Member Info for Agricore

@Nutmeg, or potentially a buy back?! With its cash pile it could buy back 20%+ of its shares at 25p and still have cash.

Not many tech stocks you can buy for 1 x book value. I can't think of a direct peer for BATM but DarkTrace is 12 x book by comparison.

Outside the American magnificent 7 and keeping your money as cash, what isn't unloved right now?

What does Warren Buffett say is his investment secret? Buy on the fundamentals, and buy when others are......

It's a beat! (Versus Shore's forecasts)

Revenue (-9.3%) $60.2m vs $65.8m forecast

EBITDA (-13%) $4.4m vs $5m forecast

PBT (+35%) $2.3m vs $1.7m forecast

EPS (+10%) $0.22 vs $0.20 forecast

The de-emphasis of non-core appears to be succeeding. The drop in revenue presumably due to a focus on higher margin activities - per Moti's presentation a few months back.

What stands out for me is the positive outlook for H2:

"Looking ahead, we have entered the second half of the year in a better position than at the same point last year, with sustained revenue momentum and a higher backlog. We expect to deliver year-on-year growth in Networking, with increased revenues from both carrier ethernet and Edgility. Our cyber business revenues are expected to be higher in the second half than in H1 as we ramp up delivery of our large contract won earlier this year. Our Bio-Medical division is also expected to continue to increase sales. As a result, we expect to report year-on-year growth for 2023, in line with market expectations."

Shore's full year forecast EBITDA $10m and PBT $3.4m for 2023 appears undercooked to me. Extrapolating the forecast revenue (aka market expectations) but at the revised margins achieved in H1 suggests a PBT closer to the 2024 forecast number ($6.9m)

Very good news indeed!

EV_Bull - you're absolutely right - I was using Google Finance (https://www.google.com/finance/quote/EG1:ASX) which shows the wrong market cap info. I'll know to use the ASX directly from now on.

Well that's +£1.4m to the valuation - be nice if upside surprises were always that easy!!

Seaman - great article thanks for sharing.

Thordon,

in manufacturing Tier 1 means it's a sub assembly provider e.g. Bosch. Not General Motors.

I don't really get your VHS/Betamax analogy since Guident has patents around Guident Springs and no one else has developed the same technology or is working towards it - to our knowledge. Can you please share details of which competing technology you are thinking of here?

Ditto with Microsalt. It's a patented process to produce micron-sized salt particles and no one else is doing the same (other than those using Potassium Chloride instead of Sodium Chloride which is lower Sodium - unsurprisingly - but tastes dreadful. Have you ever tried it? If you do, you'll wish you didn't.

>>"manufactures take time to adapt so maybe years off from mass sales."

What adaptation do you think is needed?! I disagree that any adaptation would be required - try watching a few episodes of "How's it made" and you'll realise that dispensers in food manufacturing can take a feed of normal salt or microsalt - no problem. No adaptation required. The only reason they're not (yet) using Microsalt is that it's too small and it's off their radar. Besides Microsalt couldn't produce in volumes large enough for any major food producer right now. But it'll come in time. Sodium reduction is a $1.6bn/year category globally where Microsalt has a clear USP. Expanding Microsalt globally will be the priority. Snack foods and ready meals are enormous markets, but one for the future. However (all) Salt is a $32.6bn/year category (bizarrely growing 5.3% CAGR to $48bn by 2030 (what?!)). Just like the UK government taxes ciggies and give away free vapes, you can imagine a few nanny states in the future taxing salt and supporting microsalt. After all, salt is without doubt a huge killer (Source: https://sciencenorway.no/cholesterol-consumers-forskningno/salt-is-worse-than-tobacco/1393166).

You say you need to see breakeven, but in investing, by the time you can smell the coffee you'll be paying starbucks prices. Right now what's on offer are some coffee beans with exciting potential! Trust your nose to sniff out the BS or the bargain!

GLA

Another read across to Grow to consider would be Herald. I think Katie Potts, 35 years experience and 2200% ROIC, makes a number of excellent points generally but, again, another example of how venture capital rebounded strongly in 07-09 and in 2000-2002 - well worth a listen: https://www.investorschronicle.co.uk/podcasts/2023/08/22/ic-interviews-fund-manager-katie-potts/

Thordon, doesn’t just apply to EVs - any vehicle with start/stop can benefit from Guident Springs including ICE vehicles. Vehicles can be bikes etc as well as cars too. See my previous analysis on the market size.

@Jupitar - and when I speak of a "lithium shortage" I mean a shortage to the Western World. Who controls 80% of lithium refining and battery production. Not the West. Where's EMH located? The West. A few dozen miles from Bavaria's and Czechia's EV production. Similar story with HAS. Who controls rare earths? Over 85% China. Where's HAS located? The West (Australia is considered the West). EG1 is there too. Sonora is proximate to US/Mexican EV production. Given the geopolitical tensions assets in friendly jurisdictions usually come at a premium - and not at a 98% discount. The "friendly premium" belongs in my upsides list.

@Bannor - on my "upside" you're right (well spotted) - WHI's number are "project" so "At the full 20% reduction, this increases our NPV10 for the project as envisaged currently by EMH of $149m to $1,217m using our new long-term lithium carbonate price of $15,000/t, and by $300m to $3,655m for our expanded case (whereby EMH doubles production from year 6)." That would imply a 6.5% of EMH @ US$3.6bn NPV x 49% is £90.25m or 49.88p a share.

@Bannor but my base case is taking into account the 49% split i.e. EMH 6.5% holding worth £4.94m market price (6.5% @ US$1.2bn NPV to EMH and KDNC's share of that would be £61.42m or 33.94p/share).

@EV_bull - Evergreen is listed on the ASX. On Friday's market price the 8.7% @ of a market cap of A$14.06m @ A$0.26 per share was definitely worth £0.69m not £2.1m. However, whilst there aren't any OPTIONS, further reading shows there's a further A$3.47m of shares due to KDNC on completion of certain performance milestones. I'd missed that in my "upsides" - thank you. This would have the effect of diluting existing EG1 shareholders by 24.6% and would increase KDNC's holding from 8.7% to 33.3%. EG1 is A$14.08m market cap so a third would be worth £2.37m (£1.68m more).... at today's prices. Going back to the NPV of £570m that's 33% would be worth £188.1m - or £1.04/share to KDNC holders.

@ghin - As for the sharpness of tools, I think the deals that have been struck with HAS and EG1 have been smart. We now have 3 out of 5 publicly listed holdings. Amapa and Sonora for 3p/share at a 98% discount is progress in my book. The progress made with Amapa, whilst feeling slow, has been solid. The purchase of Amapa was clever. Anglo walked away from a billion dollar asset. What fools. We have the $10m funding negotiated option for the DFS for Amapa, or a JV will be announced. That's clever too. What sharpness are you expecting exactly?

@jupitar - are you shorting - or just here to try to be original? Not ever heard that Fools & Horses line used like that before - well done you!

@jupitar - assuming behind your world class humour you actually have an opinion on the markets, do you not see everywhere you look that microcaps have been smacked down? Name me 1 lithium/rare earth miner going great guns in the current environment? SAV, ALL, MKA, PRE, RBW - no one is doing well. All down by large percentages too. Yet we have this enormous tailwind of a lithium shortage. What are the trends for electric vehicles and energy storage? Trading economics shows me current market price for Lithium Carbonate is $30k/tonne - hugely above the NPV calculations for EMH. So while your 80% drop for KDNC in 10 years is factual, why exactly do you think past performance is predictive of KDNC's future performance?.... In selecting Investments, the future is what matters after all.

GLA

Splitting out the public and private elements of KDNC and following some (further) price drops where are we?

(all valuations as at 25th Aug 2023)

The market cap of KDNC is £12.85m

PUBLIC

EMH 6.5% holding worth £4.94m (6.5% @ US$1.2bn NPV is £61.42m).

EG1 8.7% holding worth £0.69m (8.7% @ £570m NPV is £49.59m).

HAS 1.9% holding worth £1.22m (1.9% @ A$1bn NPV is worth £10m)

Total 3.9p/share. (or 66.9p at their NPV)

So current market prices are on a 94.2% discount to their NPVs (But see note 5 below).

PRIVATE

Sonora worth ? (NPV Base case is £7m, NPV is £23m)

Amapa worth ? (NPV Base case is £253m, based on 33% @ unrisked $949m NPV)

The 2 private assets marked "?" are in the price for £6m or 3.3p share. (Or £1.53 at NPV)

So £6m for £260m is on a 97.7% discount to their NPVs.

Are there other upsides?

1. The NPVs are at conservative commodity price estimates. For example EMH's PFS put Lithium Hydroxide at US$10,000/tonne and Carbonate at $12,000/tonne. As at 27th August Lithium Carbonate is $30k/tonne (2.4X)

2. Amapa iron ore reserves. Nearby "Great Panther" areas could contain further orebodies.

3. 94.2% discount for HAS is unfair? HAS is 18 months from 1st pour and 2 years from cashflow positive - that £10m value seems fairly nailed on? (Source: https://www.investi.com.au/api/announcements/has/84c09d44-461.pdf)

4. EMH has its DFS and FID in Q4 2023. It has backing from both CEZ and the EBRD.

5. EMH simplified flowsheet WHI said "At the full 20% reduction, this increases our NPV10 for the project as envisaged currently by EMH of $149m to $1,217m using our new long-term lithium carbonate price of $15,000/t, and by $300m to $3,655m for our expanded case (whereby EMH doubles production from year 6)." That would imply a 6.5% of EMH @ US$3.6bn NPV is £184.25m or £1.02 a share.

So public holdings would be on a 97.1% discount to their NPVs. (3.9p vs £1.35)

Conclusions:

1. HAS is far further advanced than perhaps people realise, with strong offtake counterparties, finance, and expansion plans for downstream processing in Estonia. Rare earths are strategically important.

2. EMH isn't so far behind. Lithium is strategically important.

3. Even considering risk, and ignoring publicly listed holdings upsides, the 97%+ discount on Amapa/Sonora makes no sense.

GLA

Even through the 2007 to 2009 recession median IRR for PE was 9%.

In 2009.. the strongest median returns of any year either immediately prior to or after the recession. Top quartile returns rose to almost 50%, underlining the strength of the deals made that year

(Source: https://www.dealedge.com/insights/private-equity-during-recession-part1/)

Steph, it's also true that there's an obsession with rising rates being the harbringer of doom - including doom for FTSE250 constituent GROW. Is it though? This podcast offers a contrary view:

(Source; https://www.bain.com/insights/upward-and-onward-in-an-uncertain-environment-bain-capital-steve-pagliuca-podcast/)

“You have to remember, in your career and my career, probably 80% of that time we had T-bills at between 4.5% and 5.5%,” Steve explained to me on the latest episode of Dry Powder. “No one was saying that was horrible, and no one was saying that the private equity industry is dead. In fact, it boomed.”

Boom.

there are numerous peer group valuations which have not moved anywhere like negative 15% during 2023 or particularly q2. let's recap the recent valuation updates across other reits: abrdn property income trust + 0.4%, aewu +0.7%, balanced commercial -1.1%, custodian -0.5%, schroder reit -0.1%, uk comm property reit +0.6%. so some valuations are upwards. let's not forget, too, that recent realisations for rgl and its peers have also generally been above valuation too. do valuers not take recent realisation prices into account?

(source: figure 1 in marten & co's broker note @ https://*********************/companies/uk/reits-diversified/abrdn-property-income-trust-limited/research/quoteddata/abrdn-property-income-trust-ready-and-waiting/21_79551f12-70a7-43ed-b9de-ed014c4d2bb3)

let's not forget, too, that stephen inglis has made a publicly stated belief that valuations are going up not down. appreciate he's talking his own book - but if i were him and i secretly knew that was cobblers i think i would be much more circumspect with my language to retain more credibility if/when i go cap in hand to investors or financeers for a bail out due to a covenant breach i know is coming.

i notice, too, that the analysts following rgl are 4 strong buy 6 buy 1 hold 0 sell 0 strong sell. average 12m target 64.6p (+50%)

(source: https://fintel.io/sfo/gb/rgl)

the concern is in a fortnight's time at the next update, a 15%+ drop that breaches covenants could happen and crash the share price despite every analyst following rgl thinking it won't. nor are such dramatic downward valuations happening to any uk reit peer (including those in the office rental space).

so i'm just not seeing the evidence for this valuation drop.

You_having_a(nother)_laugh,

1/ When the news is focused on Jackson Hole and Jay Powell's speech (again) I don't think a 0.1% movement in Nvidia today is indicative of anything much, is it?

2/ I read all your factoids so first the BoE statement suggests the hammer is coming down on construction and wholesale/retail - fail to see what relevance that has to GROW (Source: https://www.cips.org/supply-management/news/2023/august/percentage-of-firms-at-risk-of-default-predicted-to-hit-50-by-end-of-2023/). You can read doom every day in the news so a little more of the same doesn't predict much. If the creative winds of destruction clean out some of the zombie businesses that were life supported through Covid that's a good thing in my opinion. I speak to many businesses daily and read their accounts - there's many growing, prospering SME businesses.

3/ When the FTSE250 is on a PE of 12 do you really think it would move to a PE of 9, if (when) the S&P moves from its current PE of 23 to 18? I find that extremely hard to believe. Recent correlation between the pair has been either very weak or negative. Within the FTSE250, if GROW were proportionately affected that would put us at £1.80 and on a discount to NAV of 85%. Really? C'mon!

4/ And now for your "SMH ETF for semis had a negative macd weekly crossing 7/8 and each similar has led to decent falls afterwards. A strong signal of the wider economy."

So you're making a new prediction we are heading for a terrible recession because a Semiconductor ETF gave you a technical signal? Technical analysis today for SMH shows a mix of bearish and bullish signals for 24th/25th August, so you're picking a bearish signal to provide some generalisation? You also suggest that SMH is a predictor/portent for the future path of the wider economy and couldn't find anything to substantiate this either - if I compare SMH against VMID for example over 10 years there's no predictive quality to SMH whatsoever - so where's your evidence this has somehow suddenly become a predictor in August 2023?

I've also gone back to past recessionary periods to consider what happened to private equity in difficult periods like 1999, or in 2009. The evidence is - once again - encouraging for GROW.

(Source: https://www.nb.com/en/global/insights/the-historical-impact-of-economic-downturns-on-private-equity)

Clearly you've convinced yourself as to some general impending doom based on your factoids, as much as I've convinced myself to the resilience, strength and fundamental value on offer at GROW's current silly prices. This conversation is now at an end.

And, yes, let's see.

Nice 5% gain on the week. I've been pondering my investment here and what have I missed? But actually the more I think on it the more I realise this is a high yielding defensive play with strong macro tailwinds and diversified execution risk, along with capacity investments which will steadily fill simply due to simple truths like: "Only 10% of enterprise IT spending has moved to the cloud with $600 billion a year still to move"

Have a good BH w/end all

Could the acquisition be one of these?: https://www.mordorintelligence.com/industry-reports/brazil-biofuel-market

What I found really interesting is that biofuels in Brazil are neutral to gasoline at $50-$60 crude. In other words biofuels at today's $70+ are at an advantage (let alone the tax benefits/penalties - which skew this further)

https://www.iea.org/articles/how-competitive-is-biofuel-production-in-brazil-and-the-united-states

IX is down presumably because of the longer completion date. But it feels like a positive to me that we now know there's a specific deal in the making.

Great spot Rivaldo!

Great results for backblaze in Q2 - it’s up 20% today on the news

https://ir.backblaze.com/static-files/ae2a113b-92d3-4ef8-8b3e-fb07f56666a7

You_having_a_lau-ha-ha-ha-ha-gh,

Problem is your past predictions on GROW leave something to be desired. For example 6 months ago you stated:

"Now we have a heavy US recession about to land within 6-9 months. Earnings hit, e part if p/e gets hit, p/e peaks for short while before going below historical mean (p falls) and then returns to normal. Grow dodge that? I think not."

Perhaps it's the mistypings but I can't follow any logic to what you are trying to say in that "prediction". What is an "e Part"?! For the bit I can understand, you predicted a recession. Yet here we are, no recession in the US, nor even the UK. None about to land. Instead record earnings from NVidia but also many other tech names this evening. A robust FY23 performance from GROW, where the cash position wasn't as desperately short as you also predicted. And while, yes, Graphcore's fair value reduced, my point remains that the underlying IP is not of a 1000+ times magnitude less valuable. Even you concede it has value in your previous posts!

You also got it wrong on other holdings too. ANX for example, you repeatedly predicted the debt situation was hopeless yet here we are, their H1 results this week show debt reduced by a (very) good chunk, and a positive H2 forecast.

Perhaps you'll eventually be right and we'll fall into a terrible world recession and GROW will drop further (presumably the aim of your continuous wall of negativity?). Yet it's not there in many data points I read. In fact quite the opposite. If innovation can solve problems, if AI can boost productivity via co-piloting and other ways, then the economy can reach sunlit uplands and GROW will grow. It's happened before. If realisations *continue* to occur at a price higher than the 80% discount to NAV the market believes**, then the market has got the current price of GROW wrong. Bear in mind that the H2 FY23 realisations were at mark-to-market so a 0% discount to NAV (they were publicly traded Uipath & Trustpilot as well as syndication of fund of funds)

You ask for me not to make you laugh, but your past predictions have, in fact, turned out to be a bit of a laugh.

Let's see who squeezes out the last laugh here. Going short at £2.33, if that's the game behind your negativity, is no laughing matter.

** Source for the 80% discount = £7.80 reported NAV @ an average 35% discount imposed by Molten (Source: page 14 of Molten FY23 presentation, average discount taken) is £12.00 NAV. £2.32/£12 is a current 80.66% discount to NAV.