Yu Energy Share Chat (YU.)

Also YU isn’t exactly priced like a tech stock on a PE of 30,40 50 or higher again another safety net.

Ultimately YU IMHO is a low risk play compared to most sectors as a defensive play ie other sectors will feel the horrors way before YU.

I have given previously my biggest fear, they grow to fast to soon which has multiple knock on effect across the entire business.

Energy prices collapse again can’t see this for many years or until the world becomes more stable

UK spirals into recession and bad debt become a major issue

Could go on and on but the key with risk is the probability and currently the closest threat to YU is growing to fast.

Next biggest threat is a labour government taxing to death anyone and everything stifling investment in the country, inflation monster returning and higher interest rates killing businesses

Shell deal I see as a partnership but yes potential risks if the CFO screws up but hats like any business breach covenants, most get resolved amicably but huge red flag if covenants breached.

BK get worn out and accepts a low ball offer nothing we can do about it as he hold all the cards with 53% same with an offer he can block it.

Of course there are. Make the most of the elevated charges and margins due to higher energy costs, there is scope for growth, like to see Smart meter installs for other suppliers.

Any negatives?

Any positives ?

Long or short overnight ? Or no position ?

Don’t quite know what “shackles” you are referring to Sparky - Clearly those Directors who sold a significant chunk of their holdings (the CFO’s sale in particular along with their retail Director) in April and May felt differently.

Folks may find this quarterly report by Begbies Traynor (Red Flag Reort) of interest, for the likely impact to businesses like YU and other investments you may have.

“Over 600,000 UK firms face financial strain amidst challenging economic climate”

Https://www.investegate.co.uk/announcement/rns/begbies-traynor-group--beg/latest-red-flag-alert-report-for-q2-2024/8322175

Wonder if £19 will hold today?

The shackles have been of for some time now so confirmation tomorrow that it’s game on for 100,000 would be most welcome. YU always over deliver have done for several years now and I expect 2024 is going to be the defining year for the market to realise YU isn’t some lumbering energy company but a company rapidly heading towards being a significant player in the SME arena , and that the SP is ludicrous and has been overlooked for years by the market.

So, the last trading day before the long awaited H1 trading update. Little trade on Friday due to the computer outages around the world. Interesting to see where we end today. I hope tomorrow at 7am we see the cash figure has gone above £100m, the number of meters is up from 31/12/23 (53,400) to above (77,500.) That would be a net H1 increase of 24,000 meters. The same in H2 would mean ending the year with over 100,000 if they do the same in H2.

Last year Yu Group added 14,000 meters in both H1 and H2. It would be a big step up, but fingers crossed they can achieve that. Cash conversion around 98%. Hoping to hear if there are any issues with bad debts, hopefully these are being managed effectively. Also, want to see a big upgrade from Liberum in their accompanying note. Price target moving up from £20.50. Also hoping for some guidance as what is going to happen regarding special dividend and small share buyback. 20p special and a £4m share buyback would be enough for me. I am happy for the company to hold the cash for the time being.

This update should see the next leg up. GLA.

Surely we should see a record high today !!

Sparky

Sorry only just digested your last comment.

Doesn’t concern me, I’m not a long term holder, it’s not on my radar now in terms of trading strategy, have already stated what that is likely to be up to, on, and after the TU. Long or short.

As you know I always thought the deal collateral was equity (BK’s) not assets / the business, which could have presented greater opportunity for trading, but that’s not the case by the looks of it.

There has been widespread IT issues impacting RNS feeds etc, so trading volume today may be impacted?.

Sparky

Not trying to make a point, simply trying to understand more about the deal. Yes lots of businesses have covenants on debt from financial institutions, this isn’t security for funds it’s security for a service. Shell wouldn’t have wasted time insisting on this covenant for assets if they thought it’s not ever going to happen, likewise BK wouldn’t have agreed if he believed it will be breached.

Will reserve comment on your assumption about why the market has priced YU as they have.

The drop on open this morning was as I expected, let’s see if the bulls re-enter today and Monday.

Only today and Monday to be in or out.

The question is will the results be good, excellent or mind blowing.

Jury’s out until Tuesday 0700hrs

Remember we are not priced for excellent and mind blowing the market has priced us like a lumbering utility, YU have proved to date they are not that, but profitable high growth.

Place your bets folks either way Tuesday is going to a real eye opener especially as the shackles have been removed with the transformational Shell deal.

Also DD I think you have made your point with regards to the Shell and if YU are dumb enough to get in that situation BK is the biggest loser about £160m lost. I think you will find most large deal have covenants see it all the time with banking covenant breaches and the bond holders and banks get the cream.

If it concerns you that much short the stock simple really

Note 25 - Security

The Group has entered into Trading Agreements with the Shell Group in February 2024 to provide access to commodity markets. As part of this arrangement there is a requirement to meet certain covenants, a fixed and floating charge (including mandate over certain banking arrangements in the event of default) over the main trading subsidiaries of the Group, being YU Energy Holding Limited and YU Energy Retail Limited, and a parent company guarantee from the Company.

So YU breach the covenants (whatever they are specifically - the WC?) and Shell get the business.

Hi all. I'm a long term holder here who has little desire to post but a significant desire to read messages by people more informed than I am, especially those who take the time to support their opinions via statistical analysis.

I really don't want this chat to descend into playground name calling, so please find another avenue to do that, and don't tire out the contributors I'm here to learn from. Cheers and good luck to everyone else holding. I've seen some exciting predictions on here over the years, and most have come to fruition so far.

Fully disclosed at note 25 in the AR. I have no more to say on this matter.

SNN / NG

Can I ask - if the business defaults on the working capital requirement (whatever that actually is!), then Shell get the business?, is that correct? or have I completely misunderstood.

Surely if that’s the case it’s important to know and understand the risks as holders!. I know I would want to know.

Interesting point about the definition of WC. Sometimes it seems to be used almost interchangeably as 'cash in hand'.

Thanks SNN for the chart and your thoughts on the Shell deal.

I’m not as relaxed or confident about the Shell deal, but hey I’m not a holder. But do think they need to disclose more detail about the deal (yes I accept that they can’t reveal everything but so far they’ve said very little - it’s a key element of their business).

I’d always gone on WC as current assets less current liabilities - so I thank you for highlighting there’s actually more variants! - every day is a day for learning. But again there needs to be more clarity as the business grows this requirement could become quite substantial.

Well, working capital is a vague term, with more than one meaning. Is it gross W/c - ie one month of cost of sales, or net - ie one month trade debtors, less the trade creditors? In which case W/c is negative. Yu paid Smartest after Yu received payments from its customers. It could mean effectively one month of gross profit. Does it include or exclude the accrued ROC payments? Frankly, it's pointless worrying over this, as a holder. It's clear to me it's in Shell's interest to help Yu scale quickly - to boost Shell's income. Shell are willing to finance the working capital to this end. If there is extended credit given to Yu, this may be to help Yu gain more blue chip customers, who will be themselves on extended credit from Yu. There's no way in my mind that Shell deal has any 'negatives' in it, for the company.

Chart - https://www.google.com/finance/quote/YU:LON?sa=X&ved=2ahUKEwjroYD7krCHAxWKWUEAHQSkA4cQ3ecFegQIORAf&window=5D

Click 5 day.

Correction - right the first time. Yu Energy Holding then owns the supply company (Yu Energy Retail).

It's Yu Energy Holding Limited, which is the Gas shipping / pipeline subsidiary company (and also a holding co itself) which is named in the charge. Details at note 14 in the AR. So not as drastic as my last post!

SNN

Thanks for that. Interesting thought but is the months WC value in addition to what WC they require?.

May be missing something but if the months WC is the collateral why have they also had to provide their assets as security too?.

Just curious, as posted it’s the Shell deal that concerns me more, mainly because they’ve not disclosed anything other than there’s no cash collateral requirement (which also confuses me because what exactly is working capital if not cash on the balance sheet).

Anyway, I’ll see now what tomorrow brings. Sorry as well but I don’t see that range on the weekly chart (looks more like £16 - £19, no expert mind.

DD - yes, but only roughly scanned it. As I said in the original post, it looks like the group holding company (Yu Group plc) has pledged 100% of the shares in the main subsidiary trading company as security. ie if Yu defaults, Shell basically gets the entire business! It also seems a standard template document, with their names filled in in the right places! The chance of default is remote, in my view, Yu's own customers would have to default en-mass to trigger it.

There is also a cryptic line in the original RNS about Shell deal " £52.25m of cash previously lodged under the Old Facility has now flowed back to Yü Group, with further material cash benefits to be realised over the next month". I suggested at the time that the extra cash benefit to come in a month may be Shell giving Yu one month longer credit terms than Smartest did (just a suggestion). Shell could easily fund that credit itself / get it from its own suppliers. And this may be the one month's W/C Yu has to hold? If the cash figure in the TU is way up on expectations, then I'll have my answer.

Cheers, DD.

The five day chart looks to be indicating a flat channel forming between 1850 and 1900. Who knows? May remain in this range until the TU now.

SNN I meant to ask:

Did you manage to read the Shell security charge document? (I’m sure you posted link, apologies if it wasn’t you). I did at its above my pay grade, I thought KAL Portfolio was mentioned but did only scan the document - do you know what YU asset the charge related to?.