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True
Quite a lot of volume yesterday but the shares held. Do we think 480p is the floor…for now?
Morning, maybe, but probably more the general UK macro outlook impacting. Aim 100 now at 5 year low; consistent decline this year so far, so the fall is just in line with the market
Well it seems the market is discounting any deal now. We are below where we were pre rumour. Terrible close today
Feeling like I might reacquire the shares I sold the other week. Nice to add a few more “free” shares
Interesting interview: Paul Hill and Odyssean Capital on Vox (c.6 mins in to the interview) ref change in PE attitude in last month or so. Now less likely to take private a single asset but would now look to buy an asset that would complement an existing asset and where synergies can be extracted.
Implications here re TIC deal: Interest rate levels starting to curtail PE activity; potentially smaller PE pool looking to do a deal.
https://www.stockopedia.com/content/fund-manager-stuart-widdowson-of-odyssean-capital-highlighhts-16-stock-ideas-971255/
Restore tanked on results today.
I think the bid in August 2021 was about 530p equivalent for Restore.
Restore trading around 160p today.
Hi,
I don’t think it matters too much as we need to wait for the TIC deal, as that will be transformational if it gets away.
I still believe this has a high probability of occurring: One thing we haven’t discussed as a result of the deal is the shareholder base / strategy….
1) the timing of the GM in June to approve divis or buybacks, must be connected to the wider strategy / planning re the TIC divestment and subsequent software M&A. The divestment would make the business unlevered (at least initially, on completion) and therefore able to attract a different type of shareholder if it pays a divi (or appease certain existing shareholders who would like a divi).
2) Ashcroft: there could be a point soon when Talisman starts to exit(?), which will improve wider liquidity.
3) Whilst the current register includes many AIM specialists the next stage strategy may well be to aim for ftse250 at some point and a broader shareholder base and a divi would fit this aim.
Now that the prelims are out, any would be acquirers will hopefully be able to sharpen their pencil on the price and realise what a good business they will be getting!
Looks like we will just drift now
Might add if we go lower but not rushing or hoping to
Perfectly put
Arguably this is the last year of tight FCF. H2 was very good for cash flow. If we can get a full year of that then we should be cashflow neutral this year (even with £15m already spent on M&A, £10m of integration costs, deferred consideration and a high interest burden)
The statement yesterday says we have £23m of accordion left and £30m of cash on hand so in reality we could do more deals this year but I think this will be one or two. The last fire safety deal was large and will take time to integrate
Assuming we only do a few more deals this year. Then next year FCF could be c.£40m. When investors can see that then shares will rerate for sure
It seems like for now we will drift lower. Watch for good news on inflation and interest rates I think before adding
Yes, that sounds a good plan. So putting that together, on a 6 month view, there is the possibility of say 20% downside ( much higher interest rates, recession, no Tic deal), 25% upside (if Tic deal), or 75%-100% upside (whole group).
I agree both. Do I think multiples in PE have compressed? Yes and no. I think for poor assets or over hyped areas but high recurring revenues in compliance I think they haven’t. Also a buy and build platform remains attractive to PE
But I’d take 15x for the lot and cash out so maybe I’m biased
If the shares get weaker from here I’ll add. Was annoying to not be able to ask questions. I really want to know the crack with those debtors
Good analysis. I thought it was telling that several times Alex talked about the strength of the GRC business in it's own right. Pointing towards what's to come potentially. If that happens there will be a significant shift up in the SP from here
Thanks; yes, the broad consensus (brokers and press) seems to be that business is moving in the right direction. Berenberg cutting the price target on the basis of lower multiples has made me ponder that 14x for Tic may be a bit rich at the moment? On the other hand, getting the numbers to work for a 22% roic division must still be attractive even with interest rates at 5% or higher.
One thing from the presentation today was clear, in that (like you regularly highlight) the working capital requirements and restructuring costs are heavy in tic, and selling this would leave us with high growth high margin businesses and refreshed capital structure with a clear angle for international growth in the future.
I’ve said before, the CEO is a serial m and a person and selling tic will enable him to crack on with all the software deals he will be engaging with, without having to wait potentially ages for the markets to recover /ability to raise equity.
Timescale wise, I think I was a little aggressive previously: Marlowe say that it takes4-6 weeks from heads of terms agreed to completion, for a small bolt on. So if Rothschild were handed the mandate in end of May ish we won’t even be at HOT stage yet, so therefore a couple of months off completion / announcement?
Either way, worth holding to see this play out….
Https://www.investorschronicle.co.uk/news/2023/06/29/marlowe-boosts-cash-conversion-rate/
Tipped as a buy
I’m glad to be wrong! Ha
But I certainly think they are sailing close to the wind. We had a 50bps jump at last rate meeting and markets are headed where Marlowe say there is danger. The CFO should want to redeem himself (he’s the one who put us on Sonia rates) to get out ahead of this
Collect those debtors while he’s at it! £33m over 120 days old. That’s a joke
Seems the market doesn't agree with your prognosis. Stock is up. Too much value creation here and Marlowe is clearly still undervalued on a SOTP basis
Exactly as I expected when I researched this a few months ago. They are addicted to acquisitions, it's utter nonsense to spend £15.4m in the current environment when you've already stated the priority was reducing debt! Back to the £4-5 range IMO.
The increase to consideration for acquisitions seems odd. Is there an issue with staff retention?
The debtors point I flagged has got bigger. I’ll try and ask this on the call (if I can)
No mention of any spin off
Lots of deals and money spent post year end (£15m). Going concern note saying interest rates 2% higher would be an issue! Well given we are at 5% and the market is saying 6.25% shouldn’t we be stamping on it now? The FD doesn’t seem to have much foresight
Very good organic growth though shows the underlying business is good. Just need to get some cash in the door (though net debt was lower showing we can generate cash)
I’m thinking a sell off today. Sentiment hasn’t been with us and this RNS scream “more M&A” vs “pay down debt” which I think is what the market will want
Let's keep the chat to Marlowe on this board please
Not a stock I know well but a 10% shareholder halving their holding today following a huge acquisition doesn’t fill me with confidence
Also operations in darker corners of the world is also a bit of a concern
Saying that seems like good cash flows and they do deals very cheaply
It’s just difficult to see value in total when it’s actually a pile of seperate businesses
I’d watch it and see if you can snag shares cheaper than atm. As I say I think markets will fall and all stocks will sell off with sentiment. A good example is JTC. Seems to always trade well but every few months the shares get hammered 15-20% on sentiment
Brooks Macdonald I also like but sold today. Again will fall if the market comes off
Just my views but great to share ideas. I appreciate and respect your insights
Likewise - not my thing either. Yes, let’s see what tomorrow brings.
I am currently looking at Volex - any thoughts on that business?
Thanks. Not really my thing trading on margin
See you here at 7am tomorrow!
Ok, thanks. I have an IG account, which if you search up Marlowe, they have a ‘client sentiment’ section so you can see by the hour, day, week or month the cfd activity and whether these are buy or sells. Cfd trades are usually round numbers of shares (as opposed to retail punters investing via say HL a set £ value) so you can then reconcile that activity to the trades going through (under the trade section on LSE for example).
Fair enough re your sentiment - I hope and expect there will be a sale, although whether this is tomorrow is anyone’s guess.
How do you see that type of info?
Nothing from my side. Must admit I’m nervous for tomorrow. Restructuring costs and interest will hammer profits. Luckily as there have only been two deals since management can guide to strong cashflow for next year and hammer the message that debt repayment is now no 1 priority. I’d also support a raise of c.10% equity (so £55m) to wipe out debt quicker
All the above is superseded if we have a sale of TIC. I’m still holding for a sale of whole group at a good multiple. I think we are headed to difficult times and I’m already 60% cash
What else do you hold or are looking at?
Doesn’t look like the share price drop is necessarily indicating no deal; more likely low volume cfd trades (i.e 7 of the 10 trades today so far are 1k, 2k or 4k cfds) purchased since the Sky article, that are now being sold due to margin calls.
We will find out shortly, either way.
Any more info on your industry insight?
Either way, we will find out tomorrow
Ok, thanks, that is interesting to hear. However, I am surprised, with 2 days to go to the results, that the market still appears to be assuming low probability of a deal; or maybe it’s just that a deal is some way off? If I was Marlowe, I would be dovetailing it alongside the results….