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Very large trades going through and these looks like buys, arranged possible so someone's taking these, overhang clearing perhaps
will determine the share price and how it deals with it over the medium term
Thought drop yesterday was overdone and todays has surprised a little. Based on little more than previous drops and rises, will top up further next weeks as think that there will be a few nervous PI's who sell a bit more and price drops to possibly 70. Still have previous target in mind of 120, but think may now take a little longer to get there. GL all
Looking at how the company has dealt with the issue up to this point, along with the previous Mcap, the new clients on board, chart data, the banks are satisfied etc. RCN is now in a position to start putting this error behind them and continue to build strong customer relationships and increase recurring revenues whilst signing new customer deals. As I said in a previous post, all companies make errors, this being a serious one but they appear to be handling it excellently. If nothing else the next few days/ weeks will be intriguing to see how the II's respond and where the money goes. My bet is that the II's will unanimously back the company with some increasing their holdings over the next few days. Time will tell.
Totally agree although I don't see why the SP can't double from todays' price in the short term, all the bad news is priced in now
Let's get real, £5 a share Is complete nonsense
I would put the share price at £5 as a fair value, there are company's out there valued £500 million and turning profits like redcentric
As with the initial RNS the share has gone oversold on the daily and hourly charts. The 2 weeks following the last RNS, we saw a steady rise in the SP up to 90p. The issue is when news is released and people are unsure how to respond they watch the SP drop slightly and panic. Stop losses are triggered and the price is driven even lower. The lower price isn't necessarily reflective of the value of the company at that moment. The same happens when a share is way over hyped the SP runs away but inevitably comes back close to the true value. The question is where is the true value of RCN? I personally believe it is well above current levels but urge people to make their own judgement and do their own research as every member on any BB has a biased view, that is one thing we can all agree on.
Now: SP 75p Mcap: £110 million adjusted EBITDA £18.2 6 months estimated revenue up to September 16: £53 million Yes that is very undervalued and don't forget the blue chip customers they have, even if some offered 100% premium to the share price for takeover it will be a bargain getting those client and best thing about it is its reoccurring revenue!
Look back at June 14 for some comparative figures: Revenue of £58.3m Adjusted EBITDA £10.5m Share Price 120p Shares in issue at the time 144 million Mcap £172 million Now: SP 75p Mcap: £110 million adjusted EBITDA £18.2 6 months estimated revenue up to September 16: £53 million Since June 14 the company has increased its client base exponentially and has large recurring revenues as well as new contract wins above expected levels. How can the value of the company now be worth 35% less than what it was over 2 years ago when it had less than half the clients, revenue and profit? I think a transient overreaction to yesterdays news, highlighted even more by the chart data which shows the RSI has headed back into oversold on the daily for the first time since the last RNS landed. We all know what happened in the days following. GLA
Partners, hp, ibm, Cisco, cipher etc and more these are major blue chip company's redcentric dealing with
Well said, looking at the holding rns there's institutions building stake here
Not only that the BOD resolved the issue in super quick time, getting the right people in, no malpractice has been found and the person responsible for all this has 'resigned' and been replaced by a CFO with great experience. A remedial plan is being put into place and results will be with us in the next 2 weeks! Short to medium term Mcap should be around £150 million giving a SP just over £1. I genuinely believe in the medium to longer term the SP will recover completely as the business is still in a phase of large organic growth, the recent news has just effectively shifted them back a year on the growth curve. Remember every company has problems and issues arise, even Tesco! but it is how you manage and then respond to them that makes the difference and this BOD has done everything right thus far!
H1 sales targets were exceeded! Didvidends policy to be reviewed, they are doing the right thing but with share price over 50% discount your better of buying these now as it will recovery and divi will be reinstated
Fully agree with you, they just won 38 new clients!!
2.31 net debt to ebitda is very cheap plse show me some tech company's with this sort of earnings, bathos company dealing with major blue chip company's so take over is very likely
Following the results in June where the SP was 158p the price shot up to 185p and 2 major brokers quoted a target price of 220p in September, suggesting that the June SP was way undervalued at the time, hence the market response to the results. The latest RNS clearly states the new contract wins are beyond targets that were set prior to all of this news. In addition to this many II's have invested heavily in the share prior to the latest news being released even with the risk of banking covenants, yet these have been resolved and the company is still winning new contracts! Now most of the uncertainty is out of the way watch the TR1's role in from more II's. If the banks, new clients and II's are happy then I feel confident the SP will recover! As ever DYOR and don't be fooled by the manipulation of figures!
What just happened there with the SP?
I’ve done some calculations and it looks to me like this share is over-priced. The £20m black hole is not really the main issue. If it was the share price should be back up at 1.40p+ already. The problem is that the company just isn’t as profitable and is more indebted than it was previously thought to be. June 2016 Share price 158p Market cap £231.5m Net debt £25.3m EV £256.8m adjusted EBITDA £25.8m adjusted EBITDA margin 23.6% Debt to EBITDA ratio 0.98x EV / EBITDA multiple 9.95 December 2016 Share price 78p Market cap £115.16m Net debt £42m EV £157.16 adjusted EBITDA £18.2 adjusted EBITDA margin 17.2% Debt to EBITDA ratio 2.31x EV multiple of EBITDA 8.64 Looks overpriced to me. When everything was believed to be rosy it was trading on a EV / EBITDA multiple of 9.95. At that time it was believed to be earning a 23.6% EBITDA margin on revenue. If revenue remains unchanged, with a 17.2% EBITDA margin on revenue it will now take 38% longer to earn the same amount as a proportion of revenue. All things being equal this implies an EV / EBITDA multiple of 7.21 is where we should be now. So then are all other things equal? - Net debt is now at 2.31x EBITDA when it was previously thought to be 0.98x and expected to fall. - The company was previously paying a dividend and now it is not. - The company was previously reporting period after period of strong organic growth which is now known to have been overstated. - And although Deloitte and Nabarro’s involvement now seems to be providing more transparency, there will be fees to be paid which are yet to be known. Overall, until we can see the full year accounts and have some confidence in the company’s ability to continue with genuine organic growth valuing this on anything more than 7 times is folly. So with 7 times where does that put the share price? 58p DYOR / GLA
Look at the blue chip company's redcentric dealing with, no wonder banks are happy with them, this should be heading north after all company is making profit of around £20 million a year for market cap of 147 million now that's cheap!
As you say the biggest risk was the banking covenants, the fact that the banks are happy says a lot. Also they are still exceeding their sales projections. To put the current SP in perspective it is at 40% of what it was a month prior to the news being released. I imagine there will be a number of holdings RNS to come as institutions continue to buy up these shares. Also many said that this wouldn't be resolved this year, the BOD have been very quick to take action and are implementing a plan to prevent such errors from occurring again. Once the half year results are stated and we get into 2017, more contract announcements made etc don't be surprised to see the SP climb past £1 IMO. Prior to this fiasco the broker ratings were 220p for the coming 12 months, don't think we will see that but possibly 50% of it. The RSI is showing oversold on hourly and daily, get ready for this to bounce back pretty soon.
Don't think the sp has settled its real direction especially if there is no YE dividend.The waver for breaching its banking covenants saved the situation. Takes a lot of work to recover from an unexpected debt showing up due to poor controls. Back to the watch list.
I think all the major hurdles have been covered and whilst there is an increase debt they have also highlighted its all agreed and no issue. I read business as usual and someone over stated?? but no theft and illegal activity per say! this will recover on its own or someone will buy it.
I think all things considered, that is a very positive RNS considering what it could've been. 38 new clients to boot with revenues up. Net debt a bit higher, but not so bad it brings company down. Full year divi to be reviewed and no interim, but that was to be expected. The SP I believe had a lot of this already covered with the large previous drop. Looking forward to positive 2017