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I’d sum it up as follows - the likes of Clifford Chance, Linklaters, Allen and Overy etc are the equivalent of Tesco, Sainsbury, Morrisons etc. Moving down the pecking order, you have firms like CMS and the like - the Lidl and Aldi. Moving on further down you have the big regional players like Burges Salmon, Osborne Clarke and northern equivalents - the Happy Shoppers and Spars. Then you get to Knights - the corner shop whose previous owner saw the writing on the wall and sold out to an amalgamator!
Says the guy quoting Stockopedia and misunderstanding the debt.
From the half year results RNS:
Secured position as the UK's largest regional commercial law firm(5)
(5) Largest firm by revenues outside London. Source: The Lawyer's Top 100 report, October 2022
"Just to repeat. There is no truth whatsoever that Knights are anywhere remotely like the biggest UK law..."
What an idiot, telling me not to make false claims.
@Dartron: "Does it matter Its only a statistic."
Yes, it does matter if you make a false claim, without checking it, because somebody might actually believe it!
Just to repeat. There is no truth whatsoever that Knights are anywhere remotely like the biggest UK law firm. Have you heard of Clifford Chance, Allen & Overy, Linklaters,..... They are in a totally different league to these tiny AIM-listed law firms.
I was corrected by Humpty. Largest law firm outside of London. It is in their RNS, and explains how they calculate it.
Does it matter Its only a statistic.
@Dartron: regarding your comment that Knights is "Currently the largest UK law firm."
That is not even remotely correct. If you look up the league tables, Knights Group is the 62'nd largest UK law firm by revenue. i.e. they are a *tiny* firm compared to any of the big City law firms. They are an AIM-listed company.
I had another look at the balance sheet this morning + the recent performance of other listed law firms. I found the following:
- Net Debt is less than I thought @£35.6m, with headroom of £24.4m in £60m RCF. The higher Net Gearing figure of 94.3% in Stockopedia is due to lease liabilities (IFRS accounting). So Net Gearing is not too bad pre-IFRS.
- I looked at peers: MANO, BEG, BUR, GTLY, KEYS, NAHL, KGH, DWF, INCE as a group. With the exception of KEYS, the share prices of all are performing poorly, deteriorating significantly relative to the All Share since mid January. i.e. it's a bad time to for the shares of listed law firms.
Has KGH bottomed? Who knows, but unless I see Director buying, I'll continue to wait until the sector as a whole improves.
I’m not liking this company, but I do like this board. Good comments from peeps with different points of view. Exactly how it should be.
Agreed, there are a couple of metrics that aren’t too desirable. They’re pretty good with their updates though and I think the next one should be middle/end of March. That could be telling. If all is moving in the right direction then I see no reason why this shouldn’t be back over 200p.
Regardless, imo there is limited downside from here and possibly an 80% upside, even if it’s just for a trade. We’ll see.
No hard feelings anyway and all the best to you.
In terms of fundamentals, the red flag is the Net Gearing, which is 94.30% (e.g. in Stockopedia). That is high. But overall, I think it's a reasonable stock at an unusually low valuation and a CEO with very deep pockets who has bought and sold large blocks of shares in the past, the last such purchase being @83.9p and his last big sale being @390p. That's interesting!
Well at first glance, and looking at your last four of five posts, it wasn’t difficult to think that.
You’ve stated that you have a ‘tiny’ position. You’ve also stated that you’re interested at 83.9p and then again at 65-70. What I don’t understand and even your last paragraph reiterates this, is why would you invest at any price if you have such huge doubts?
I personally don’t see any huge red flags here. Of course, there is risk, as with any stock. KGH have been punished badly due to the pandemic. Well overdone, in my opinion. Yes, it’s not a sexy sector but I see real value here, at these levels.
The market is also hugely irrational right now. I think you may be looking too deeply into the fall over the past month.
ATB
de-ramper? - year right... I have a long position here. I'll add more once the freefall drops.
Ince is relevant here, because it's a listed law firm with a nearly identical strategy. It's quite possible that there are small-time shorters of KGH, as there were for INCE, but that's a dangerous game and there's zero evidence of it happening here. There's not a single short position big enough to declare - so the simplest explanation is that there are none...
All it would need is for DB to start buying an you'd be toast. You guys need to do some homework before trying to 'educate' the rest of us about KGH...
If you like it spicy, have a look at indivior. Interesting company and interesting day today! Not a recommendation, obvs!
Yes agree HD. I knew that but mis typed it. My point is that they are substantial.
I think its a good day to buy small caps. I must be paranoid, I think everything is being shorted currently.
Spread bet costs increasing, FTSE at record high, makes sense to me, get the shorts in to load up on all of these great stocks. Managed to dump a few of mine and buy back cheaper. Still waiting to buy some others. All good fun.
Pompal - fair enough. atb to you too.
Darton - we have different views, but one correction to your post. Knights are not the biggest law firm in the UK. They are the largest law firm without a London office. Every other large law firm, probably from c £30million turnover upwards has a London office, the reason being that they can win work at London rates using their London office and the turn a massive profit farming it out to a regional office where office costs, salaries etc are much cheaper.
Never looked at INCE, and only spent 5 minutes so this might not be fully accurate but:
INCE global offices, in China & Singapore during covid.
Reliant upon Shipping, and hit by Ukraine war.
Couple of placings 21/22 ** This was the time to leave.
Disposals of subsidiaries
Cost rationalisation
Suspension.
I dont think Knights is even comparable.
Sole UK offices, benefiting from a small amount over seas work.
Currently the largest UK law firm.
5 years of growing revenue. Last 4 prior years growing earnings, hence the climb to over £3.
No talk of money troubles. £73M curr assets vs £30M curr liabilities + 40M debt.
If this is going to do an INCE, I would bail at the first sign of it, but so far I have not seen any indications that there are problems. Await the trading update and see. Note whole sector down currently, Look at BEG, DWF, FRP etc all dropped.
Its not a sexy sector, but I think it will be steady over the years. Cant avoid needing legal unfortunately.
Yes as said over on INCE, keep a very close eye on them, you cant trust a lawyer.
I think the crux of what is being discussed is that the bears here are expecting an easy ride of FCF at a dirt cheap price, and complaining and shorting because its not here right now. Where as the longs here are saying it will come, but this is an investment and the rewards are further down the line. Like all investments it carries risk.
Fair enough. I didn’t go back that far on the thread and haven’t followed this board for too long.
Just saw him/her keep making reference to a failed stock, whilst seeing their target price shift twice.
Not a ramper at all but of course I want to make money and I see a fair bit of value here.
All the best.
If anything Canetoad is overly optimistic about the listed legal sector. Look at his posts on Ince. He liked it, but got burnt. Fair enough for him to share his views here with that history. Branding him a deramper simply identifies you as the polar opposite.
#deramping
CaneToad
Your attempts at decamping are laughable. Have you seen the size of the trades over the past week? Yet you think the drop is due to a large holder offloading?
And what is this comparison you keep making with Ince???
@Dartron: "This story about selling an audio company to a Swedish buyer demonstrates that the model is valid..."
I don't think it does. The only thing that's important is how much of the revenue is being translated into profit and how the debt pile is being managed. It does look as though Knights are falling into the same trap that Ince found itself in.
I see no significant (declared) short positions; perhaps it could still be manipulated, given how low the volume is, but I think it's more likely a large holder offloading their shares. It reminds me of Ince, where the selling took many months.
Short term, be good for share price, especially if being shorted. Long term, id rather he didn't buy any more.
Currently gives others a chance to have influence on a vote, etc. E.g if an offer came in.
David Beech 18,922,309 22.05%
Octopus Investments 14,023,727 16.34%
Columbia Threadneedle Investments 10,051,432 11.71%
Wasatch Advisors Inc 5,359,090 6.25%
Invesco 3,446,292 4.02%
BGF 3,325,120 3.87%
The question is whether or not DB buys any more. He sold £61m worth @390p/share in Jan 2021. He has no bought many back since.
This story about selling an audio company to a Swedish buyer demonstrates that the model is valid, look at the team required to help complete the acquisition: As well as Dominic Travers the Knights team comprised Sam Steckler (corporate), Sarah Burke and Beth Hullah (employment) and David Nicholls (commercial property).
The second deal - The Knights project team was Dominic Travers, Sam Steckler and Peter Abel (corporate), Sarah Burke (employment) and David Nicholls (commercial property).
The third deal completed recently saw Knights advise the shareholders of high speed printed electronics manufacturer Flexotronix Limited. Knights’ team that advised on the sale included Dominic Travers, Sam Steckler, Sarah Burke (employment) and Guy Cartwright (commercial contracts).
Demonstrates that company is benefiting from M&A activity.
Here is another story this time about planning permission:
https://www.knightsplc.com/knights-news/2023/knights-helps-lincoln-city-f-c-get-planning-permission-for-1-8m-stadium-revamp/
Or this one about helping fellow AIM company Journeo
https://www.knightsplc.com/knights-news/2023/knights-advises-journeo-on-capital-raising-and-8-7m-acquisition-of-igl-limited/
Have to say the Knights news feed shows the company has been busy, all of this happened in 2023.
I am still certain this is short. We have had quite a big fall now! Cant see them getting it back to the 70p level, but lets see.
Where the share price goes after the short closes is all going to depend on the trading update. 40p SP would be some major disaster, not yet factored in, at 40p it would be mcap of 35M with 10M PPE assets, plus 35M debt. Saying something like that could happen is as valid as saying that the share price could also jump to £1.20 (40p the other way). Ironically the word fundamental was used as justification, but on the current known fundamentals broker consensus low end is 77p not 40p.
The 8 analysts offering 12 month price targets for Knights Group Holdings PLC have a median target of 179.00, with a high estimate of 405.00 and a low estimate of 75.00. The median estimate represents a 132.47% increase from the last price of 77.00.
Meanwhile looks like Knights has been doing ok.. (there is plenty on the website if any one thinks this is now cheap to buy in). I Think this could be a good pick under 80p.
https://www.knightsplc.com/knights-news/2023/knights-advises-bam-boom-cloud-on-sale-to-us-tech-firm/
https://www.knightsplc.com/knights-news/2023/knights-south-coast-team-advise-on-three-high-profile-deals/
https://www.knightsplc.com/knights-news/2023/knights-advises-on-3m-deal-to-take-nrc-waste-water-solutions-back-into-founder-s-ownership/