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Fair enough smudgedan - my investment strategy is slightly more risk - averse, although only slightly as this is AIM after all. For the moment I'm going to sit on the sidelines so may miss out slightly but I have decided to invest a small amount elsewhere in a stock that it seems you míght be invested in as well from the look of the board - BOX
Yep, my rationale for getting in now is that once the refinancing goes ahead there is likely going to be a bit if a squeeze and can see the sp doubling. Of course, if it doesn't go ahead as planned then that will be a huge problem, but the sign are that it will so I think offers decent risk/reward.
Oh I see, yes the write off of the debt creates an accounting gain. Am going to follow closely as any positive noises about the refinancing or the operational performance will be a reason to buy here although not much downside at this level in any event
In my enthusiasm I erroneously reported the RNS of 30th June as mention a £4m tax credit whereas it was actually an exceptional gain after tax per the paragraph below: "Subject to being able to conclude the refinancing of the AIB credit facilities, we will record an exceptional after tax gain of around £4m as a result of the debt to equity conversion. This, together with the intention to raise new equity as part of the refinancing, will restore shareholder funds to a positive value." Would be interested in your thoughts here
I'm doing a bit of research here as an £83 rev business with such a low mc could be an opportunity Smudge - I think the position in 2014 is now largely irrelevant particularly as AIB have just taken a £3m haircut on their loan. I think there is upside here if they can get their finance sorted particularly if they can do it without resorting to equity but raising £9m new debt won't be straightforward as they seem to be stressing the fact that the US business may not be as profitable this year. The tax credit is potentially significant though - where did you see reference to that?
At the time of the last interim results released on 15th September 2014 the share price was around 5p, however to be conservative I have used a price of 4p for the following calculations. At that time the debt stood at £14m and the market cap was around £3m giving an enterprise value of £17m and an enterprise value share price of 22.69p per share. On the base they complete the refinancing as planned and they receive the £4m tax credit this will reduce the debt to £5m. Taking to in account the 12.5% dilution bringing the total shares in issue to around 86,135,000 using the formula above this would give an enterprise value resulting in a share price of 19.73p. Whilst you could argue that some weighting could be applied, what is abundantly clear to me is that 2p is no where near the right price for this share.
From last RNS This is a turning point for r4e, as once the refinancing is completed it will lift previous cash constraints and allow all three principal r4e businesses to focus on exploiting their leading positions in the growing markets in which they operate.
From aimshare ... Great post It's obvious that AIB believe that the price will be going north in a big way. They're prepared to take over £5 million of the debt for 12.5% of the company. For AIB to break even on the £5 million, the share price would have be around 50p per share, and the resultant market cap over £40 million. So, AIB are expecting a 25 fold increase in the price to get their £5 million back.
Well I think most agree this should be over 5p, just needs to get noticed a bit now
Let's see if a few more Cotten onto the potential of this company share today.
R4E was trading at around 4p and an mc of around £3m before the latest finance problems, but this was still at a time when they were carrying the £14m debt. With that debt reduced to £5m it's got to be worth more than a £1.6m mc in my view, even taking into account the 12.5% dilution this would still only get us to a £1.8m mc based on the current share price. Think this is easily worth over 5p
I don't know if you'll ever know though, because of that £5.5m, some may be written off. Doesn't make sense to issue at a crazy premium if they can be sold under a put option at £2m in 5 yrs time. Don't get me wrong, it's a good deal (I think), but not the bonanza deal of selling at 47p or whatever.
Yes, absolutely right. The question is how much of a premium they will be issued at.
I'm fairly sure a company can't issue shares for less than their nominal value, so minimum is 2.5p if that's what the current par is.
Zac Mir has this one reaching 5.5p shortly .
Thanks for reviewing. What you have suggested makes sense to me. Will be interesting to see the strike price for the 12.5% being issued to AIB. They haven't mentioned any share consolidation as yet, but if the strike price is over the nominal value of 2.5p then that in itself may give the sp a shot in arm or at least raise the profile.
A few buys , Perhaps starting to get noticed this £10 mil turnover company which has a tiny market cap of £1.6mil
Interesting. A couple of things stand out to me: - AIB seemingly taking an initial 33% hit on the face value of their debt, taking £9m + £430k fee in full and final settlement. - Also taking £5.15m worth of new shares, being 12.5% of diluted share capital, which can be bought back for £2m at AIBs request after 5 years. This is effectively a write down by AIB. Is there a share restructure ongoing? Can't see much after about 2 minutes research. Presume the debt is unsecured, or the assets aren't worth what the value of the loan is. Haven't looked. Think it's broadly good, but could easily be a round of drinks in the last chance saloon as well. Better to get the interest charge out of the company, reduces the cash requirements but dilutes holders. Wouldn't say it values the shares at 47p though, it's more that AIB are happy to take nearly £9.5m now and maybe £2m later rather than run the risk of r4e dying and them getting far less.
It appears that the penny is finally beginning to drop here.
you were right about that stock. p.s im not following you by the way,lol
patience is needed. look at ngl for example. took a few days for the market to pick it up and then woosh!
Cannot believe market hasn't picked up on this , yesterday's RNS went unheard
Don't forget the £4mil of tax gains here. It just gets better .