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Cane, I’ve posted example after example here where office REIT peers are not experiencing great drops in NAV, valuations or realisation prices. Actually a bit the opposite. You’re right on the 15% drop because the covenant is 60% LTV.
Interims are 3 weeks away so not long till there’s a commercial update.
Biffa, totally agree with your assessment.
I hold both AVCT and PDS (via NSCI) and both achieve the same outcome via different approaches (for different forms of Cancer). Both using an existing drug (Keytruda and Doxorubicin) and enhancing that, at a relatively lower risk.
Speaking of pairs. I'd also call out Sofant as another exciting NSCI holding. There's a positive read across from MWE (MTI Wireless) who also design and supply antennas. They spoke of Defence & the 5G rollout as having very positive prospects.
Someone aptly said here sometimes you're the pigeon and sometimes the statue. Today we are the statue.
When considering whether GROW will shrink further or, err, grow sometimes it's helpful to focus in on one of its investments to "dig in the dirt". I chose Graphcore - GROW's biggest loss in the last update.
This article speaks to the struggle Graphcore has had competing against the NVidia behemoth.
https://www.bloomberg.com/news/newsletters/2023-05-31/nvidia-is-soaring-ai-chip-rival-graphcore-can-barely-get-off-the-ground
This article speaks to the reason GROW wrote off 2/3 of its investment. Microsoft pulled out of a deal.
https://www.uktech.news/deep-tech/graphcore-microsoft-deal-20221010
This was the biggest single loss for GROW's NAV in the y/e 31/3/23.
There was a $78.4m write down from $115.6m to $37.2m.
On a prior $2.8bn valuation for the whole of Graphcore that puts it at -> $0.9bn now.
Yet, when NVidia has tripled this year due to excitement with AI does it make sense that an alternative is worth less? AI is a growing market so can Graphcore find niches? At what point does Graphcore's 144 patents and capabilities in supercomputer AI semiconductor chips become snapped up by someone? NVidia can't sell to China, leaving the Chinese with few options, including Graphcore. Hmmm.
Couple of other things I found interesting. Even after the write down, this is at a 1.5X ROIC. So the loss is kind of less of a gain, actually.
Also I can see it's fighting hard even in the past few weeks, on UK govt contracts (rightly so) as well as partnerships and competing services.
https://www.artificialintelligence-news.com/2023/07/27/gcore-partners-ubiops-graphcore-empower-ai-teams/
https://www.eenewseurope.com/en/graphcore-takes-on-nvidia-with-uk-ai-datacentre-offer/
https://www.ft.com/content/9a82d54d-3b21-46b1-8bd0-7d767db33d96
So when you read there was a -16% drop in NAV in GROW for FY23 there's a lot of detail which leaves room for optimism. Sometimes even in GROW's "worst" holdings.
Think also when the market believes that 780p NAV is too high and the market has "voted" today that the NAV is only worth 228p (a 71% discount). That suggests over 2 out of 3 holdings are worth ZERO. Absolutely nothing whatsoever. Let's imagine this were one. Would 144 patents for AI/super computer chips ever be worth zero? NVidia went from $100bn to $1.07tn market cap in the past 4 years. Has the market got it right that Graphcore is worth 1,118 times less than NVidia today?! ($0.9bn vs $1007bn)
And that's why there's room for optimism. Chin up and have a good weekend.
GLA
In todays Interactive Investor discount delver top 10 tent has the dubious honour of being 4th largest discount to NAV move for the week (GSF 5th). When you look at the 10 none of them are weak options - trig, SUPR, DGI9 etc all strong reporting and no smelly updates - yes it’s baffling.
Who'd have thought that with 1.1m UK net migration last year, the return to work or at least hybridisation of working practices, full employment that REITs could be suffering! Who'd have thought that with record heat, the world boiling, the US IRA and EU NZIA, and with inflation rampant that substantially inflation-protected renewables would be suffering!
In economics there is a "crowding out" principle. The "armageddon mode" to me just feels like worldwide government debt has finally crowded out private investment i.e. people buying bonds and putting money in bank accounts has sucked much money out of stock markets.
I don't understand why the BoE doesn't announce no more cuts and simply use QT to manage the tightening needed to achieve inflation reduction. Do the people at the BoE not know the Fisher Equation MV = PT!
Meanwhile as opportunities to average down at TENT present themselves I'm more than happy to oblige!
GLA
Chilting,
Thank you for sharing that simple fact. Yes, growth usually requires cash. Cash can come from fundraising. Cash can come from operations.
Cash is just cash so I question your idea that "A successful fundraise is probably the best way that an AIM company can move forward".
In a high interest environment full of despair (or do you not think that's the case?) there are many arguments that fundraising is in fact NOT the best way to move forward (unless you have to). Stabilise the business, become cash positive even if that means growing slower. There's been enough negative comment on this board about dilution! So I don't think many would agree with you (unless you use the aforementioned time machine and go back far enough).
In your reply your reasoning appears to have changed to "new funding will be needed regularly" ....because EQT has to grow faster. I think the clear consensus is EQT should grow at its current trajectory, where fundraising is not required. And that is the plan.
ST in the IC comments on the update:
https://www.investorschronicle.co.uk/ideas/2023/08/16/despite-write-downs-tmt-is-bargain-way-to-own-start-ups/
Re-iterates points I've set out previously regarding the hidden value from Backblaze and Bolt alone (53 investments effectively for free)
Chilting,
>>especially as new funding will be needed regularly.
What makes you think that?
EQT's strategy is to remain "asset light" and to earn from services/licencing.
Forecasts show EQT to turn cash flow positive from FY2024. Based on the last 2 updates they seem to be more on track to achieving that.
Perhaps you need to get in a time machine, go back in time, and post comments in a time when might have been the case?
Great news today - but is there more to come?
On the 12th July I wrote:
"So they've just decided to acquire a 14th (today, from EQT), and they have 12 more (after the 1st Limoges Métropole was awarded RNS27/03/23 for conversion by EQT). Doesn't seem unreasonable to think this alone could rapidly provide a pipeline of work. A £200m pipeline for EQT."
GLA
While a disappointing update it is interesting to examine the offenders. Are these "hopeless investments" by a hapless RSE - or something else?
Write downs at:
1. Anuvia - dead - nothing really to comment on. Move on.
2. Enuvia Biomass. It's worth looking at the scale of this business. Presumably Drax source from them powering the 5%-6% of UK power biomass. Their ability to replace metallurgical coal is particularly interesting as well as base power capability from converted coal power stations. Investor Presentation targeting margins to grow from $8MT (Q2) to $31-36/MT by Q4. If they can achieve that we may see the write down reversed?
(Source: https://s28.q4cdn.com/898203682/files/doc_financials/2023/q2/EVA-2Q23-Investor-Presentation-08-04-2023-updated-4pm.pdf)
3. Goodleap - loans impacted due to higher cost of capital - when you look at their range of improvement loans alongside higher energy costs and the IRA helping drive the cost of US solutions down (via tax credits) then I see reasons for optimism. A Forbes FinTech top 10
"GoodLeap is a marketplace for sustainable home upgrades including solar panel systems, energy-efficient windows, smart thermostats or HVAC systems. The company offers point-of-sale financing solutions in an effort to make environmentally-friendly home upgrades more accessible. GoodLeap has provided more than $20 billion in financing to about 700,000 homeowners, up from $13 billion disbursed to 380,000 homeowners one year ago.
Cofounders: Chair and CEO Hayes Barnard, 51, and Chief Revenue Officer Matt Dawson, 49, two longtime executives at SolarCity (now Tesla Energy); and Chief Risk Officer Jason Walker, 49, a veteran mortgage broker."
https://goodleap.com/homeowners/
https://goodleap.com/about-us/ (Backed by Edward Norton and Shailene Woodley)
https://www.forbes.com/sites/emilymason/2023/06/06/the-10-biggest-fintech-companies-in-america-2023/
Not a write down but one I've had my eye on steadily going up in price for some months.
Hammerhead - doubled from lows - its investor presentation suggests 30 years inventory from its assets:
Investor presentation: https://ir.hhres.com/static-files/e463159c-5a38-41eb-8178-7685d6a4991d
Conclusion: A lot of detail to chew through and still more to go. But despite a step back there appears to be grounds for optimism and there remains a substantial discount to NAV insulating investors, and tailwinds why their portfolio should do well going forwards.
To put an EV/EBITDA of 1.5 in context imagine investing £1 in BELL add debt (per share) minus cash (per share) gives you the “EV” or enterprise value - how much each share is worth stripped of debt and cash.
EBITDA is earnings before interest, depreciation and tax so gross profit minus operating costs (overheads).
So 1.5 means you earn 66p per pound each year in 16 months time (minus deductions).
Hence it being jaw dropping.
Usually when something earns so much, then people want a piece of the action hence the share price goes up. An EV/EBITDA of 5-10 would be reasonable and valuations are usually forward looking not backwards looking suggesting BELL could quite easily return to its 90p origin and a forward 5x would equate to 140p/share.
GLA
People seem to be getting more than a little confused as to what the current NAV and NAV per share is.
Current NAV (unaudited) is $157.12m or £123.42m
There are 85.88m shares. So NAV per share is £1.44 (1.437)
Comprising:
+ $63.84m NAV 31/12/22
+ $84.78m B Series UpRound of Waste Fuel RNS 6/7/23
+ $3.9m Enphys Uplift to NAV via Enphys Mgt Co to 30% ownership RNS 7/8/23
+ $4.6m Carbon Engineering Uplift to NAV due to Sale to Occidental RNS 16/08/23
Today ended on an bid/ask of 25p/27p. 27p is now "only" an 81.2% discount to NAV. (It was 84.3% discount a few days ago)
Where in the past 41 days, 3 out of 3 times that NAV has proven to be TOO LOW. Why? NAV or Net Asset Value uses fair value methodologies but in the absence of anything else an investment will be on the books at its book value (its buy price). If you sell an investment for more than you bought it then you recognise the gain. If you have a funding round (like WasteFuel did) you can recognise the gain. Otherwise, generally, you can't recognise the gain.
You can read around the subject, and look at progress, look at key appointments, listen to commentary (2Phevs has recently done some excellent work in this area), and ultimately trust the skill/capability/honesty of the management team. Or not.
There's a famous saying by Warren Buffett - I have it on my wall - only when the tide goes out do you discover who's been swimming naked.
But, equally, you also discover who's clothed. And 3 out of 3 times the tide's revealed hidden value... swimming trunks you might say.
I'd very glad I doubled down on the recent pull back, and have averaged up further today. Just because BP Ventures and Maersk have thrown in $10m doesn't mean that's it in terms of NAV accretion for WasteFuel. Given the number of methanol powered ships and converted to methanol ships coming on stream there will be a Series C funding round to put some serious money behind expanding Waste Fuel. A funding round which I think will be in large 9 figures if not 10. Perhaps with some Middle East state's involvement. Why? It has to be to meet their 2030 targets/ambitions and shipping uses 5% of global oil (5m barrels/day). At today's $81 a barrel that's $405m spent on fuel. PER DAY! Investing a day's worth of fuel in the scale of things is not that inconceivable.
Source:
https://cen.acs.org/environment/greenhouse-gases/shipping-industry-looks-green-fuels/100/i8
The prospects of a future EV/EVITDA of 1.5 based on how many units BELL is selling is exciting.
But I have 1 more thought. Show me where the value of BELL's IP is in that valuation?
The answer is NOWHERE!
"The Company is already working on the next-generation NOMAD app that will alert patients when their blood oxygen saturation level has varied beyond parameters set by their doctor, which is expected to help patients better monitor their conditions, but also improve the efficiency of the device by delivering supplemental oxygen as needed."
This is the next aspect which will prove a game changer. The logical progression from mastering this "telehealth" capability in Oxygen Supply would be to roll it out to CPAP machines, Diabetes monitors, Pacemakers and all manner of health devices.
If BELL provide some form of subscription model for this then the revenues are not just about units sold. You can't just think of this company in those terms. It has an opportunity to generate valuable recurring revenues and to licence its technology. When you look at the wider subscrption and licencing opportunities (which Bob actually alludes to if you listen to his last Pox Markets interview with Paul) then you are getting this in the price for FREE.
Remember Apple made lots of money from selling lots of iPhones. But how valuable was the App Store?
(the same prospect exists for LUCY too)
GLA
The prospects of a future EV/EVITDA of 1.5 based on how many units are we selling is exciting.
But I have 1 more thought. Show me where the value of BELL's IP is in that valuation?
The answer is NOWHERE!
"The Company is already working on the next-generation NOMAD app that will alert patients when their blood oxygen saturation level has varied beyond parameters set by their doctor, which is expected to help patients better monitor their conditions, but also improve the efficiency of the device by delivering supplemental oxygen as needed."
This is the next aspect which will prove a game changer. The logical progression from mastering this "telehealth" capability in Oxygen Supply would be to roll it out to CPAP machines, Diabetes monitors, Pacemakers and all manner of health devices.
If BELL provide some form of subscription model for this then the revenues are not just about units sold. You can't just think of this company in those terms. It has an opportunity to generate valuable recurring revenues and to licence its technology. When you look at the wider subscrption and licencing opportunities (which Bob actually alludes to if you listen to his last Pox Markets interview with Paul) then you are getting this in the price for FREE.
Remember Apple made lots of money from selling lots of iPhones. But how valuable was the App Store?
BELL now has an order book larger than 2023's forecast sales (6250 units per Dowgate)
That's now nailed on.
On the basis that we are seeing actual production of Discov-R by end of Q3 and on a 6k per annum capacity in the US factory, existing orders will be 50% fulfilled Q4 and 50% Q1 of 2024. That's before any further orders.
Working on a China 6k USA 6k capacity (for now) then 2023 will comprise 25% Discov-R @ $2500 and 75% X-Plor. Dowgate's per unit sales therefore is far too low. The $1180 revenue per unit for 2023 will be $1,450 by my estimates. ($2500x0.25 + $110x0.75)
That means revenue for 2023 will be $9m not $7.5m. We know Discov-R is much more profitable so forecast EBIT -$4.5m would be ~$-3.5m.
Going forwards to 2024 the $1400 assumed could (pessimistically) be a 50/50 mix of X-plor and Discov-R (it could be much higher in favour of Discov-R.... the order books suggests so!). If that's true then $2500+$1100/2 = $1800 revenue/unit. Assuming the 20,000 units (split 50/50) can be achieved (so that's a 66% increase in production) then we are looking at a $36m revenue (not $28.8m) and assuming a +10% to COS then a GP of $17.7m (not $11.5m) so EBITDA of $7.7m (not $1.5m). And cash of $7.7m not $1.5m.
That tanslates to an EV/EBITDA valuation of 7.7 for 2024 dropping to an jaw-dropping 1.5 in 2025.
That's based on a 50/50 product mix in 2025 ($1800 revenue/unit) and 40k units. Gross Profit grows to $41m.
Today's announcement is *significant*. The estimates that the majority of sales would be X-Plor and just a small number of Discov-R clearly has ignored the KEY PHRASE "A BETTER FINANCIAL OPTION" (to quote the RNS):
>> use for CMS E1390 (stationary) and E1392 (portable) reimbursement codes, making the DISCOV-R a better financial option for the thousands of homecare oxygen providers. It will also produce nearly three times as much oxygen by weight than its dual flow competitors.
GLA
We now have an order book larger than 2023's forecast sales (6250 units per Dowgate)
That's now nailed on.
On the basis that we are seeing actual production of Discov-R by end of Q3 and on a 6k per annum capacity in the US factory, existing orders will be 50% fulfilled Q4 and 50% Q1 of 2024. That's before any further orders.
Working on a China 6k USA 6k capacity (for now) then 2023 will comprise 25% Discov-R @ $2500 and 75% X-Plor. Dowgate's per unit sales therefore is far too low. The $1180 revenue per unit for 2023 will be $1,450 by my estimates. ($2500x0.25 + $110x0.75)
That means revenue will be $9m not $7.5m. We know Discov-R is much more profitable so forecast EBIT -$4.5m would be ~$-3.5m.
Going forwards to 2024 the $1400 assumed could (pessimistically) be a 50/50 mix of X-plor and Discov-R (it could be much higher in favour of Discov-R.... the order books suggests so!). If that's true then $2500+$1100/2 = $1800 revenue/unit. Assuming the 20,000 units (split 50/50) can be achieved (so that's a 66% increase in production) then we are looking at a $36m revenue (not $28.8m) and assuming a +10% to COS then a GP of $17.7m (not $11.5m) so EBITDA of $7.7m (not $1.5m). And cash of $7.7m not $1.5m.
That tanslates to an EV/EBITDA valuation of 7.7 for 2024 dropping to an jaw-dropping 1.5 in 2025.
That's basd on a 50/50 product mix in 2025 ($1800 revenue/unit) and 40k units. Gross Profit grows to $41m.
Today's announcement is *significant*. The estimates that the majority of sales would be X-Plor and just a small number of Discov-R clearly has ignored the KEY PHRASE "A BETTER FINANCIAL OPTION" (to quote the RNS):
>> use for CMS E1390 (stationary) and E1392 (portable) reimbursement codes, making the DISCOV-R a better financial option for the thousands of homecare oxygen providers. It will also produce nearly three times as much oxygen by weight than its dual flow competitors.
GLA
When you can get 5% for taking (supposedly) zero risk on government bonds then effectively the bond market "Crowds out" the stock market. It's happening to very many shares. I don't believe it's a matter of "stopping the rot" and "attracting new investors" or something peculiar to BMN. Interest rate rises hurt businesses in more ways than just the cost of borrowing (if they need to borrow).
The perceived risk due to the funding, disruption due to the power load shedding all exacerbates the situation and why this now is on a serious discount to both its book (net asset) value as well as the sum of its future cash flows.
For the patient, I believe BMN could be an excellent investment in time, and the new leadership is most welcome. Diversification of your money is of course important.
GLA
I've watched the presentation and would make the following comments:
1. May 2023 was a missed opportunity. Resolution 3 at the AGM 11th May Re-Appoint J.Auld.
a/ 26.7m in favour (86.66%).
b/ Against (fire his ***) 4.1m. (13.34%)
c/ Abstain 12.4m.
d/ Did not bother to vote 77.6m.
(Total 110.8m shares)
Fewer than 4% voted to be rid of Mr Auld. I count myself in that 4%. Shame on you if you didn't bother.
So lots didn't bother who voted to keep Mr Auld?
Assuming most (all?) PIs would vote in favour it must be the ii's.
A little bit of research shows that there are a swathe of ii's holding 47.4m shares (42.7% of votes)
Source: https://research-centre.barclays.co.uk/shares/serinus-energy-npv/company-information/detail/
2. I previously commented on this board that the $22/boe G&A cost was disproportionate and needed cutting. Someone raised this on the call (thank you whoever did this). This was immediately dismissed. $22/boe is less than many other similar companies said Mr Auld! And besides he continued SENX has 2 listings and 2 operations explaining the elevated cost.
It didn't take me long to rack my brains and think of i3energy. They are listed in Canada and the UK. They have operations in Alberta, Canada, plus also operations in the North Sea. 2 listings and 2 operations. What's their G&A cost per BOE? Well the admin cost for 2022 was $15,038,000 and their 2022 BOE production was 7,415,705. Their G&A was $2.03/boe (rounded up). Not $22. To give an idea if i3 had a $22/boe admin cost their admin would have cost them $163m last year! (i3 made $42m net profit to give you an idea how ridiculous that ratio is)
3. Today's fall. Probably along with many other people I feel there's substantial value here, but also the incompetence is spectacular. My instinct today was to average down at a 1.9p buy price but I resisted the urge to do so. Judging by the 100k buys suggests one or more of the ii were busily hoovering up shares.
So what does the smart money know?
a/ Sabria N2 is "in the bag". 45% of 420boe/day x 365 x $38 net back is $5.8m to the bottom line (assuming further G&A is not required!). Ah, one off costs of $180k if the acid is required (45% of $400k)
b/ Sabria W1-side track is potentially achievable in 2023. That could add a further $5.8m or more at a cost of circa $2m.*
c/ Sale of assets (asset stripping)? **
d/ Take over bid in the offing? ***
* +840BOE/day means G&A per BOE - drops to $10 from $22.54 - still high and SENX is suddenly quite profitable.
** - ii's listen to presentations too. That comment about the value of the gas works being worth more in scrap than the market cap might've pricked up someone's ears.
*** - IF THERE'S AN EXTRAORDINARY MEETING ANNOUNCED PLEASE VOTE!!!
GLA