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Singer's update nore retains their Buy and 2p target price based on a forward P/E of 8.1 at the current price.
I only have access to the front page of the research, which unfortunately shows only rounded figures for EPS, and it's impossible to see the progression.
So EBITDA and PBT is the way to go, which are:
Y/E 30/9/22 : £1.0m EBITDA, £0.7m PBT (actual)
Y/E 30/9/23 : £2.2m EBITDA, £1.9m PBT (minimum as "in excess of" £2.2m)
Y/E 30/9/24 : £2.8m EBITDA, £2.4m PBT
Y/E 30/9/25 : £3.2m EBITDA, £2.9m PBT
A great update and I added again today.
What the RNS doesn't tell you, but you'd know from listening to interviews with/about the company, is that their payments for the Ladders Free (iirc) buy out will come off the books in June 2024, causing a healthy boost to the bottom line even if nothing else changes in the business.
I am anticipating 2.50 in 12 months time.
The year end update makes pretty good reading in the current climate.
£19.6m revenues and "in excess of" £2.2m EBITDA (up from £0.95m last year) is just a touch behind Singer's forecasts, but most importantly the outlook is very positive with a "healthy" pipeline and "strong demand for all of our divisions".
This equates imo to likely around 0.13p-0.14p EPS, which at 1.575p is a historic P/E of around 11 or 12 and which should fall again in the current year to only around 9.5 based on Singer's forecasts.
I note that REAT now have £0.7m net cash, which is well ahead of Singer's £0.1m forecast. This is almost 5% of the m/cap in itself and represents an even lower ex-cash P/E.
Terrific results and a 'healthy pipeline'. Have said before, hopefully a matter of time before a Rentokil / other snap this up at a premium. Doak must be thinking about his next venture also. Lets get above 2p anyway in the short term.
Yes, amazing results. This company is set to grow and grow, and will loom large on investors radar.
Nice update. Asking price on LSE just flashed up to 1.8p ahead of the market opening.
Good to see a 500,000 buy at 1.656p this morning causing an uptick.
Remember that Singer's are forecasting 0.1645p EPS for the year which has already started on 1st October.
That's a current year P/E of only 9.7.
Last year's year end trading update was on 26th October, so not long to wait. The outlook from the interims was confident in achieving expectations, as "All three divisions have traded well in the period and this momentum has continued into the second half".
It's a biggie :o))
The doubling in value to a whopping £3.8m over 3 years makes this "the Group's largest single annual contract to date".
A great validation of REAT's abilities and strategy:
Https://uk.advfn.com/stock-market/london/react-REAT/share-news/React-Group-PLC-Contract-Win/92232138
That level of institutional ownership will also prevent REAT being taken out on the cheap, like so many other UK companies at the moment
The major shareholder list as at Oct '23 now looks extremely impressive for a micro cap - the list below now represents almost 70% of the shares in issue.
And Onward Opportunities PLC also own £800,000 of REAT shares, i.e 4.6% of the current m/cap but haven't issued a holdings RNS presumably for technical reasons (do they have to declare when they get to 5%?), taking the major shareholder list up to almost 75%. So REAT is pretty tightly held now:
Shareholder Number Ordinary shares %
Octopus Investments Limited 163,344,667 15.45%
Canaccord Genuity Wealth Management 103,333,333 9.77%
Dowgate Wealth 99,426,699 9.40%
Harwood Capital LLP 95,750,000 9.05%
Helium Rising Stars 95,329,362 9.01%
Premier Miton Investors 75,114,393 7.10%
Hargreaves Lansdown Asset Mgt (Bristol) 49,851,226 4.71%
A J Bell Securities 33,689,126 3.19%
The Onward Opportunities Fund's September results presentation is available. They own £800,000 of REAT stock, and slide 13 is specifically on REAT as follows:
"Case Study - React Specialist Cleaning Plc
React is a B2B specialist cleaning group in the UK, with 3 complementary divisions across reactive cleaning, specialist glass/cladding and public sector facilities
Valuation – an 80% contracted (1-5yr) revenue business growing at 17-25% per annum purchased by ONWD at a P/E of 6.5x-8.5x
Timing – New management team have transformed the group, reached a scale of cash conversion and operational gearing
Catalysts – Ongoing contract win momentum from new head of business development, completion of deferred payments unlocks FCF for growth CAPEX and returns to shareholders"
Https://onwardopportunities.co.uk/wp-content/uploads/2023/09/Onward-Opportunities-Half-Year-Update-September-2023.pdf
Sorry, typo, 2.50p.
(250p and I could retire!)
But it's no wonder IIs are taking positions (Chris Mills at Harwood, and Dowgate Wealth have both increased their stakes within the past month) and stock is hard to find. A gem of AIM.
I managed a couple more purchases this morning, had to pay full offer 1.7p, but I have a full position here now and I can sit back and wait.
Once the Ladders Free payments come off the books, June 2024, the metrics of the bottom line will improve further and React will be producing so much free cash. The board is very smart, so I'd expect possible M&A with the spare cash or prepping the company for a buy-out.
250p minimum is my target for 2024.
Continuing to move up steadily on relatively small buying, so stock seems to be scarce once again. Good to see buying this morning at the full 1.7p offer.
I could only buy £800 worth of shares just now. There is v little stock about.
Saw on the other site, someone said, where are all the shares coming from. Good question.
This and the other Institutional buying could explain why there aren't many shares about for the rest of us. I've been averaging up here but have been finding it hard to buy meaningful amounts. The maximum Interactive Investor would let me have this afternoon was 50000 shares. Ill take this as a good sign and try again tomorrow.
Dowgate Wealth Limited up to 9.4%
Onward Opportunities PLC, a smaller company focused investing company, has just released its interims to 30th June. They've disclosed that they've recently invested £800,000 in REAT (mostly since 30th June) and have this this to say:
Https://polaris.brighterir.com/public/onward_opportunities_limited/news/rns/story/xje12or
"With React, we believe we have captured a defensive growth opportunity, at a value price and invested c.6% NAV into the company. It is a business the team have been researching since September last year and was an early pipeline priority. Through a mix of specialist cleaning services for UK corporates, the business has a highly attractive earnings profile. The business has three core divisions:
1. React - the heritage of the group, reactive specialist cleaning often needed for emergencies or callouts requiring specialist cleaning techniques, high margin but less predictable.
2. LaddersFree - large glass pane and cladding cleaning for UK corporates, executed through a capital-light membership model.
3. Fidelis - contract cleaning focused on public services.
The business operates over 80% of its sales on contracted terms of one to five years and has been organically growing at 17%+ per annum for the past four years under a new management team. Sales are highly cash generative and yield a high contribution margin, whilst CAPEX, depreciation and amortisation are all insignificant.
Crucially now as a result of to a mix of organic and acquisitive growth and the upcoming cessation of deferred consideration payments, the business is beginning to generate strong profits and free cash flow growth from contribution margin, as it exploits inherent operational gearing. If one were to look away for a moment - not knowing the company cleans large glass facades, rolling stock, and prisons - its characteristics mean it could easily be mistaken for a small, successful software company. Yet we have been able to acquire shares in React over the past six months on forward P/E multiple of 6.5x - 8.5x.
We have analysed React's ability to continue growing organically and potentially through bolt-on acquisitions over the next five years. Independent referencing with a number of larger customers and partners have underscored React's competitive advantage and high levels of service delivery. This work has given us confidence to model and substantiate projections further out than most analysts. Based on our work, we believe the business can grow sales to c.£30m and generate a c.15% EBITDA margin within the next five years. Such a growth and margin profile should command a P/E multiple well in excess of 12x, and as a result, our investment has the potential to outperform our target returns of 2x money invested. At this scale, we believe the business would become a target for larger managed services groups."
Despite the chart showing a positive breakout, the P/E ratio for the upcoming year-end remains low at 9.2.
The increase in turnover is commendable, clearly driven by the successful acquisitions. The recent gains in new business indicate positive prospects for future outcomes. Additionally, the consistent revenue and profit margins are favorable indicators for significant shareholder gains in the coming years. I am delighted to be a part of this journey.
Despite a positive breakout in the chart, the P/E ratio remains low at 9.2 for the upcoming year-end.
Last night's late RNS saw Harwood (mainly via Christopher Harwood's Oryx Growth Fund) disclose they have bought another 13m shares - they now own more than 9% with 95.75m shares:
Https://uk.advfn.com/stock-market/london/react-REAT/share-news/React-Group-PLC-Holdings-in-Company/91990736
Another building block in place for this very well run micro cap. At some point in the future Doak may be looking for his exit through a sale to a Rentokil / similar. Cash in time.
The average volume for the last 5 days was 13,000 pounds, so 20% of that figure would indicate an investment should not exceed £2,600, to have good chance of selling without difficulty. The only problem, with the conclusion, is the exceptional volume on friday. If Friday is excluded , then the figure is £9000 x 20%= £1800, not £2600. Share transactions require to be matched, and if there is,a preponderance of sellers, there can be difficulty selling .