Yu Energy Share Chat (YU.)

Same a bank loan having a charge is it not, pay your debt or else. Simple as really

Old news that was posted weeks ago

Shell have a Security charge over Yu Group its reg in Companies House

22/02/2024

Charge code: 1000 4236 0002

Persons entitled: SHELL ENERGY EUROPE LIMITED

People who make these deal are way more clever than you and me. BK will be the biggest loser from a bad deal than you i think.

2227

The devils in the detail.

Anyway, decent volume again today and 3 trading days to go.

Discodave4561,

Remember, BK is a shrewd businessman, has built this business from scratch to this level and most of his wealth is tied with this company . I don't think we need to worry about deatails we know nothing and understand nothing.

NG

It’s the Shell deal that’s my biggest concern, or would be if a holder. The agreement is for 5 years and surprised something so variable and correlated with growth (which makes sense from Shells perspective) like WC is the collateral element. They (Shell) I’m guessing will also have a cash charge or fixed fee (do you know what that is?). Their own UK energy supply business didn’t do too well either despite their commodity buying power / hedging - but best I stop there as I do have a glass half emoty type of strategy where investments are concerned.

Accepted DD. However, even the very cautious Liberum have the cash figure for y/e 2025 at £138.4m, and if Yu's figures are what I am expecting, it will be a lot higher than that. It isn't something that causes me concern. I think that if the hedging agreement is working for both parties, Yu to buy energy forward and Shell who is producing the gas and electricity be know what price they are selling their products for in the future, then if the agreement needs to be revisited and both parties are happy, I am sure they will be able to come to an agreement that works for both parties.

NG

Not too certain as their WC could be quite significant based on your £2bn turnover by 2026, that’s over four times last years income. Using the WC Turnover ratio based on FY23 finals data that equates to a ratio of 14.4x. So using that ratio the WC for £2bn sales would be circa £140m.

They have no doubt got a better handle on what that collateral commitment actually looks like over the longer term.

When asked the question directly in the institutional presentation, the only collateral mentioned was the one months working capital. Nothing else.

I don't know what the figure is for one months working at the current time, but I would expect his figure to increase as the business increases in size over time. Also, with all the cash in the business at the current time, (over 1/3 of the market cap.) I don't see this being a problem for Yu Group.

Ipc - thanks for clarifying.

NG - I’d read that some collateral (other than cash) was part of the deal hence my thinking that BK could do a secondary placing with Shell the other party. He has the opportunity to take some well earned profit, it improves liquidity and Shell get a decent equity stake in the business. Hear what you say that that was kicked into the long grass, but time will tell.

You mention that the actual collateral was one month of WC, which I’m surprised at as that is in effect cash on the BS and if defaults could prove to be an issue? (with all that cash perhaps not too much of an issue?). Out of interest do you know what a month of WC equates to?. The accounts are only a snapshot in time so difficult to get a feel as to what that might be. From the finals it’s about £30m from memory for that instant in time.

Thanks

DD,

The company didn't give a revenue figure last year in the TU. They gave number of meters, cash figure, Cash conversion % and monthly bookings, as well as indication of what margins are doing. Luckily, Liberum gave us an H1 revenue figure of £195m and it came in at £194.7m (although their EBITDA figure was only £11m and it came in at £13.7m). We will have to work with the numbers we are given, and work out our own estimates for what will be confirmed on 24th September 2024.

Shell could see Yu Groups forward revenue projections in the Due Diligence that was carried out by their lawyers for over 12 months. They wanted to form a joint venture company which would have involved Shell buying some of BK's shares. This was dismissed by BK. The agreement was put together so that Yu Group didn't have to post collateral but did have to keep 1 months working capital in cash at all times (on Yu's balance sheet.) They will not be revisiting this, and it is clear to me, SNN and IPC why BK was not for selling some of his shares back in January/February.

He know better than us where this share price is going! I am in full agreement with SNN, this company if it gets to 8% market share of the B2B energy business will be doing £10 EPS per year, and if you price that conservatively on 10x p/e you get to £100 share price. It will get there more slowly if BK holds onto all his shares, but it will get there. Why sell them down here to speed the process up. I've been on this for 5 1/2 years. I am happy to hold.

The share price will be over £30 in March next year, if they are close to 100,000 meters at the year end in Dec 24. Priced at under 10x P/E. I am hoping they achieve 5% market share by the end of 2025. That's 165,000 meters! If they do that then 2026 turnover will be over £2bn. This company is a growth stock priced as a utility. What's the rush? It will be priced correctly in time, if BK sells a few of his shares or not. It will just take a little more time with the low free float. One advantage of BK's >50% holding is we won't be taken out too early and fail to see the full potential.

@DD I am using 16.7m shares and 25% obviously and I said in the region of £25m, would need to be £26.7 PAT to get to the 1.2 EPS. 1.1 or 1.2 EPS is way ahead of current brokers either way and my jottings below are based on continuing 2023's contract numbers, which YU implied were being held back by the Smartest deal due to the need for ever increasing collateral with them. Iam certain that we won't see PBT numbers next week, might get EBITDA if we lucky but definitely H1 TO and hopefully bookings. With those the brokers will reevaluate, publish new guidance and we can all then update our calculations and positions.

NG

That’s exactly what I’ve used to get my figs. If they only give H1 Rev in the TU then it’s still up for guesswork anyway until Sept interims.

Have you any views on BK reducing his holding?, it would help liquidity. As you said Shell wanted a stake in the business then a decent secondary placing by BK would be a win win IMO.

2227

Fair point but margins have been quite variable.

Long SB at 1845 this morning just after 9am. Tight stop which I’ll float. Volume is picking up so will see how it goes. Could be close to new 52w high by 22nd (looking at 100 points). If it is then will close and review depending on the TU.

We should be using a tax rate of 25% and the number of shares for EPS purposes (deducting the shares in Treasury,) should be 16,784.337 (to be exact!)

The reason I think that H1 revenue of £300-310 or even £315 mentioned is conservative is because H1 2023 they had started 2023 with £247m pre-booked. So minimum of £123.5m from forward sales, and added another £70m in the H1 to get to £194m H1 sales. Yu will go into 2024 with at least (£520m/2) £260m already falling in H1, I would expect them to do more than £70m as the shackles of margin have been released. But even if they only match H1 2023 @ £70m I get £330m. They are geared up staffing wise to increase the £70m H1 additional sales.

YU. achieved PBT £31m in the second half last year on revenue of £265m.

With turnover over£300m, PBT might turn out to be higher than £25m even on a lower margin.

Thanks ipc, I’m still going more conservative, but not by much:

Rev £300m - £310m?

Pbt £24m - £26m

Eps circa 105p to say 115p?

Can I just ask, you say pbt £25m (which I agree) but I don’t get an eps of 120p, it’s c 111p, what tax rate and shares in issue did you use?

Thanks

Some great debate from IPC, SNN, NG and our resident SB expert DD

Not long now and all will be revealed

@SNN / DD

Definitely in the same ballpark SNN, my lower case estimates - based off continuing last years bookings of £55m new contracts/month (approx £2.6m business / month) gives me H1 TO of £315m and PBT in the region of £25m (Inc interest of £1-2m on cash balances). EPS of 1.2 after tax or so. It doesn't take much to get to EPS for H1 of 1.3.

Now if the Shell deal releases the brakes on new business and YU are booking more like £65m of new business then the numbers get bigger quickly....as do the free cash balances. I am still of the opinion that they will be holding at least £50m plus ROC in the bank so the H1 numbers will be pretty much what they could distribute, remembering that they have already spent £4m buying the share options into treasury this year.

SNN

Thanks for your comprehensive reply and being upfront.

I’m more conservative as to their H1 numbers and beyond, but that’s just my opinion, as is everybody else’s, none of us can predict the future. Unfortunately some take it personally, particularly when potential risks / issues are mentioned, but won’t go there.

There is a good chance that if this becomes technically overbought by the 23rd that there’s a pullback on the day - we agree I think!. Will there be sufficient news to maintain upward momentum? Who knows, I will play it as it comes.

DD - Thanks for the comprehensive reply. I have never used SB etc, so genuinely intrigued by its mechanics and the thought processes behind it.

As for Yu's growth, all is down to opinion. For the next 2-3 years I think the growth is sustainable. The leverage in their business is very significant, and if it pans out (£2.5 - £3bn T/o) I see eps over £10 and a SP over £100. There will eventually be a brick wall limit on the market share it can capture, say 6-8%.

If this rise continues to Tues, then yes I also see the chance of a fall on the day, regardless of the TU. However, if good, as last year, I would expect a long trend up to form until the H1 interims in Sept afterwards.

The 100k target for meter installs in 2025, was verbally given in an analysts meeting. I expect the next round of broker notes to comment on this. Besides, it fits with having 200 engineers - they won't be paid to be idle all day long. I suspect there is a closer working relationship with Shell than meets the eye, to support rapid growth, then perhaps an exit sale to Shell 3-5 years on.

I don't get 130p. That was NG. I commented I am in the same ball park. I am on £750m revenue for 2024 at the moment (£320m for H1) but will revise as we get the update. I have similar margins to last year, but with increased O/s. EBITDA of £30m ish for H1. It's simply my own research, maths and intuition. NG and Ipc also sometimes post their forecasts on here and we all three have been consistently ahead of brokers and very accurate in our estimates long before the brokers producing 'final' estimates in January. We've been here swapping thoughts a good 2-3 years now.

I only post here. I do not wish to be caught in the cross-fire of stuff going on elsewhere. I have my own boundaries and will respond, in my own way, should they be crossed.

Waiting for the same quality we see elsewhere.

It won't take very long.

Oh dear.

The CFO and Director of Retail selling more than 50% of their holdings is not a positive sign and you are assuming too much about the future.

Yes I felt a PW was coming because following their investor day the share price continued to fall at a decent rate plus last year they issued a TU in May. It was an opinion that proved to be wrong but its not etched in stone, the moment has past, I called it wrong (didn’t lose a penny), get over it.

You never post my correct calls.