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If the State of Pennsylvania contract for 1 Year to 150K students is worth $3M then this significant Contract in California to 6 Million 13-25yr olds is going to be huge, when the details are announced.
Quite a Win for the Company against 475 other providers.
I like this bit……’with an associated highly material impact on revenues”…..
Very little stock available and I note this was 360p last year, without this win.
Lovely hold in the ISA from these levels imo.
I think the sells are stop loss executes why else would you sell below £2.50 ?
Very interesting news yesterday, as usual for AIM it's already been forgotten with the price starting to drift back on low volume (market makers being ultra risk averse as always). Once the value of the deal is confirmed then I think more PI's will take notice!
Here is an interesting interview from a few months ago;
https://www.youtube.com/watch?app=desktop&v=BJxOQOaijNs
5 year plan mentions the word 'unicorn'
After yesterday the chances of that happening have to have increased a fair bit.
Won't be long till we have definitive legal documentation then we will know how much this will be worth can't see this hanging around this level for too long
Interesting to note our 5000K ( Currently £12,000) block buyer loading up this morning, in advance of the figures for this contract being released.
Kooth already has 8 Million NHS patients & now is making deep inroads into The Worlds Biggest Market, the importance of Winning this Contract in California shouldn’t be underestimated.
I find it deeply interesting that the app that they are developing as part of this deal will be available in many languages to cater for the multi cultural society in California.
So Kooth are effectively being paid to develop an app that can then be launched Globally, this Company has the capability to scale very rapidly.
This could be a wonderful long term hold with the potential of very nice dividends in the future.
I suspect the size of the incoming contract will take almost everyone by surprise. It’s a tremendous endorsement & will surely lead to further deals with other US states, health providers & internationally via licensing out the software.
The 20 years of groundwork they've put in with the NHS gives them a huge competitive advantage which until very recently had been ignored by the market. Not for much longer IMO.
Yes, good points.
And with Freefloat of only 18.7M, many of which will be held tightly held, buying on that announcement, or further announcements regarding expansion across the U.S., will be tricky indeed.
Worth watching the Investor presentation on the Website with Tim Barker & Sanjay Jawa.
The US is their opportunity to really scale the business.
Re. buying on news, agree it will be very difficult & based on last week's behaviour the MM's will be reliant on sellers determining where supply lies / how high the price goes.
I note yesterday's buyers appear to have exited this morning, shame we couldn't get through technical resistance at 245p (where it traded post IPO & the peak last week, also provided support on the way down last summer). Just a matter of time though.
I'm taking a 1 year view of where this will be trading post the Cali rollout commencing in Jan 24, not interested in selling before that unless the share price re-rates to the £7-10 range (£200-300m cap) that I believe represents fair value given the scale of the opportunity / need.
Re. free float, as per Simply Wall Street data (why I assume is taken from filings / bloomberg), the top 20 shareholders own 91.2% of the shares, of which management own 42.3%. This could be even higher given that Premier Miton are down as holding 890k but are at 1.62m on the Kooth website. So that leaves a public float of <3m shares if none of the top 20 want to sell.
That’s interesting Shearclass, I’ve not used Simply Wall Street data before but since your post I have researched and found it rather informative. Thank you for that.
Yes, it appears freefloat is far tighter than I had imagined.
I agree, a 12 month view here will give sufficient runway to see the expansion of the potential rollout in California, plus the further 500 School districts in Pennsylvania, expansion of the Pilot in Kentucky plus whatever else is in the pipeline.
My feeling is that 2023 could be a rather transformative year for Kooth.
Very solid results indeed, and always nice to see;
"Expect to finalise terms of California contract in Q2, resulting in revenues ahead of 2023 market expectations"
Also liked;
"In the US, our focus on State-wide contracts, coupled with the rapid progress we have made in Pennsylvania and California, has the potential to significantly change the growth trajectory of Kooth as more States take action to prioritise youth mental health."
Would be great to get through the technical resistance at 245p and moving up towards £3 before the big contract is finalised & RNS'd
Hi ShearClass. I have followed with interest your understanding of balance sheets / P&ls, both with Kooth and TinyBuild. Thank you for such helpful insight and comments.
With Kooth, it is forever loss-making. Whilst I understand that the business is incurring costs to grow, to ask a silly question, how and when will it make money? The Californian contract will considerably boost revenues, but also costs. Do you know what sort of profits and earnings may be possible looking a year or two ahead?
Hi Uh-oh, glad the comments have been of use.
First up, they are actually profitable on an operating cash flow level and balance sheet cash was higher at 31/12/22 than 2 years earlier, so forever loss making isn't true here. They are more or less scaling at breakeven, which is exactly where the opportunity lies in my view.
Where does profit come from? It's all about scale + operating leverage.
UK gross margins have historically been 70%, if the size of the California contract is anywhere close to what I think it's going to be then the increase in gross profit will be highly significant and start to generate material profitability.
The majority of their costs are related to the practitioners who provide the service, beyond that they have to pay for the tech, product, customer success & management teams + other overheads, however not all of those costs scale in line with revenue growth. It's a capital light tech business with a human front line, which makes it highly scalable & typical of a SAAS company.
If the California contract adds £20m per annum to the top line & gross margins remain at 70% then overall gross profit nearly doubles to >£30m. IMO the rest of the business will need to add a few more hires, but nothing material - product, tech & US management teams may need a couple more heads, but overall I'd be surprised if they added more than £2m in other staff costs. Let's say they add a further £1m in none staff costs and you have a net addition to operating profit of £11m.
That would leave 2024 profit before tax at around £10m, PAT £7.5m & basic EPS at 22p. If the Californian contract is larger than £20m then the bottom line figure could theoretically expand further. It's part of a $4.7b scheme & they beat 450 companies to the contract so the potential is massive.
If the above comes off this won't be trading at £2.35 that's for sure... Obviously all in my opinion / no investment advice ;)
Oh and for reference, my valuation comps for KOO are Eagle Eye & Microlise, who are fellow AIM listed SAAS companies who are forecast to report around £3-5m in PBT in 2023. Both are valued in the £160-180m range, vs £77m for KOO. So plenty of upside there if top line ARR rockets & bottom line profitability kicks into gear.
Thank you again, ShearClass. Your comments, allied to this potential transformative Californian contract for Kooth, remind me of that quote of John Maynard Keynes "When the facts change, I change my mind - what do you do, Sir?". Mind you, he also said "In the long run, we are all dead"!
As someone who had to take early retirement, partly owing to severe mental health difficulties, yesterday I decided to take the plunge, tucking away 8,000 in my SIPP at 233.8p. Whether the investment works or not, at least I am supporting a good cause.
Yes the current facts here are very solid indeed, but the Cali contract has the potential to re-rate this to another level, we just need to get confirmation of the key details. Intriguing that they have just scheduled an investor meet company presentation for the 17th April, it could just be to present the annual results, however they didn't do that last year & they had an introductory presentation in mid January...
Well done Uh-oh, tucking these away in the Sipp is a shrewd move I suspect.
I have 6000 in my ISA and 3000 in my t/a but I intend to Bed & ISA these on Tuesday now we are in the new tax year.
Whilst I occasionally trade within my ISA I generally tuck the ‘don’t touch’ stocks away in here, lessons learnt over the years that certain stocks are best left well alone, with surprisingly pleasing results.
I’m of the mind that Kooth could be one of those stocks that grows very nicely indeed.