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Sounds like the logical conclusion there, ipc.
(I was in IAG when that situation occurred. They paid the special as cash was there, luckily before COVID did the rest).
It does provide clarity going forward for when they approach II's on the road afterwards.
Some TR-1's late March/early April and a main listing would be acceptable!
I wonder, in line with Liberums thinking, that we may get a better capital allocation policy stated. Perhaps along the lines of the intention to deliver a dividend fixed at 10% of EPS with remaining free capital to be distributed to shareholders as special dividends when available. Provides some clarity moving forward.
I am sure we will find out in just under 3 weeks , personally very excited.
Have to agree with you there - if it doesn't happen now, there will be a disappointing reaction on the day. Once again I have to wonder why they would come out with it off their own bat...
What would they do with the cash otherwise? £62M is already ample for growth ambitions surely. Plus Q1 revenue incoming.
Liberum are certainly chancing their neck with the dividend comment. Looks very affordable in terms of the cash balance, but looks high in terms of the percentage of eps for the year, and a big jump from last year's 10%. It's set an expectation, which if not met will tank the SP on results day. If true, it's one hell of a good dividend yield this price.
Definitely. I would be very surprised if Liberum would put out a £20M special dividend speculation rumour on their own without any guidance from the BOD...
Therefore, a no-brainer to hold steady. Where else is better atm!
As correctly pointed out earlier, it's actually a bit on the light side with £62M available after the buffer!
Could do with an 'off AIM' RNS into the mix as well.
GLA.
Another late 25k sale - some serious profit taking done today, but unlike previous times, the good news is holding the share price steady and will head upwards in the next few weeks into the FY23 and hopefully special Dividend RNS (s).... onwards and upwards.
Lol seen it all before all the way from £1, sit back relax and enjoy the ride to £20
Just profit taking I suspect - we have seen this before with YU. traders taking profits when good news is out. When the next RNS drops (no later than March 19th) with news of FY23 figures and if Liberum are correct, a £20m special dividend (£1.19/share) we will see some significant buying again. What is interesting today is historically we have seen the share price drop on this level of selling but today the market has absorbed some very big sells - 40k and 32k at 1345p and not really react. I suspect this means that the news is beginning to get out and more investors are seeing the growth and income potential here.
Hi N,
Thank you for your question. The answer is that eps growth will be more difficult with the spot price of gas around 59p per therm than where it was 10-12 months ago, (140p per therm.) However, there are some positives that have fallen into place over that time as well. I am now expecting somewhere close to £800m revenue for the current financial year. This will be achievable if the company reaches it's target of in excess of 100,000 meters by the end of this year. The company already has £520m in the book for this year, and if they nearly double the amount of meters at the end of this year as they have at the start of this year, then yes, £800m is achievable even at the lower gas price.
I am expecting the net EBITDA margin to be 8% this year. It would be higher if the gas price was higher, (into double figures would have been my guess, if it is 9% this year.) I have shaved a bit off for the lower gas price and that I expected bigger customers will come at lower margin. I have added a bit on for the new hedging agreement, (which is an unbelievable deal!) I also think that there will be a bit to add on as the bad debt provision still looks a little high. There will be around £6m coming from deposit interest this year even after special dividends have been paid. Liberum only have £1.6m in their figures!
It is worth mentioning that when I attended the capital markets day on the 21/11/23, I came away thinking that there would be tangible disappointment if the 100,000 meters was not exceeded. I also think that the company will give up a little margin to pay the third party introduces more to allow Yu Group to reach and exceed the 100,000 meters.
So, above is my thesis, what does that equate to: EBITDA £64m take of tax @ 25% £16m, gives £48m profit after tax or 300p of eps. I think 12x p/e for a disruptor is too low.
As the heading of this tread says word is spreading! At some stage when the herd finally wake up to this little cash machine the p/e will stretch to a silly level by a silly level 20x p/e is not out of the question! So yes, I am still comfortable with the share price target around those levels towards the end of this year.
I’ve just been crunching some numbers and imo this looks incredibly cheap still. Surely the only way is up from this level! Will be buying a few on the open. Atb
And another
https://twitter.com/RebelHQ/status/1762142091436581264?t=Kdx5AV_NJr7vvq6km32zCg&s=19
Hi NG, you have been pretty bullish on your estimate of the sp this year (between £35 to £52, I recall from an old post). Do you still think the same given recent news or given the uncertainties SNN has mentioned and reduction in wholesale price reducing T/O have you revised your personal goals. DMOR and all that! Thanks for considering the question. N
Excellent post, NG. Lays it out rather nicely.
At the end of last year I recall one of the trolls on the other site scare mongering about how the hedging agreement expiring at the end of 2024 was a business risk and that the 5 year agreement with Smartest was coming to an end, this would be a big problem for Yu Group Etc Etc.
On the 21/11/23 I visited the head office in Leicester and put that question to them directly. (Nobody likes a smart ar*e!) However, at 11:41 on the 22/11/23 when I was reporting back to the group on the investor day I wrote the following:
"Back in 2019 when the hedging agreement with Smartest Energy was signed, Yu Group was a £30m market cap company and had around 9,000 meters. The agreement comes to an end at the end of 2024, at that time Yu Group could have a market cap of >£600m, (in my opinion,) and over 100,000 meters. Smartest Energy will want to keep the business, but Yu Group will be in a much stronger negotiating position. If Smartest Energy do win the tender again, the terms will be much more favourable to Yu Group. There will be other companies invited to tender. The hedging business will be placed with one of 7 or 8 companies. They will have clearer visibility on the longer dated hedges and this will result in a higher margin for Yu Group. This is an opportunity NOT a business risk."
Wow! The RNS on Friday is far bigger than the market has priced in, in my opinion! This new agreement is game changing for the company. I am very impressed with the terms that the management have secured with one of the largest companies in the UK. Shell no less! If they have negotiated a new deal for 5 years WITHOUT margin on the forward hedges up to several BILLION of turnover. Also, if the chat is correct with a month of credit, OMG! This could mean that by the end of March cash will be £30m + £52m coming back, plus £50m (one month credit,) plus £10m profit for the first quarter. That's over £140m in the bank. That means at the current price the market is valuing a company that is making £40m profit per year at £80m (Market Cap £220m, less cash £140m.)
As many on this board have realised for a very long time............too cheap at current levels! Hopefully the 19th March will show this in spades. It is amazing that institutions are too lazy to do the sums! However, 3 weeks tomorrow when they put the price up on Bloomberg of Factset the p/e will say 7.6x, maybe that will encourage them to dig a little deeper.
Hi Ipc - yes, should now become a decent income stock, and a dividend yield should support a better share price. If it's made clear the 2023 dividend will be at least paid again in 2024, then at a 6% yield hopefully puts at £20 (120p dividend). The SP won't react until the final results and the actual dividend policy is released. They will need to be more explicit - ie, state a minimum payout ratio or similar going forwards, which will then allow IIs to buy in confidence, knowing where they stand.
I remember it well, we have had some great discussions on here about YU and its future potential and its nice to see that 15 months on as we approach FY23 RNS some of the ideas we threw around are looking like becoming reality. The Shell deal I agree is going to provide the "lift" that the YU needs to push on a continue to grow the business. The key now is maintaining customer satisfaction - helps bring in the new business, and grow the Smart meter business. If they hit the 100k meters this year then we will be looking at £2-3 dividends for FY24....
Agreed - I remember NG saying a few months back even that they had got some big names on board and a domino effect could now occur with this Shell tie-up in place.
Very exciting and fair play to them. Reaping some well- deserved success now the groundwork is accomplished.
I guess that's why they now also have loads of vacancies to expand with all that extra cash on top salaries.
Turbo charge , I like that term. Very much looking forward to the next 12 months, I never once thought YU would tie up with Shell. Incredibly bullish signals
Yep. Hence, the word 'transformational'. Yu's business is a drop in the ocean to Shell. Shell is just huge, and will have very favourable payments terms from its suppliers. It can easily finance the working capital / collateral which it has passed some of it down the line to Yu. It will enable Yu to super charge growth, a combination of sharper prices to customers and possibly slightly relaxed credit terms, without losing profit margins to Yu. Yu should be able to go after significantly larger customers, with a solid balance sheet and a global player on board as a partner.
Worth looking back to early December 2022 on here, when we were discussing that £1 dividend was possible for 2023 and talk was for eps in the region of 150p. (2022 results weren't anywhere near out and brokers were at 60p!!!)
Indeed, the more I have digested the news over the weekend the more transformational the news is. I really do not think people have full absorbed the impact of this. Shell Jesus Christ these guys are simply huge and 12 months of due diligence for a deal that doesn’t require collateral because these are obviously very impressed with YUs abilities
It's still sinking in here how huge this is.
62 million of spare cash for distribution after the 20 million buffer...
20 million special speculated is approx £1.19/share - wouldn't II's be all over this next week and beyond IMHO. Can't see where else you could get such growth potential with a juicy roi like that.
Wonder if the announcement on Friday has actually sunk in yet ?
Yep. Mind boggling, Sparky. It's explicitly stated now that they don't need it for working capital (ie collateral), and as Liberum say it's a capital light business. What's all the cash for? Either very substantially up the dividends, say 60 - 80% payout ratio every year, or they are perusing acquisitions.
Not keen on acquisitions - no control over the quality of customer, as with Solrs, bring in a lot of bad debt, and the customers are free to churn elsewhere. A major acquisition is not just buying a customer book, but may involve buying premises, the staff and all the IT systems - not really integratable with Yu's unique approach. Easily waste a lot of money here.
It's all uncertainty which needs resolving. A drag on the SP, off-putting to new institutions. All to be revealed with the results and in the roadshow presentations.