plant and equipment etc etc etc- IT WAS AN AMAZING fund raise if you think about it as a LT investor!