Proposed Directors of Tirupati Graphite explain why they have requisitioned an GM. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Always be wary when someone says things have changed. BUT for Yu Group things have changed! The movement since the results were reported is different. The share price in the past has been driven by individuals, private clients who have got seen an opportunity, a share price that has fallen a long way and a company that is righting the wrongs of the past. The results on the 19th March have changed everything. Yu Group became the cheapest it has ever been, and the people now looking at this company have also changed from private clients who say I can't buy this stock, because look where it has come from to now institutions looking at a company on it's fundamentals and saying this share is too cheap. A company that is classed as a disruptor in the SME energy sector should be trading on a p/e multiple of a lot higher than 9.89 times and if they do the 100,000 meters by the end of 2024 then this share is unbelievably cheap at this share price and looking to what it will be worth in the future not where it has come from over the past 5 years.
Yu Group now has a market cap of over £300m and the free float is £150m (taking BK's shares out of the equation.) The cash at the end of the year will be around £120m after paying ROC and dividends. They have a new hedging agreement with Shell who want them to grow their market share quickly and have not restrained them with margin payments as Shell are producing the gas and electricity anyway, and want a guaranteed market price to sell into one and two years out, to allow them to have price certainty for their products.
So going back to the institutions now looking at a company that was too small to consider, what do they see now? They see a house broker that is comfortable predicting that Yu Group are aiming for 100,000 meters at the end of 2024, a company management that is very pleased with how the year has started, and very comfortable with a 100,000 meter target. They also look at Liberums research note and see that in 2023 each meter averaged £11,700 of revenue. They then look at the meters at the end of 2023: 53,400 and the 100,000 target which if met will mean that the 2024 average meters was 76,700 (53,400 + 100,000 /2) this is the calculation Liberum put in their note of the 19/03/24. They then multiply 76,700 by the liberum figure per meter of £11,700 and see a turnover figure for 2024 of £897k. £520m of this £897k 2024 revenue figure was booked at a net EBITDA margin in double figures! If we assume the 2024 net EBITDA margin is lower say 8% (management are comfortable between 6-8% then you get around £72m, take off 25% tax and add around £4.5m for interest. That means profit will be £58.34m for 2024. There are now 16.74m shares in issue, so eps for 2024 would be 348.5p per share.
Institutions know that the p/e on a disruptor growing at this rate is worth over 15x p/e and they don't care where this share was 5 years ago they only care about where they think the share will be in the futu
Remember this time last year Liberum where expecting eps for 2023 to be 43p they ended at 182.2p per share.
If what is set out below happens in 2024 then Yu Group will start 2025 with 100,000 doing £11,700 per meter, so contracted revenue of £1.17bn of revenue already in the book for 2025. If Yu Group achieve the 100,000 meters by the end of 2024 then they will try and reach their 5% market share target of 165,000 meters by the end of 2025. If achieved then the average meters during 2025 will have been 132,500 meters. Again times that by Liberums £11,700 per meter and you get £1.55bn revenue for 2025, at 7% net EBITDA margin then that is £108.5m, take off 25% tax and add £6m for interest. Then the EPS for 2025 would be 522p per share. Just 15x p/e for this kind of growth? I think II's will be happy to put this on a better rating. Don't get scared by the current share price, this little gem has a lot further to go. Also, be wary of Liberums eps forecasts of 186p for 2024 and 211 for 2025. They will upgrade significantly over the next year or two.
From 43p to an actual 182.2p need I say more?!
What does 15x p/e look like in share price terms: It would be trading at £27.33 now. In a years time Yu Group would be £52.27. In two years from today we would be £78.30. Then if I were BK I would take £100 per share from Shell for the whole business and ride off into the sunset with my £880m and have a wild time!!
We should also remember this is just working on 15x p/e not 30 or 40 times p/e!! The main thing to watch in this thesis is the figure of 100,000 meters by the end of 2024. If this happens the game is on!!!
I truly believe that Yu Group have been held back by the old hedging agreement. I think the amount of collateral they were posting which was £52m has meant that they have been restricting the amount of new business they have written in the last half of last year. I think the new hedging agreement will let this business fly. They can now drive for meter growth. I think they know they will blow through the 100,000 meter target. Hang on to your seatbelts this ride could get very exciting!!
100% agree we have moved from 1st to 2nd gear still 4-6 to go
Oops missed out 3rd lol
great posts and coverage once again, ng.
i'm encouraged also by the fact you have been inside the doors of the company and heard how they are approaching the future first hand which has always reflected in your summaries and gives a true insight. i think that is a great benefit to all of us here on the outside looking in. much appreciated.
i agree with your thinking and i've been convinced since the hedging deal then the y/e results that it would be shell buying on the open market, along with probably miton who have always seen what the goal was here. the action since results looks and feels very different and no longer are these infamous twitter traders able to control the narrative as they have done so in the past. in fact, i believe they have already done their usual 'pump then sell' but it backfired this time as the shares were gratefully hoovered up into ii hands and the price didn't bat an eyelid! it was only driven down in the first instance by old, dated accounting from 5 years ago, (by a different cfo) and they can see that. as you say, looking forwards not back from whence it came!
if that is the case, it could get very exciting as there is no longer that chunk of float for those aforementioned traders to 'rinse and repeat' as done before at previous levels, thus stalling the progress we all knew was due some while back. the price could roll on quickly with 90 + % held in tres sticky hands now and bk can concentrate fully on the job in hand.
delighted to have found yu in 2020, when walking my dog by it! i have added all the way from £1-£9. i must state again that my own dd has been backed up by great research shared here (and minus the troll(s), on the other bb also) to keep adding and and keeping the faith. so my thanks go to ng, sparky, ****er, ipc and snn for their efforts over these years. hope you enjoy the fruits going forward and happy easter to all investors here.
dave.
Sent that and every capital letter has changed - weird lol !!
Apparently, I'm not allowed to say C ocker either!
Some crazy world we find ourselves in - O rwellian almost.
GLA.
Not sure that Miton will be increasing now. Last time I looked, Yu was at about 8.5% of both the micro / small cap investment trust and the unit trust. They are capped at 10% max for one stock. SP now up by 50%. They will be forced to reduce in these two funds. They may of course be able to trade stock into their diverse income trust, which also holds, and is a much larger fund, so the 10% threshold is no where in sight. Clearly IIs now buying, may be knocking on Miton's door to release some stock - at an acceptable price of course!
@NG - some really interesting points raised - the key numbers are above my current forecasts but I can see how you come to them. As you say the key is that 100k meter target and I can see how that then leads to the others.
I would be amazing if they hit their 2024 target as you are right that then leads straight into their longer term ambition of 5%- and I agree if they hit 100k in 24 then there is no reason why they cant get to the 165k in 2025...
I suspect that you are correct in your view on the old supply agreement - it got to the point where it was constraining growth - we should find this out in the next 4-5 weeks when the next TU comes out.
This is one of the best BB's for genuine discussion and ideas that I am a party to, so again thanks to all who help maintain the quality.