Member Info for Agricore

While we wait for a trading update (looking back 1 yr, updates have been haphazard and as and when so there's no specific date to expect this) on throughput, and progress with the Great Lakes (REE) acquisition, I was curious to look at whether commodity prices had moved since my base assumptions. The short answer is no, not really. That's a positive by the way, that the prices are supported despite many other commodities dropping during 2022 (e.g. gold, copper, tin)

Lithium 515000 CNY/Tonne - up 290%
Diamonds - up 5%
HMS - Flat 0%
Tantalum - up 5%
REE (Neodymium) - up 13%

I wrote some analysis on the 2022 outturn a couple of months back. Revisiting that and prices I can still see how KZG could be valued at £15m-£20m based on a PE of 10-13 based on a $2m forecast profit. Which translates to a share price of 1.7p-2.2p or 100%-160% upside from here - based on conservative assumptions. Just because KZG has got caught up in the general sell off the fact is the facts haven't changed. The upside percentages have got bigger.

The analogy I'd draw is that the current market price is like a field of Russian military equipment left abandoned. You can be brave and advance (buy/average down) and increase your arsenal or you can stand your ground in which case the opportunity will eventually recede as the Russians sneak back to their tanks, or you can retreat based on market panic.

GLA

https://www.theaic.co.uk/companydata/0P00015JML/announcements/320997
the Company is seeing an *increase in demand for private debt* as a practical alternative to growth equity financing for emerging businesses. As geopolitical issues and continued market uncertainty have dampened start-up funding globally in the first half of 2022, the evidence suggests that growth-stage companies are increasingly turning to debt financing to support their expansion plans. The Company encountered a similar trend during the Global Financial Crisis in 2008, where businesses began increasingly looking for non-traditional sources of capital. The Company expects this trend to continue.

The Company's asset backed investment portfolio primarily consists of senior secured floating rate credit facilities with interest rate floors typically in the 1.0% to 2.0% range. **Recent moves in interest rates have positively affected revenue returns** as rates on the Company's facilities reset on a monthly basis. In the last few months, short-term interest rates have increased materially, reaching 2.29% for three-month rates (at 30 June 2022).

Berenberg recently said GROW could get taken out by a US Hedge Fund or PE Investor. With the $/£ at 1.1 (threatening to go to par) this possibility, er, grows.

A 5 year investor today owns assets over 2x more valuable (even after accounting for inflation).
NAV per share of 370p (as at 31 March 2017)
NAV per share of 937p (as at 31 March 2022)

What about since March 2022 -> September 2022?
You can deduct off 28p/share (-£51m) from the 31/3/22 based on drops in GROW's listed portfolio (i.e. Cazoo/Uipath/Trustpilot) (NB CZOO -16%, UI -23%, and TRST up 30% in the past month)
Assuming cash realisations/new investments are cash neutral, then £78m cash nets the current £416m market price off to £338m and taking the £51m reduction, above, and topco cash that nets the £1.8bn NAV down to £1.67bn. So you are actually getting a 79.7% discount to NAV (£338m/£1670m) when you consider each £2.75 share contains about £0.51 of cash, and about £0.12/share of listed companies.

So how real is that 79.7% discount to NAV? The true discount might actually be higher still. GROW state "For investments calibrated to the price of recent investment, the range of discounts used in our valuations were 15%-89% and a weighted average discount of 25%". Also of interest "over 80% of investments are fully funded to their exit or have over 24 months runway".... so I can't see where any skeletons are hiding.... I've gone through their reports. Where do you think they lie?

Or put another way you are in effect paying £2.12 for about £11.04 worth of companies which might be worth £13.25 (removing the 25% discounts), and in any case are growing and managed to grow 37% last year and 51% the year before. So potentially £13.25 could grow to £20.00... for the price of £2.12.

No wonder Berenburg Bank in their July 2022 stress test concluded that GROW was "too cheap". GROW invests into areas that solve problems in Enterprise Technology, Agritech, AI/ML and Climate Technology. In a world of shortages its portfolio companies help solve problems. These portfolio companies will prosper and are prospering, and by extension GROW shareholders can prosper too.

GLA

Market Price 58p/MarCap £361m/NAV as at 30/6/22 is 163.48p/Net Assets £973m/595.2m shares in issue.

30% of market cap is cash and listed equities* (as at 30/6/22 17.6p a share or £105m) that leaves £867m worth of unlisted investments as at 30/6/22 valuation. So you're in effect paying 40.4p for 145.88p of unlisted - so a whopping 72.3% discount.

* in 3 months since June TRST, REVB and THG have dropped 20-30% but WISE has doubled.... so I've not adjusted on latest market prices - roughly the same as 3 months back.

Of that 40.4p when you consider these 2 are approximately worth 55p:
Starling Bank: 17% ROTE and already profitable. Growing.
We Fox Insurtech: Strong growth (nearly 100% forecast for 2022) almost profitable. Insurtech is the most "undisrupted" area and therefore is ripe for digitisation disruption. (Source: the chap from Augmentum Fintech)

You are also getting holdings in: Klarna, Smart Pension, The Brandtech Group, Graphcore, Featurespace, Deep Instinct, Wise, InfoSum, Tactus, Sorted, Secret Escapes, THG, Revolution Beauty all for free. Of those Klarna is well funded due to recent downround. Strong expansion. Demand for credit will grow not shrink in current env't. If they can manage credit risk. And even if you value THG and REVB at zero then there's still serious value here.

International Buyers (esp. US) are eyeing up UK companies due to the FX rate. It's conceivable one or more CHRY will get taken out via M&A or taken private.

Legs,
Looking at your past posts you've got things like GLO, Ediston, HFEL, SEQI. Which of these do you think is better than RGL or what else do you see as plenty of bargains elsewhere? (i.e. You've not got a >10% 2022 yield of any of those other holdings...)

Jupitar, When? The 24th December 2021 is a good example.
Over a 2 day period last Christmas you could have made 50% on KDNC.
Over a 2 week period in August and once again September you could have made 35%-40% on flipping EMH, a KDNC holding.
Them's the facts.
Lithium is at 5X its 2021 price. There are several lithium projects in KDNC's portfolio.
Iron Ore is at the bottom of its trading range and quite a lot of mines can't produce profitably at the current $100/tonne market price (especially the Chinese).
KDNC is like an inert volcano, and your "does it even matter?" makes you sound like a cynical Pompeiian Roman....... One day its inert price suddenly won't be.

Everyone is probably feeling miserable and TEK has dropped like it did in June 22. Our esteemed Tim the Flagstaff PR man appears to have overlooked this update from Lucyd, and it's pretty cool and who knows maybe it'll cheer you up like it did me. If it doesn't, then look up the weather in Florida. It's 29c, it's boiling hot and if you were mooching down the sidewalk and wore a pair of Lucyd's from the new 2022 collection you'd look like the dog's .....
https://www.lucyd.co/blogs/press-releases-editorial-features/innovative-eyewear-inc-announces-debut-of-their-lucyd-lyte-fall-22-collection
https://www.lucyd.co/products/lyte%C2%AE-22-darkside-matte#lenspicker
I particularly like the Jupiter ones. Is getting a 2nd pair greedy? If you hang around for about 15 seconds on the Lucyd web site a 10% off pop up invites you to grab a bargain and BNPL winks at you and that $135 is only $33.75 for 4 monthly installments. I'm probably not all that down wiv' da kids but I can see how lots of people would buy these and how Lucyd will prosper. Today was the quarterly SEC update but of course it relates to the April - June period pre-IPO so the info is, if anything, older than the August IPO info.
However mark your calendars, or speak to Vyrb to put a digital reminder in your virtual calendar :) as the next SEC filing is 3 months away at Christmas. I think we'll be pleasantly surprised on their progress July - September 2022.

GLA

Prof,

No that's not right. Net asset value *IS* the net value of the assets on the balance sheet.
I think you're thinking of NET PRESENT VALUE (or DCF) which includes predicted cashflow.
I guess you're not a financial analyst and my point was a Financial Analyst from Cenkos should know better. I'm sure he just an oversight in his report, and he meant to say NPV not NAV.

GLA

I'm positive on CHAR but I read this morning:
Cenkos say CHAR is "Trading at a Significant Discount to NAV"
https://*********************/companies/uk/oil-gas-integrated/chariot-limited/research/cenkos-securities/cenkos-chariot-ltd-enabling-the-energy-transition
Net Assets are £61.9m
Market Cap is £178m
So there's a 187% premium to NAV isn't there?

Laugh,
1. You assume the holdings require support. Many are cash generative or will be with sufficient runway. Those which don't can either be invested in, disposed of or written off. Even in good times write offs happens a lot. Half win and half lose. The losers lose 1 times the investment. But the winners can win many times the investment. GROW have substantial cash to do so and a track record of successfully doing so.
2. You say these are "illiquud assets". But that's patently not the case and you don't understand deal flow in PE if you think so.
3. You say "An illiquid asset, the value of which, is not entirely transparent no matter what method GROW use to value it". Again demonstrably not the case. Any company must submit financial results each year. Using these there are numerous ways to value a company and if you don't know this then you really shouldn't be investing. Accountants are forced to be prudent and use the method of lowest value. This means that it is common for holdings to be sold at a profit to their book value.

The market at the moment are like the retreating Russians. People have panicked and sold up. It's like the battlefield is strewn with perfectly working equipment.... and for the brave who advance and invest, they can pick up some huge bargains. I see GROW as a huge bargain at its current market price.

Bladerunner, I think you sum it up perfectly when you say "negative comments" and "positive facts".

I've not read anyone who's articulated or coherent set of negative facts to Aandi or others. While, yes, sentiment is low EQT is progressing towards successful financial close on numerous projects including today's news for Deeside.

As at 31/3/22
£96m assets
£80m deployed by year end (31/3/22)
£40m debt facility with 4.5% cost
Targeted return of about 8-9% per annum. Spread over a number of projects and technologies.
Notably Hydroelectric, Battery Storage (BESS), CHP (growing Tomatoes!)
2022 dividend not covered by income. 2023 "should be".
Can achieve a 3-4% non-cash "fair value" adjustment (this appears to be in excess to the 8-9% return above).
Typically peers trade at a 15-20% premium while TENT is at a 11.7% discount.

So back of a fag packet 2023:
Assumes average of £120m assets deployed during FY2023 delivering a return of 8% (£9.6m)
Servicing Debt £0.9m
OCF £1.4m
Dividends £6m
Profit £1.4m (plus possibly £3.6m fair value adjustments) = £5m

2024
£145m deployed returning £11.3m
Less debt servicing £1.8m
OCF £1.4m
Dividends £6m
Profit £2.1m plus fair value adjustment £4.5m = £6.6m

The profits could mean higher dividends (potentially double to 13.2% at current prices) although there is a buy back policy where the share is at a discount. Current yield is 6.6%. I can't see any reason for it's recent drop other than its change of name which has meant the previous "TEEC" history is lost. The bit I was concerned about (uncovered dividend) is covered. I'm also of the mind that compared to say GSF or GRID this offers better protection since it doesn't put all eggs in 1 basket (BESS). Also this is the best hydroelectic power play I think exists in the UK markets (happy to be wrong on this but I think that's accurate). The high electrical prices are a benefit to hydro electric and have the benefit that so long as Scotland is not in drought then there's reliable daily returns - more than you could say for wind or solar.

Based on my PE FY2024 estimate and a 5.5% yield on a future target price, then this has scope to double bag in 18 months.... at low risk.
GLA

Pumpkin, TheBoyG thinks there’s 16 weeks in half a year so you need to use 200 x 23 weeks plus 100 x 3 = 4900 units. That’s if you can assume doubling headcount will double production from week 4 of July……..

In their presentation they talk about 3500 maybe 4000. My prior posting used this as a reasonable production for 2022 and I modelled this to give a near break even for BELL for 2022 turning cash flow positive and profitable for 2023.
…Which is a fortnight away for some people. :)

V 0 x markets replaces the asterisks

Paul Hill’s analysis beats mine:
https://www.**********.co.uk/articles/venture-life-offers-a-safe-harbour-in-bear-markets-7cc6097

Revisiting my estimates and model from July today's update shows we are on track for a slightly lower adj EBITDA than anticipated. However we are exactly on track for 2022 revenue. (And the growth was exactly as predicted).
Today's update contains important clues for H2 from the order book. VLG don't disclose the exact order book (in common with almost any other company) however they do tell us it is 30% ahead of last year on a like-for-like basis. In other words the 45%/55% split will be a little bit more like 42%/58%. I estimate the following:

FY2022 £43.3m revenue (which is H2 2011+30% plus H1's £18.9m).
FY2022 EBITDA I arrive at £7.85m (which is lower than my prior estimate** but close to Cenkos' estimate of £8.2m)

**In July I posted this:
Cenkos use a 45% H1/55% H2 split based on prior year data. If we apply this to the H1 numbers we arrive at the following revenue and EBITDA forecast numbers for FY2022:
1. Revenue rate £42m (above forecast £40.5m)
2. EBITDA £9.9m (about 20% ahead of the forecast £8.2m).

However we still have not seen the China effect. If H2 finally sees an unlocking of Shanghai then the numbers can surprise to the upside. I think today's 28p market price is an opportunity to top up.

I see Simon Thompson has also said nice things today in IC
https://www.investorschronicle.co.uk/ideas/2022/09/22/nothing-ventured-nothing-gained/

GLA

https://www.autocarpro.in/news-international/saietta-group-displays-raft-of-edrive-innovations-at-iaa-transportation-102855

Some negativity today and of course a drop to 60p (which then bounced 10% throughout today). If you’re negative on this you need to stop smoking whatever you’re smoking. Looking beyond today’s results what is the news? Think about why the results in H1 were “poor poor poor”?
-> reading between the lines the 1st generation X-plorer is dead in the water and the 2nd gen (X-plorer) is 100% of sales with 3rd gen (X-plorer's big brother Discov-R) following in 3 months or so. Not that much of a surprise that the prototype gets tweaked and become the killer app.
-> Contract mfr couldn’t keep up with growing demand. So switched to in-house production. Achieved 100 units/week = 5200/year. But have doubled the labour force since then. “Significant cost savings translates to 15% saving, lower scrap, better inventory control”
Looking to H2 then 3500 @ $1350/unit = $4.73m. COGS $0.82m ($275 less 15% saving on labour and materials). 2022 EBITDA looks more like -$4m and net cash more towards $12m. Dowgate are being very conservative in their update today (and say so). Their view is much lower than the reality of what Bob tells us in their update today.
-> Innomax now Q4 2022 or early Q1 2023. Forecast production circa 12000. Material savings of 33% on plastics and resins and ability of Innomax to buy far cheaper on various components (for both production plants).
-> US and China production are ISO certified: https://www.iso.org/iso-13485-medical-devices.html
-> A very telling statement from Bob (I’m paraphrasing) was we can’t just sell 100 units as a one off with some vague promise of some more in 6 months. We have customers lined up who will want a continuous supply of product month after month. If that bit alone doesn’t excite you maybe go back to what you were smoking.
-> Cash runway for 2022 and 2023. Turns cash flow positive from 2023.
-> Discov-R launching Q1 2023. Larger capacity but also provides continuous flow. This opens up a further $500m addressable market and Bob was v.excited about this point: This helps explain his excitement. https://www.portableoxygen.co.uk/understanding-pulse-and-continuous-flow

To conclude, if you bought at a pound and are sitting on a loss well sorry to hear about that. But what interests me is what risk is there going forwards, and where does it go from here. According to Dowgate’s conservative forecasts this is valued at a Price Earnings of 2.6 on FY25’s numbers.. which is 27 months away. In a defensive stock where they’ve got huge demand and are not only the most feature rich but also 10-15% cheaper than the competition. Where they have a proven COO who previously built up a 100k units medical equipment operation. Where they are already achieving cost savings, product feature improvements and visible excitment among their customers. While initially annoyed at the numbers being lower as I'm sure you perhaps have, I've reflected and feel extremely positive about today's update - and BELL's future.

GLA

Syste, both Shore Capital and Arden use that % risking.
Regarding Tunisia the mobilisation will come. The Tunisians stand to gain from royalties and taxes so while yes they probably are prioritising their own drilling they are also facing a number of players leaving their shores, so they will also be motivated to keep existing companies happy. I agree it is frustrating.

For a BOD constantly criticised for being "asleep" it seems to me they have mobilised the rig to the 2nd drill site far faster than their slumbering reputation might suggest. There are 4 targets within the 2nd drill and a 30% chance of success.

Fingers crossed on that and indeed on news from Tunisia.