Member Info for Agricore

Just to be clear:

"6. Roughly, on a cash burn of £0.2m a month, EI now has 6-9 months runway taking it to Q2 2024."

This is based just on tranche 1. Tranche 2 extends the runway by a further 6 months. My reading is that the 2nd tranche occurs in October and rereading the terms there doesn't appear to be a mechanism to opt for tranche 2 - i.e. it just happens. Therefore the dilutive effects based on both tranches plus 24 months interest (£2.64m) @ 1.8p would be 30.1% or say @5p would be just 13.5%.

There's no trading update yet, so whether my 2023 forecast is on track is impossible to conclusively say right now. But I previously said "maybe the night is not really so black nor so full or terrors when you actually chew over the numbers." So how do I feel about that comment ahead of any trading update?

1. Right now we have a supportive investor who can open doors in Asia. That's a positive from the get go. The dilutive effect today would be £1.46m @ 1.8p/share = 19.4% - the maximum dilutive effect (of 43%) diminishes as the SP rises. If the share price goes to 3.6p then the dilution is below 10%. The 2nd tranche of the convertible may not be needed although kicks in in 3 months.

2. We also know from the last numbers they have "invested in growth" so we are definitely seeing growth based on the Twitter updates aren't we?

3. Hidden in the 2022 numbers was growth of ~70% in the USA which **far** exceeded WHI's 2022 forecast (of 12%). The lacklustre performance in China/Singapore was to be expected - although the WHI deal will be a key support for that strategy/expansion in 2023. I'm reading about tourism numbers exploding in SE Asia. EI is well placed to serve those markets bouncing back.

4. Stock of £1.7m. US bottling and run down of stock levels will mean a reduction of circa £0.6m working capital is possible in 2023.

5. I said that funding req'ts would be circa £2.5m so was quite close on that. The lower funding suggests my estimates on sales & margin were too low. An increase in Margin due to US Bottling said (by WHIreland) to be worth 12% improvement to margin (although strangely they foresaw only a 5% increase to margin in 2023). Using 30% margin and extrapolating growth I forecast at the start of 2023 a 2023 Revenue of £6m and GP of £1.8m. Net of Costs a 2023 loss of £2.2m.

6. Roughly, on a cash burn of £0.2m a month, EI now has 6-9 months runway taking it to Q2 2024.

7. But if EI can get Asia growth of 70% (like they achieved in the USA) now supported by WHI, as well as continued US growth supported by its local bottling partner, along with margin increases to 32% through bottling, logistic savings, price rises, while volume increases more quickly through that extra investment in "admin" (aka sales&mkg) reaching £9m sales and a GP of £3.4m seems feasible. Combined with streamlining inventory and invoice finance and you can see operational cashflow and EBITDA breakeven in H1 2024 and much improved for 2023 as a whole.

My original 2023 Forecast for EISB:

Revenue £6.4m

COS £4m

GP £2.4m

Admin £3.7m

EBITDA -£1.3m

My new 2023 Forecast for EISB:

Revenue £9m

COS £5.6m

GP £3.4m

Admin £3.9m* (I've added £0.2k for interest accruing)

EBITDA -£0.5m

If we see WHI convert some or all of their loan later this year, this will be an extremely strong buy signal. Equally, the pressure is on the BOD to perform. If they fail, WHI takes Anthony Burt's 18.8% holding.

GLA

Roger65, yes, still of the same mind. Those who had **BELIEF** on EISB and averaged down at or under 1p have big smiles on their faces today. If your stream of negativity was because you were shorting, well, you might be a short of money now! I'd give you a quick hug but you've probably had enough of a short squeeze already.

Yet another positive read across from RLE - and this one is probably the closest to RGL in the sense that it's a/ predominantly commercial office b/ regional (albeit just the Midlands) c/ High dividend (albeit lower than RGL and they cut theirs)

Highlights:

i/ Sale of assets 11.7% ahead of their Dec 22 valuation (further indicating the 2022 cut to NAV was probably overdone and that there are not further falls occuring in 2023)

ii/ Rent collection 99.9%

RGL enjoys a far longer fixed debt period 5 years vs 1.5 years so RLE has had to take steps to bring down leverage, initiate disposals and preserve cash, but potentially gives a blue print for RGL's position in a few years time should interest rates remain as high as they are today.

GLA

Just a quick add - because of supply chain disruption over the past few years an "order book" doesn't equate to speculative or "it might happen". Customers are forward planning and committing to orders months and months ahead (to ensure they get the stock, and don't suffer stock outs as they did during the supply chain crisis.

So we can take that 30% growth as pretty much nailed on sales numbers - by the nature and history of this business area.

Dusting off my forecast 2023 numbers (this thread below) how did I do? Well, the forecast appears to be for a Y/E of 1X not 0.7X, so was I too optimistic?

I don't think so. Couple of reasons. First of all Cenkos' own numbers suggest a sub 1X group leverage, more like 0.9X. The key phrase I'm seeing however isthat the order book is ***30% ahead of the prior year end***. Well if we do a little maths and say £23.5m revenue H1 and using the 45%/55% usual sales ratio we arrive at £28.7m for H2 and a full year sales of £52.2m - about £1.5m ahead of Cenkos. But if we consider that the order books is 30% ahead, as stated, then calculating a steady run rate just isn't appropriate! If we consider the 30% on top of the H1 revenue of £23.5 (i.e. that the Y/E order book was for orders for the coming 6 months which seems reasonable) then we arrive at £30.5m so a £54m out turn for 2023 revenue.

Under that scenario adjusted proft therefore would be £12.5m+ and net debt around £9m therefore I believe I remain broadly on track with my 0.7X prediction (i.e. 9/12.5 is 0.717x)

I believe the broker has extrapolated past organic growth to arrive at lower numbers. But I think doing so and assuming steady state organic growth ignores a couple of key points:

1/ China/Samarkand is pumping stimulus so we will see strong growth in that area. Every time I watch coverage of China they are all still wearing masks. Won't Dentyl be a sales winner in a "covid" environment?

2/ Ecommerce is showing strong growth (far faster than historic) and there's plenty of runway there for a D2C model.

3/ Opportunities to grow Earol again was not historically there. I know first hand the complete lack of help from the NHS around this area (historically they did help people). So self help is the only solution, which is bad for taxpayers expecting free at the point of need, but good for VLG and its shareholders. I also know this is the same in the ROI and in a growing numbers of countries.... hard pressed health systems are driving the demand for self care products which is a collosal tailwind for VLG.

4/ An order book 30% ahead. So we already know there's more than steady state growth!!!!!

5/ And it's not just about revenue growth. There's capacity in both Sweden and Italy to grow, and this occurs this will improve margins (fixed costs are spread wider)

If I'm right that translates to a adj PE of 4.8x so on a conservative 10X that's 72p and extrapolating "only" 10% growth on a forward 2024 PE the adj PE drops to around 4.4x and a target price of 79p. But I would stress VLG's peers are valued 10X-20X so on a 2024 forward adj PE potentially VLG is worth 158p.

The market reaction of +0.75% to the share price (as I write) shows how overlooked this share is!

GLA

You sure about that Biffa?

Seems likely that the PDS shareholder presentation from earlier in the week has excited people to the “major catalysts coming in the next 12 months”

https://www.benzinga.com/general/biotech/23/07/33373627/pds-biotechnology-top-line-data-from-its-lead-candidate-points-to-promising-future-for-this-compa

SD,

This link gives some further clarity on the timelines - see Page 2 and 3 particularly:

https://vpcspecialtylending.com/wp-content/uploads/2023/07/VSL-Monthly-Report-May-1.pdf

"Approximately 64% of the Company’s asset-backed lending investments, by value, fall due for repayment by the end of 2024, with the remaining 36% due for repayment by the end of 2027."

Comparing this statement to Page 3 the net inflows at first it struck me these don't tally. I see a large chunk fall due in 2025 approximately equal to that due in 2024?! Approx: 2024 £80m/ 2025 £80m/ 2026 £10m. So ~£170m of the £277m based on the 2022 balance sheet numbers bearing in mind Jan-May NAV is cumulatively -0.19% (i.e. about the same). The chart does say "Profile of Contractual Maturities less Projected Borrowing Paydowns" so of course this relates to loans, not equity/prefs/warrants. Adding equity on the balance sheet and £80m of 2024 loans gets me to 67.5% - so that appears to reconcile.

So:

1. VPC think they can liquidate most of equity and about 45% of debt in 2024. 64% of NAV is £177m which is also 87% of the current share price. That's 63.7p per share.

2. VPC then think something like 28% falls due in 2025. That's 28.7p per share.

3. Leaving something like 3.6p a share in 2026 and H1 2027.

4. By my reckoning if you factor in quarterly 2p dividends which we know will happen for "a year or more", us shareholders can expect a cash break even in either Q3 of 2024 or Q4 2024, where there's then a 40% (28.7p) upside coming the year after. With a 5% upside in 2026/2027. Worst case was a loss of 5% so worst case is 40% upside.

5. But I would repeat my earlier optimism that the NAV growth could surprise to the upside making the upside larger than 45%. This year's US magnificent 7, the excitement around AI, the Fed's likely position that rate hikes have finished, and VSL's solid 4 year growth in NAV (2018 - Nov 2022) are all evidence that there's potential for further upside. So my

best estimate is this will end somewhere between a 40%-100% upside, where break even is just over a year away for investors based on today's share price of 73p.

Been working through some due diligence on this stock. Some points of interest:

1. While there are some negative reviews (aren't there always?) I'm struck by the overwhelming positive from customers/brokers. Read for yourself: https://uk.trustpilot.com/review/lendinvest.com?page=17

The feedback is continually reflecting the "spin" that this is a genuinely useful platform/provider.

2. The share price has been falling - it's now down to 47p. Why? Well, negativity towards the housing sector is the only explanation I can think of. It released great results and has great forecast results. But it's interesting that LINV represent just over 1% of the £250bn bridging/buy to let/complex mortgages/specialist segments and 0% of the £1.1tn home mortgage market. Even if - let's be dramatic - the level of house sales halves in the coming 2 years (i.e. same as the crash in 2008 or for the month of April 2020) LINV only needs to continue growing its market share there's plenty of runway even at depressed levels. It would be different if LINV was Rightmove, but it isn't.

3. What's the value of the IP? There is absolutely no sign of the market ascribing value. To my mind LINV's platform is a little like Cushon which recently sold for £144m (for 85% of the business) valuing it at £169.4m. If anything LINV appears more sophisticated than Cushon but let's say it's worth the same - that's 2.6x the current share price. Watch the tech presentation and judge for yourself:

https://www.equitydevelopment.co.uk/research/lendinvest-technology-investor-presentation-28feb22

4. What about risk of defaults etc? Well there's a maximum LTV of 75% and LINV is rapidly moving loans off the balance sheet. It's moving from 80/20 on balance sheet to 40/60. So defaults appear to be a growing risk but on a shrinking amount and I think it unlikely that BTL rental properties are going to drop >25% when rental yields are so very high (and I can't see this changing because of the severe shortage of rentals)

5. What about the cash generation and profitability? Well this is where it gets baffling. Apart from happy customers, valuable IP, good assets, the business is highly profitable and cash generative. The dividend is nearly 2X covered on reported EPS.

6. Dividend? Yes a 9.68% well-covered and growing dividend. It makes no sense for this share to be 47p. It goes ex dividend on September the 14th with a 3.2p final dividend (6.8% of the current share price)

Finncap recently valued LendInvest at 300p based on 35x FY24 P/E or 22x FY24 EV/EBITDA, and at 49p believe it is undervalued on FY24 P/E of 6x, 4x EV/EBITDA, 33% EFCF yield, and 9% dividend yield.

I keep thinking where's the catch? Or should I instead conclude that in fact LINV *is* a catch.

GLA

Well just stumbled across this. Mix of global REITs, Energy, Transportation, Mining, Banking and Industrials.

Fukuro,

I totally agree with your assessment, except for 1 thing. BT in his presentation speaks of Zimbabwe as this untapped opportunity. I started to wonder how true that is. Our perception as a (presumably) predominantly British audience is probably that Zimbabwe is some lawless land with artisinal miners scraping away with bare hands and lots of mercury. White farmers being driven off the land by a mob. That if only some UK firm would bravely venture there, untold riches await.

I would just encourage people to read about Zimbabwe perhaps in their newspapers. It doesn't seem quite so frontier or under explored to me. There seems to be plenty of Western (and Eastern for that matter) firms there already.

e.g.

https://www.herald.co.zw/category/articles/business/

I retain a small holding here and I genuinely hope that this Zim strategy works. And next year's KCB exploration finally yields results too. But multiple failures culminating in the KSZ made me decide to offload my relatively large holding (at great loss).

I do feel that Ben Turney wasn't clear about the risk of failure in the KSZ. I'm not clear about the failures at Ditau and the KCB either. The excuse of "the x hundred page report said it could be graphite" actually made me feel quite angry. Ultimately, it's down to my lack of knowledge of geology, but that's exactly why I decided to largely get out of KAV. I have a great respect for Ben, and his presentation capability. I do dislike the negativity continuously thrown at him. But at the same time his presentation capability caused me to lose sight of the risk. As you say Fukuro "It's hard to stay objective, but important." I hate to say it but I would say that applies to listening to Ben Turney too.

GLA

There seems to be a positive lift for stocks like FAIR investing in CLNs this week. Combined with the June uplift in NAV a nice end to the week!

Squirty, not occurred to me who holds that debt and therefore who gets upwards of 400m shares (and becomes our biggest shareholder I think?) - it's a very good point you make about that. It would be interesting to know the answer to that.

Cindercone, I'm with you on that. Consolidation wouldn't be the right move right now.

Priority is steady state production and pay down debt. When the price of vanadium climbs (and it will, I'm convinced of that based on the demand/supply dynamics) then debt will be paid down rapidly - BMN is a highly leveraged bet on the price of a variety of vanadium products - and by extension on the growth of VRFBs and on increasingly stringent building standards (i.e. vanadium reinforced steel). Once debt is being paid down I would say it's likely that buy backs will be on the table if the share price remains in the doldrums.... .so you get consolidation by means of buy backs.

I dare say that the sale of Enerox if I'm right about it's valuation being unrealistically low will make a step change to the indebtedness of BMN too during 2024 or 2025.

But it's quite possible Enerox will be spun out as part of BE. The same logic of the BE spin out applies to Enerox doesn't it? So if the IPO is accretive (as Fortune believes it to be, and I don't disagree with the logic) then the decision would be to offload some or all of BMN's holding in BE to reduce indebtedness. Just because it's got Bushveld in the name doesn't mean we can't do it. Makes sense to maximise shareholder value. But I think Craig Coltman seems sensible enough to cut through any bull**** to make the right call on that.

GLA

Bonxie, the assumption I am making, is only the assumption that Mustang will not be able to complete within 30 days of 31st July 2023. If this were the case (as seems highly likely), is then the agreement is the 22.1% holding of VRFB-H goes to BMN who issue shares. It's all there in Mustang's annual report, previous RNSs and in today's SP Angel broker report. See page 1 of the Chairman's report:

http://mustangplc.com/documents/Mustang%20Energy%20PLC%20-%20Final%20Financial%20statements%2031%20December%202022%20(Fully%20Signed%20and%20Dated).pdf

The rest of my analysis is then just mathematics and pondering the value of Enerox vs its peers.

Just to add, rationally, on today's yesterday market cap of around £40m, a non-cash cost today of £2m is a 5% hit to the market cap, so a 20% drop is an overreaction.

BMN owns 50.5% of VRFB-H. This news potentially increases BMN ownership to 72.6% ownership (for this analysis I'm assuming it happens)

At an assumed cost of ~$10m ($8m + interest)

100% of the assumed $10m is funded by BMN shares. @ an assumed 2.5p-2.7p/share this is 370m-400m shares.

Current shares are 1.29bn so this is 23.5% dilution.

Assuming Enerox is worth zero then the dilution suggests a market price of 2.1p/share.

....But it's not worth zero....

Meanwhile VRFB-H owned 50% of Enerox. Now it owns 40% and $3.25m.

72.6% of that cash belongs to BMN. That's a realisation of assets of $2.35m or £1.8m

If we assume that Enerox is worth $32.5m (10x the 10% paid today for those struggling to keep up) and if BMN owns 72.6% of 40% of something worth $32.5m that's an asset worth $9.44m or £7.3m.

Comparing that to BNP Paribas evaluation that BMN would get $19.4m or £15m from Mustang, the assumed collapse of the Mustang deal has "cost" £5.9m... but that cost is future assumed value based on a deal with Mustang.... and that £15m assumed Mustang shares at 20p/share which ****STAYED AT 20p**** - or went higher of course :)

In other words forget about Mustang. If we look at book value. BMN's investment in VRFB-H it's $12m plus potentially (assumedly) a further $10m on today's news. So by my reckoning this is a $2.6m or £2m loss. ($22m book-$19.4m down rated value)

BAD but not catastrophic. And it rather assumes the total value of Enerox is only $32.5m. Compared to its peer Invinity this valuation is low (IES is today a $118m market cap). Enerox becomes profitable in 2025 (like Invinity) and if you do top trumps on the comparable MWHs of order book, and installed MWHs they aren't vastly different. Arguably IES' mistral could be a game changer but the target price on IES places this as a ~$500m market cap, so I don't buy that IES is 4x more valuable today.

In other words the asset which BMN owns is valuable and the apparent collapse of the Mustang deal might actually turn out a positive. The £1.8m cash flow is a positive, while the dilution is a negative, it doesn't justify an 18% drop in share price in my opinion. The value of Enerox only has to be worth ($9.44m/$2.6m) = 27% more than the price paid by Garnet for this to actually be neutral for BMN. When IES is worth 4x more than Enerox is that such a stretch to be true?

So if you're topping up today there are grounds for optimism around today's news. Certainly a ~20% drop suggests that people have paniced and haven't actually understood the news.

GLA

Today's (27th July) share price is slightly lower than May (Market Cap dropped from £275m to £249m):

As of today there are 46,254,554 shares in issue.

The update shows each share of RSE @ £5.40 (Q1 £5.70) is worth the following (as at 30/06/23): £10.14 (Q1 £10.97)

There's £3.68/share of publicly traded Oil/Gas holdings (Q1 £3.72)

There's £2.23/share of Cash (Q1 £2.10)

There's £0.69/share of publicly traded Decarbonisation holdings (Q1 £0.96)

So £6.60/share worth of liquid/tradeable holdings and cash...... (Q1 £6.74).

Plus a free carry on £10.14-£6.60 = £3.54/share worth of listed/unlisted decarb/ plus unlisted O&G (Q1 £5.19)

So you get £1.20/share back from liquifying all listed holdings plus £3.54/share worth of unlisted O&G/Decarbonisation.

i.e. Unlisted holdings of O&G are £1.64/share (Q1 £1.92) and unlisted holdings of decarbonisation is £1.86 (Q1 £2.23) a share.

The IRA remains a huge tailwind for the £2.55/share (Q1 £3.19) decarbonisation portfolio. The tax/subsidy benefits of IRA will begin to appear in 2023. Also of note in the commentary "Global investment in the energy transition totaled $1.11 trillion in 2022, a 31 per cent. increase in transition investment over 2021".

Meanwhile further buy backs of £29m will also be accretive. Assuming an average buyback of £5.40, equates to 5.37m shares for cancellation (@£5.40/share) dropping the shares in issue by end of 2023 to 40.88m. This equates ceteris paribus to a NAV per share of £11.47 (+£1.33)

So a 53% discount to NAV.

But if you think if reasonable that the decarbonisation portfolio could bounce (2x) from here due to IRA and the various measures due to a growing climate crisis and that the discount to NAV reduces to 20% over time then the upside is exciting.

£10.14 NAV/share+£2.55 decarb upside+£1.33 buy backs = £14.02/share @ 20% discount = £11.22/share

So future "fair value" is over double today's £5.40 share price. That assumes no appreciation on O&G where there's reasons why that might be too pessimistic. For example Hammerhead have made progress yet the share price has been punished compared to peers. Meanwhile most holdings have 30%-40% hedging so even if the oil market drops dramatically later this year (as I write Brent is comfortably back above $80) there's actually quite a bit of downside protection via the hedging.

GLA

Declaration of dividend is 21st August 2023. Canacord forecast the FY2024 dividend (full year) at 0.8p/share which will cost $15m (if declared). The problem is forecast Capex for next year is $10m and Operating Cash flow is forecast to be just $1m.

y/e Cash (30/6/23) is $93m and the Toliara project will require capex of something like $570m. If I were the CFO I'd pull the August dividend, to minimise the borrowing requirement. Saying that, I'd have built a war chest and not awarded a dividend for the past 3 years. I'd have built up a warchest of about 60% of the Capex of Toliara as a result...... I guess they are far more relaxed about their ability to borrow at reasonable rates than I would be.... or they've blind sided themselves and now face expensive funding if/when Toliara proceeds.

On a more positive note, it's interesting that today's 9p share price comprises a valuation of Kwale of 2p/share, cash 6p/share and Toliara 45p a share (less 16p corporate/minorities). In other words, only about 3% of Toliara's NPV is baked into the share price. Keeping the cash rolling at Kwale and getting moving on Toliara is what will bring this to rerate - and not maintaining the dividend, in my view. I love dividends but I'd rather not have one next month.

GLA

Ah, speak of the devil here's the June monthly report. A 1.9% increase mom to the NAV is very creditible. No pun intended.

https://www.fairoaksincome.com/~/media/Files/F/Fair-Oaks-IF/Fair%20Oaks%20Income%20Fund%20-%20June-23.pdf