Member Info for Agricore

Final Results 31/12/21

· NAV per share of US$9.00 (up 47.5% from US$6.10 as of 31 December 2020)

· Total NAV of US$283.1 million (up from US$177.9 million as of 31 December 2020)

· 5-year IRR of 38.2% per annum

· US$18.5 million of net cash proceeds from exits during 2021

· US$40.5 million of investments across 31 new and existing companies in 2021

· US$19.3 million of new equity capital raised in October 2021, at US$8.50 per share

· Diversified global portfolio of over 50 companies focused mainly around big data/cloud, e-commerce, marketplaces, EdTech, FinTech, SaaS (software-as-a-service) and FoodTech solutions

· US$6.7 million of investments post year-end

· Negative effect of the military conflict in Ukraine on portfolio companies is limited (US$4.6 million of potential new write-downs currently identified), with future impact dependent on how the situation unfolds in coming months

· US$18.6 million in cash reserves as of 22 March 2021

I agree Jjuxi, and there is a history of buy backs (think 2020 was the last time?). I expect the short term focus is very much on monetising the SPAC and concluding that would generate liquidity to support a buy back programme.

Weekly NAV update - discount to NAV now stretched to 34%! The NAV has recovered 15% since it's dip following Ukraine invasion. It's now -2.2% down YTD 2022, up from -16.8% 2 weeks ago.

Compelling value and while the parabolic bet on interest rates was reduced by 90% to buy Netflix it's nevertheless over $120m and has potential to drive a significant chunk of 2022 earnings.

As of Date Period USD
NAV/Share Euronext
Price/Share GBP
NAV/Share LSE GBP
Price/Share LSE USD
Price/Share MTD
Return QTD
Return YTD
Return
22 March Weekly $55.96 $37.00 £42.20 £27.95 $37.08 10.1% -2.2% -2.2%

**233% upside?**

Hi all, I'm very excited by today's update. Let me share why.

1. Revenue £0.6m ahead of estimates. So what I hear you say. Bear with me.
2. EBITDA "in line" so that means it's around £6.3m. So 2021 PE of 9.9 (half to that of its peers)
3. Samarkind/China boost started in early 2022.
4. Forward PE forecast to drop to 7.8 based on past assumptions..... BUT

5. Did anyone spot the "Q4 revenues 59% above Q3"? Game changer in my opinion. My maths is that we know H1 2021 was £13.9m revenue leaving £18.7m for H2 yeah? We know Q4 59% above so £18.7m/2.59 gives us Q3 at £7.2m (same run rate as Q1 and Q2) and Q4 as £11.5m. 50% jump from Q3 to Q4.

6. What's more a 11.5m for Q4, assuming we see only modest 10% growth in 2022 now suggests a £50.5m revenue for 2022, or £5m ahead of Cenkos prior forecasts. I think 10% is too modest because of China/Samarkand so indulge me and assume 20% that brings us to £55m with a likely PBT of about £8m compared to Cenkos current 2022 forecast of £4m (based on £41.7m turnover).

7. On that 20% scenario the 2022 PE has now dropped to 6 so now about 233% upside compared to peers which suggests a fair value of 133p

8. However it just gets better. We know VLG have a credit line of nearly £50m and potentially more based on the GP of the acquiring firm so there's room for other upside via acquisitions. We also know they have production capacity to cater for growing revenue (to around £65m-70m).

9. We also know that Covid is rampant even if we are now apparently pretending it isn't there and we can all take the masks off. Practical steps like taking Dentyl is probably the way forward in a world where keeping a mask on makes people frown. I've been to business meetings recently where I felt like an odd ball keeping my mask on. We also know the Chinese profilically eat their shark fins and rhino horns and all sorts of weird stuff so they'll hammer the Dentyl if they think it will do them some good.

10. For what it's worth I felt the new CFO is a better speaker than the prior one. I think they've filled that vacancy well (or pushed out the old one and replaced him with a better alternative, who knows)

Anyway I'm very bullish and I'm gratified to see this heading in the way I anticipated it would. I think we'll see Cenkos' article in early April then ST apeing their analysis shortly after. That gives you a week or so window to buy in the 40s. I've a healthy position already here but I must say I'm sorely tempted to top up further ahead of news.

GLA

**CONSERVATIVELY 59.88% DISCOUNT TO NAV**

Hi again SD
Even with the recent reversion it's still incredibly cheap.
£696m NAV (2021 accounts). Market cap (18th March) £278m. Discount to NAV 59.88%. 2021 buybacks of $10m take the discount to NAV to 60.75%.
NAV growth averaged over 5 years is over 11% per annum (average PAT £80m/on NAV of £696m)

Extrapolating 11% growth to the end of 2023 (NAV grows to £857m) and suggesting a reversion to 20% discount to NAV (the average for UK listed PE capital is 10-20%) suggests a target share price of around 150% upside i.e. £14.43 a share. ((NAV 857m-20%-£278m)/£857m)=1.5

More if we see further buy backs or if the discount drops below 20% or if growth is more than 11% (2019 and 2021 was around 20% PAT). Georgia GDP growth forecast at 5% is 2022 so every reason to think it could be higher. More if there are asset realisations above NAV (just as the majority stake in water company GGU recently was sold 13.4% above NAV!!!!!). More if Iran is brought back in from the cold (as seems to be the case with that lady being released, probably an oil deal soon happening) - Iran is a large trading partner to Georgia.

So the fact you missed buying at £4.50 and it's now £5.80 doesn't mean you've missed out. Far from it :)

Hi Observer, that's superb analysis - much appreciated.

The current market valuation is insane. All I can say is I've had other shares like this on huge dislocations of price. But like an avalanche when the market realises its mistake then the rerating comes through. I held RSE for and it was flat on a bonkers discount, then fell further. I thought what the heck? Then the telegraph tipped it in Questor and it's steadily going up day after day since. The fact it was 50+% below NAV helped of course too :)

Just as KDNC is 40% below even the most conservative NAV. And with £9m of publicly traded shares (EMH) there's no cash crisis either. EMH's market cap at £111m is well below its fair value too so I'm not wishing a cash crisis by the way!

>>> Join the dots and you can see where this is heading.

I've sold out of WRES today. I bought on the fact that metals prices were (and are) extremely attractive. Then when it fell I expected recovery. Around the debt I expected refinancing. But in investment you need to extrapolate on the news and today's announcement that only now they've restarted production was the last straw. Good luck to remaining W'ers but just consider whether there are better investments elsewhere like say Afritin or POW where you can invest in mining the same metals as her but the extrapolation of news is substantially different to here.

Hi SD, I don't think that's the case. Refer to:
https://markets.investorschronicle.co.uk/data/equities/tearsheet/profile?s=CGEO:LSE

Shows free float of 35m / 48m and II's make up around 35% of shareholders. Some smart money there, too, if you read the list of institutional investors.

Buy backs make sense to me when it's on such a large discount. A tender offer would be my preferred form of distribution.

Hi TopCatz, TEK's drop in price - I don't think it's about gearing particularly, but more about discounted cash flow (DCF) of tech stocks.

I've been giving this a lot of thought recently. I trained in business economics so I understand the theory of DCF. I understand how you need to discount future cash flows based on the "opportunity cost" of capital.

But here's the thing - particularly for TEK.

1. There are substantial future cash flows if they continue the trajectory of success. But TEK is actually quite "capital light" so DCF works better for a capital intensive business e.g. if I were building a steel works.

2. Whilst I understand about discounting for interest rates - have I missed something on MoneySavingExpert? Are we now enjoying buoyant interest rates on savings? Or actually are we still VERY MUCH T.I.N.A.? = there is no alternative. See, I think that that's the case where the opportunity cost of capital is perhaps 1% - if you are prepared to lock it away for a year and guarantee yourself losses due to inflation. No thanks.

3. The 2nd reason for DCF is Inflation. If you are selling a premium, unique product in the market (as opposed to a generic product) then you tend to hold strong pricing power and can absorb inflation. How unique is TEK's portfolio? Exactly.

4. Then the final reason for DCF is the unknown future risk. Yet nothing has changed here. Yes there's risk of all of TEK's business units failing and us losing our investment. Welcome to the world of investment, eh?

So to conclude, a cool level-headed person might look at the current sentiment towards tech stocks due to DCF and indeed at TEK's price of 25p and conclude it's in fact a huge value opportunity. The market is applying conventional logic to something which is causing a mispricing.

Remember the NAV is around 45p so you are able to buy TEK at a 45% discount to NAV. (perhaps the NAV is a little less given BELL's recent retracement in price)

TEK's NAV grew by over 50% in 12 months.
TEK's 2022 NAV is forecast to grow much further as the other portfolio companies commercialise and approach a sale
TEK have lots of further seedlings they can turn to once these portfolio companies leave the nest
TEK being solely valued relative to NAV isn't the right measure in any case. Tesla for example is valued at 16x NAV for example.

GLA

Hi Colin, actually the Swansea tidal lagoons would cover electricity for Wales with outgoing tides ; while the original barrage (spanning between Wales and England and two-way generating on both incoming and outgoing tides) would generate 10% of the UK's power requirement. There was a general "we can't afford it" excuse given yet as to why it was shelved.

BONKERS VALUATION

One of it's large holdings, Backblaze is trading at $1.80 below my last assessment so that reduces the NAV of TMT to around $8.75.
I topped up today sub $4.
Show me another investment trading at over 55%+ discount to NAV that can show a history of successful and profitable exits and an average 30% premium to NAV and that has a portfolio of 50 companies (a 50 trick pony perhaps?) that it shows on twitter at this address: https://twitter.com/TMT_PLC

As it is, the forecast growth of sales in 2022 and 2023 is exciting (albeit with corresponding investment so doesn't feed through to profit - yet).

Today's research note acknowledges that this understates the situation for 3 important reasons:
1. Zeus' long-term financial model is under review to reflect the company’s pivot towards “S” Series fuel cells which will result in a smaller physical footprint and significantly lower production costs and selling prices which, in turn, will enable a change in the company’s sales model.
2. The previous approach envisaged an LTSA (long-term service agreement) under which the fuel cell stacks would have been leased to customers over their expected life. The lower selling price should allow the company to move to outright OEM sales, which is also simpler for the customer. This will make the business model significantly less capital intensive as sales grow which will be positive for cash flow.
3. Zeus will be adding projections for the Marine and Data Centre markets which was reviewed 13 September 2021 as well as Group projections for FY2024

*70%+ discount to NAV*

https://en.wikipedia.org/wiki/Economy_of_Georgia_(country)
This is a good read MinusBat. Of significance is Georgia's membership of the EFTA. So there's clearly strong support for Georgia from the West. Of note, too, that the Georgia economy barely shrank during 2020 (when other economies tanked). The recent water utility sale demonstrated the conservative NAV to what is now at a huge discount anyway.

Exposure to Russia (Imports and Exports) is 13%; with Ukraine is around 6%. See:
https://wits.worldbank.org/CountryProfile/en/Country/GEO/Year/LTST/Summary

My take on Georgia's "danger" to a future (further) incursion from Russia is that Ukraine has made this far, far less likely. The political cost of the Ukraine invasion will scar Russia deeply no matter what the outcome of the current Ukraine invasion/special operation.

In conclusion the baby has truly been thrown out with the bath water here and the (now) 70%+ discount to NAV is what is an exciting growth opportunity is probably one of the best opportunities in the market right now......

Hi Unhooked, thank you. I exited out of here at $9.60 mainly to get some liquidity, but have bought back on today's update that there will be the (long awaited) buy backs. Amidst people "Russian for the exits" the annual report shows solid progress and particularly they announced $50m buy backs which is around 6.5% of the market cap so that should help close the 70% discount. Interestingly Investors Chronicle included it in their Alpha IT report in their top 25 February although it didn't make their top 10.

https://www.tetragoninv.com/~/media/Files/T/Tetragon-V2/financial-report/2022/annual-report-2021.pdf

Hi Troyto, thanks, your posts are much appreciated. I'm establishing a position here in what looks an interesting opportunity.

Thanks Equity, great to see some more detail on their technology and on my investment here.

Alan Green also very positive on the BATM results in his podcast today:
https://www.**********.co.uk/articles/alan-green-discusses-bp-batm-advanced-comm-kavango-resources-mosman-o-g-mccoll-s-65582b9

https://www.investorschronicle.co.uk/ideas/2022/02/28/on-a-war-footing/

ST article

PS ST is at it again. He makes a couple of valid points too :)))))

-> Cash = 20% of current market cap
-> Cyber Security - BATM expect “many more government defence contract wins this year” - AGRICORE ADDS: Cyber Unit - revenue +111% YOY; a large chunk of the $18m contract will be recognised in 2022 so the numbers are up year on year 2021 to 2022 even before they've started!!
-> Forecast release H2 2022 of a Cyber Security Product for non-defence customers. ST quotes Strix and Safestyle who got walloped by Cyberattacks today. AGRICORE ADDS: There is no forecast in Shore Capital's numbers for this, and since the development cost should be fairly low as it's repurposing existing IP then becomes immediately profit enhancing.

My take on today's update:

-> First and foremost: The company delivered a solid performance and every "rat" lie was confirmed as untrue, based on the facts of the results.

-> In fact no-one thus far seems to have noticed that Sales were $2m ahead and EBITDA was $1.2m ahead of forecasts.... as we spoke about recently, Shore Capital is prudent indeed!

-> The fact that the share only increased by 1.3% on a day that Mr Putin is threatening Nuclear War just shows the sugar rush mentality of some people

-> 4 strong partnerships to drive Edgility: AudioCodes, Albis-Elcon, Stem Connect, Advantech – if you actually look these businesses as to who they are, it’s testament to the strength of the BATM product really.

-> Edge computing holds a great deal of potential. In fact it’s analogous to Blockchain technology. One is decentralised processing and the other is decentralised financial ledgers ‘de-fi’. If you know much about computers (and Crypto) you’ll know that processing at the edge is radical but a wall of smart money is behind the idea.

-> I was struck by the profitability of NG Soft, sold in March 2021. The accounts reveal this wasn’t an unprofitable dog of a business by any stretch. However it was lower margin than BATM’s 2 divisions (28.3% vs 35+%) so that suggests a huge confidence in the underlying business and smart business sense – reduced profit today leads to better future focus and growth. The sale included liquidating over $5.6m of fixed and current assets as cash in addition to the $13m price tag = $18.6m total – no write off of goodwill on disposal suggests we as shareholders got a fair deal.
-> Would also point out that on a constant currency basis the profit would have been much higher still. $5m adverse in 2021 vs a $3m favourable in 2020 – so 2021’s performance was actually much better than the numbers actually show.
-> In the diagnostics: the certification and validation of the multi-plexing diagnostics test for 100 pathogens is truly exciting and in the 2021 results BATM forecast to begin revenues in 2022.

-> Using the 10% buy back at current depressed prices makes a great deal of sense.

To conclude: the business has delivered stronger results in 2021 and enjoys a stronger outlook in 2022 than when it was trading in the £1.00 - £1.10 range a year back. So it’s only sentiment and “risk off” for this to continue at today's knock down level. The fundamentals and outlook point to a rerate.

GLA and hope you've raised a glass in celebration this evening for today's result. Salud.