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They will have to RNS now
Brilliant news!
The software platform then can get valued the same as Ideagen! Which would be near £1bln
Could be fireworks if there is any truth
https://news.sky.com/story/lord-ashcroft-backed-marlowe-tests-appetite-for-650m-inspection-arm-12903057
Agree with all the below. The business needs capital and PE have it to deploy. PE multiples are those numbers but on EBITDA
I have to admit I got a bit excited today when google incorrectly quote 993p share price. I thought a bid had landed
Pretty high volume today on a flat price - interesting to see tomorrow when the interest is updated if this is shorts closing?
Yes, true. The scenario analysis ran through the upside from cross sell, for example, and just reiterated that absent a one off event, this business should just keep compounding its growth year after year and generate 10% fcf margin and 15% roic (18 months out). The multiple will ebb and flow with the market but if they keep growing organically the share price will gain momentum.
Question for me, and you regularly note this, is that the CEO is clearly a buy and build person and that if the public market doesn’t return to a level where he can execute on this strategy in a material way (I.e. not just bolt ons) then does he look for a sale / PE involvement etc and some point in the medium term? Note that the LTIP pays out in 2026 and c£11 is needed to maximise.
Interesting that it's on EBIT and not EBITDA given how high those figures are but I guess that then accounts for future M&A spend ie amortisation of acquisitions
Investec split the business into TIC, Advisory and Software with respective values of £350m, £417m and £171m (total £938m) less net debt £170m and other £25m = £743m (£7.75/share). Multiples are respectively 14x ebit for Tic, 15x advisory and 4x £43m ARR for software. Wacc 10% growth 2.5% in the model - so conservative.
It’s a 44 page detailed note but the theme re the forecasts is very prudent / probably more realistic short term than the house brokers e.g berenberg, where £10+ target has been maintained. Investec are also very clear that the rating is undemanding given the contracted revenues and demonstration of margin progression from integration etc.
Let’s wait for the results but from the time of the last CMD I am looking for a slight beat of the consensus for fy23 and an outlook that run rate org growth is around the 10% mark i.e accelerating further
770p seems low for a SOTP valuation. Can you provide some insight into that and any other points
I agree a raise isn’t needed but there is more than a £50m drag on the equity due to the debt and rising interest rates therefore a raise will drive a rerate it my view
Yes, the Investec note was an initiation on 8th June. Berenberg issued a reiteration of buy and £11.6 target on 31st May. Apologies i am unable to provide a link to these.
I don’t expect a raise to clear debt at this juncture, as they seem comfortable operating at 2x leverage. Tic bolt ons make sense at 7x multiples but grc / software private valuations are still too high to make sense. Would therefore expect them to keep small tic acquisitions on the table for the near term unless interest rates go materially higher.
All makes sense to me
You refer to an investec note? When was this and do you have a link to a copy?
My thoughts atm are whether we should just do a raise. Say £50m or so. I think the slashing of debt would take away any down side risk and we’d see more than a 10% rise in share price
Had problems with my login, and just realised i posted as Everestingly, which was some historic name. Should be Geologika but now looks like I have a pseudonym so will revert back on next post!
Hi,
My thoughts are along 3 lines:
The volume has been normal / relatively low and there is no evidence yet of shorts reducing. Would shorts have topped up if they were confident of the share price dropping? I view this as positive - there are c3m shares shorted which could create a nice squeeze if some or all of these are bought back following the hopefully positive results ( due last week of June).
The Investec note was very positive (£7.7 sotp valuation). I liked the scenario were they conservatively see ebitda doubling in 5 years based on the current platforms, and using growth rates lower than current trading. Clearly, if equity is raised at any point in this timeframe then this would be accelerated further.
The divi / share buyback piece. I don’t see them using this but provides an option for the future.
Therefore, the rise is probably a blend of a few things but should put a nice floor under the price before the results.
Haven't a clue what might be triggering it.
Historically MRL SP used to move like this when they were in the process of taking over a business, but I'm not sure that is the case this time.
Do we think there is anything to this rise? or just positioning ahead of results?
Citation was acquired for 17x and PTSG a similar multiple. This would be ripe for PE takeover who could clear Marlowe's debt and unlock the FCF
Ok, gotcha. Thanks.
It doesn’t generate any cash at all. It’s just a number on the balance sheet but the cash related to it has already been received and spent
It comes from say Marlowe raises equity at £8 and the nominal value of shares is 5p then the £7.95 goes to share premium and the £8 goes to cash
Thanks for feeding back.
If they could use it to pay down some of the debt, that would be my preference.
It won’t add any liquidity. All it is for is to move the balance within share premium to p&l reserves. Having a higher p&l reserve gives you more room to pay a divi or buy back shares
So it’s possibly positive ie small divi (which I think will be so we can access more investors) or a buy back of shares given price is so low
I’m not a fan of either atm with debt high and interest rates still rising
Is anyone with more knowledge than myself able to explain what MRL is doing regarding the below RNS and the "capital reduction of the Company's share premium account"?
https://www.lse.co.uk/rns/MRL/posting-of-circular-and-notice-of-general-meeting-1iq8cv9j3a9ki83.html
Will it simply to aid liquidity???
Up again!
Its just the way of the market. 2.68% short now, 3 players. I have funds arriving soon, hopefully can buy back my shares.
I bought some FRAN today, they have just made another great acquisition taking their reach far more global etc. The acquisition of Perex (Hydraulic hose repairs) was part funded by a placing at £1.80, I managed to buy at £1.68. Crazy.
Perhaps there is a little similarity as FRAN appears to be another amalgamator. Also taken debt up quite high.
Are back in control
Don’t see what the business can do from here other than head down and generate some cash!
Not a like for like business (if anything it’s poor relative) but bought out for 12x this morning
No where near the level of recurring revenue and margins are poor. I was offered to buy an asset from
Sureserve 3 or so years ago. The whole stream of work was delivered by subcontractors, vs Marlowe where you get in-house experts
12x puts Marlowe at north of £10!
No worries. Well in my mind that info is the key to the next cycle: a period of consolidation from mid 22, getting key individuals appointed (e.g. the Ex Deloitte partner on the software CMD call), streamline the platforms and define the next medium term strategy, in the knowledge that they can meet the existing targets organically. New long term targets likely back end of H2 fy22 - surely something like £750m rev, 25% margin, 20% software rev (which fits the quadrupling mentioned in the 22 audited - say £150m). Needless to say this will need significant equity / new shareholders.
Sounds plausible - and can be cross referenced to recent new targets announced by LTG (similar e learning - am a holder).
The share price may ebb and flow in the coming months but I am holding to see this play out….