Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
DragonFire getting more publicity
https://www.bbc.co.uk/news/uk-68795603
From Wiki - DragonFire is a British laser directed-energy weapon (LDEW) technology demonstrator. It was first unveiled to the public in 2017 at the Defence and Security Equipment International (DSEI) conference in London and is being developed by UK DragonFire, a collaboration consisting of MBDA UK, Leonardo UK, QinetiQ and the Defence Science and Technology Laboratory (Dstl).
Fair point, you're right. What's your view on the persistent undervaluation and lack of institutional interest? I'm holder, and not bearish on the stock, but do appreicate open discussion. I don't think they can "spin-out" MSALabs as, as far as I know, they do not own the IP and are only acting as distributor/operator. Chrysos is also very overvalued to consider acquiring it. They pay a small dividend and have high ongoing capital requirements through maintenance and reinvestment.
One possible thought on what could be causing the undervaluation is the cyclical nature of mining. Although recent utilisation rates have been increasing and are high (I think), compare them to 2015/2016 when they were a lot lower. Perhaps insitutions worry about this playing out in future, with CAPD being left with lots of surplus underutilised costly equipment therefore reducing returns. Difficult to see if one subscribes to the "commodity supercycle" or "age of scarcity" theses, as well as the general need for increased macro capex at a global level.
Great points. A lack of insitutional interest (assuming that them simply being unaware is not the sole reason) suggests unaddressed or unavoidable permanent weaknesses in CAPD's underlying business model or irresolvable risks. I think your second may speak to these underlying weaknesses; mining services must be highly commoditised resulting in the worsening margins, high amounts of capital will always be required for re-investment and maintenance (poor cash flows for investors for ever) and a high cost of capital now and in the future (although CAPD is using internally generated cash).
CAPDs high cost of maintenance in its fleet requires it to be a "price-taker" in a well supplied market otherwise it would face significant capital costs, and the larger this fleet - and competition's fleets - the more pressure to race-to-the-bottom on price. On the other hand, CAPD has high (I think although not sure of any benchmark) utilisation rates, suggesting there should be wrong for price increases and enhanced margins. The only reason that they can't do this, must be competition?
The contract tendering process, similar to all, also has similar flaws for companies that "win" contracts ( in this case being given contracts due to giving lower prices that cause problems further down the lines).
On MSLabs... while the growth in sales in fantastic, I understand CAPD's relationship with Chrysos (the actual owner of the IP and I think producer of the machine for MSALabs) to be that of a "distributor" and perhaps "operator". My main concern is the lasting strength of this arrangement. Could Chrysos partner with someone else in future? Could they push CAPD on margin? Could they remove MSALabs whilst benefiting from the scale, marketing and market created by MSLabs? Etc.
Now trading at a capitalisation of £3.99m with £2.8m cash. They should have sufficient cash to year end Sept 24, possibly Sept 25 if costs can be controlled, but, if things continue as they are, then I think there is fair chance they will have to raise. Given small numbers of directors, with 1 leaving this year, then the raise would have to be mainly institutionally backed. But I find it crazy that the shares are 93% down from their all time high. I am personally nearly 40% down on my small holding.
The director salaries of £634k in FY23 (up from £618k the year before) seem excessive given the state of the business. There has not been any staff cuts and it is hard to see where a genuine effort is being made to cut costs until business picks up.
Reassuringly, their pipeline is growing, but this is very much a metric that is given based on the opinion of management rather than totally objective. They promised in their FY23 that "IXICO is uniquely positioned to partner with innovative analytics organisations to provide a market channel to the global biopharmaceutical industry" and that they were "hopeful to announce our first significant partnership agreement early in 2024". I'm not aware of any such announcement being made yet. The departure of the CEO adds to IXICO's challenges this year, although saving £300k plus in salary may be useful... but it remains unclear if it is an attractive proposition for a quality candidate.
I think it might be useful to gain better insight into their historic pipeline numbers and how these converted into revenues. With revenues unlikely to pick up until FY26 at the earliest, the only indicators are pipeline. They will likely "grow" their pipeline to justify business operations (i.e. their salaries) and a future potential raise to keep the lights on. I still think this would make an attractive acquisition (costing only £1.2m to someone after taking out the cash) and I am still on the fence about adding to my holding or not - more likely to add on positive news around IXICO or around the clinical trial market (which seems to be very cyclical and currently entering/in the amidst of a downturn).
Very interested to hear the thoughts of others...
Some things that need thinking about:
1. Distil declined the opportunity to increase their investment to £5m, likely due to lack of cash and need for a raise. Or was it due to Ardgowan not representing as good value as previously thought? My thought is that if Ardgowan was good enough for the initial £3m loan, with a raise supported by major shareholders, why not for another £2m after more progress has been made.
2. Ardgowan has been well supported with £1.2m equity investment from existing holders, £3m from Distil (24% owned by Roland Grain), £7.2m directly from Roland Grain and nearly £1m from the Scottish Government. There is tourist demand, export demand (for Scottish whisky) and hopefully inherent durability (should be around for decades to come). Ardgowan have recently agreed a £100m deal for a decade long supply of cherry casks.
3. Major shareholders of Distil: Roland Grain 24%, Cooley 7%, Rothschild 19%. It is likely that Distil moves in the director Roland Grain's choosing.
4. Distil has a market capitalisation of £4.4m. If Ardgowan was worth £30m, then in 10 years we might expect this to increase and over decades increase significantly, making Distil's chance at conversion increasingly valuable (depending on the success of Ardgowan).
5. We do not know if Distil plan to convert or not. Distil may have existed solely as a means to use public markets to increase funds for Ardgowan to Roland Grain's benefit, but not convert later (and thus reduce his own share of Ardgowan). Thinking it through logically, it might be Roland Grain's self-interest to not convert Distil's loan into equity as he already has equity in Ardgowan, unless the £3m outstanding is not available to pay back.
6. A best case scenario would be a conversion into 10% equity of Ardgowan after receiving interest back, a massively successfully whisky product for distil with production taken care of and the other brands growing and trading profitably. Of course, again much of this relates to understanding exactly what the directors have planned.
I know both these posts are very wordy. For full disclosure, Distil represents less than 1% of my portfolio. I've held for a few years and am thus holding at a loss. I do think Ardgowan seems opportune, although I am yet to research profitability, durability and prospects for Scottish distillery businesses, so have no idea if a £30m pre-money valuation is fair.
If anyone has any thoughts they would be greatly appreciated.
Similar to my previous post, I am increasingly valuing Distil based on its relationship to the Ardgowan distillery.
1. Although they have lots of brands and a track record of sales, espcially RedLeg, it is fair to say that these have struggled to achieve a consistent or significant increase in traction. The sales of each are probably still too small to attract a buyer, and most buyers (with similar or better distribution already in place) would likely be able to quickly create their own product. In sum, I think Distil's original stated strategy of building and selling drinks brands is not possible unless they have a blockbuster or nascent blockbuster brand.
2. That said, Distil remains debt-free and has a history of trading profitably/being cash generative (ignoring recent raises). For this reason and my first point, I ascribe neutral value to Distil's trading business and brands and even consider them in "run-off". Obviously, there is room for suprise to the upside here. More positively, there has been an acceleration in sales with Q3 looking to be similar to Q1+Q2 combined.
3. After a raise, Distil gave a £3m convertible loan at 5% pa to fund Ardgowan. I believe this was a good decision for shareholders. I am more concerned by the recent raise for working capital until March 2025. For the loan to Ardgowan, this equates to £150k in interest received per year for 10 years (£1.5m over the 10 years) and then the return of £3m loan OR conversion of this loan into a 10% equity stake into Ardgowan (convertible at £30m pre-money valuation). In my mind, it (would likely) make complete sense to convert into equity in the final year of the loan.
4. Production at Ardgowan Distillery is due to start in 2024. It is ancitipated to produce 1 million litres per year in the initial phase. Distil has claim to 10% of this production (of malt whisky or another product of their preference) for the duration of the loan, possibly initially equating to 100k litres.
So, a lot of the valuation of distil relates to:
1. Whether directors plan to convert the loan to Ardgowan into equity, and whether this will be worth it.
2. Whether Distil is able to use the production at Ardgowan to sell more drinks. As far as I know, Distil have not been supply constrained but demand constrained for their brands.
3. How the directors plan to use Distil to achieve their own aims and how this relates to other shareholders.
I don't thin MSLABS could ever be spun out given that Capital Ltd is simply a distributor for Chrysos (also publically listed with very different valuation profile to Capital Ltd) and doesn't own anything.
I think so. I think the West African trio (Burkina Faso, Niger, Mali) have continually increasing risk of seizure of assets, leading to a bigger West Africa discount.
Have been doing more reading and found this interesting:
https://theconversation.com/free-movement-in-west-africa-three-countries-leaving-ecowas-could-face-migration-hurdles-222826
That said, I hold a smaller amount (relative to Endeavour) of Thor Explorations Ltd, which has also seen its share price hit. It has two projects in W Africa, but Senegal and Nigeria, not in the aforementioned trio.
Https://www.bbc.co.uk/news/world-africa-68322230
Seems likely to only worsen
Current shareholder sitting in the red. Have been recasting an eye over Distil (been ignoring them since all the shenanigans around Ardgowan) and would like to ask whether other investors consider this move shrewd?
If I understand correctly, they are receiving 5% interest on a £3m loan which they can convert into a 10% stake in Ardgowan at any time up until 2032. Distil has no debt and seems to have low risk of default - and so, if Ardgowan is a success it would make sense to convert into equity. After 10 years they would have received half the loan back in interest.
https://www.thespiritsbusiness.com/2023/11/ardgowan-begins-work-on-20m-whisky-distillery/
It does appear the distillery continues to move forward with lots of local and governmental support. I am now pivoting to think of Distil not in terms of its brands (I was particularly focused on RedLeg which I feel they could have done more with), but in terms of Ardgowan.
Distil is worth less than the loan it currently carries as an asset.
Sorry to bump this. There's been no further release from the company. I note the mechanics of the acquisition were discussed in detail on the Sunday Roast podcast at the time, but it would appear nothing further has transpired or been confirmed. This would not look good for the management's integrity...
How could he do this? At 47.6% he is still classed as a "minority" shareholder (less than 50%) , so the most he could do is block special resolutions
Would it be as simple as proposing an offer of 2p to the board and then voting with his 47.6% holding in favour, and how many other shareholders would need to agree? Or he could just block any AGM resolutions until the board agrees?
What happened to the planned acquisition of the remainder of Recyclus? This was announced way back in October 2022, but as far as I can deduce, has not been completed nor has there been any update?
https://www.proactiveinvestors.co.uk/companies/news/995793/technology-minerals-says-to-take-full-ownership-of-battery-recycling-associate-recyclus-995793.html
Anyone know how Ondo compares to the competition?
Is Water Intelligence plc a competitor? Seem to have a strong presence in leak detection
https://www.thearmchairtrader.com/endeavour-mining-share-price-forecast-november/
I am a holder of Capital Ltd and have been pleased with the continued progress. I have noticed this with other listed companies, but I was wondering if anyone has a good explanation of the Ltd has been retained rather than adopting a PLC within the business name?
Wish we had more clarity on future plans, safety of the business, and reasons for the board changes. If Chaker Hanna starts to sell down his stake this may create downward pressure (may have already happened) but possibility improve liquidity and the tight float.
https://www.camdennewjournal.co.uk/article/taki-knifed-to-death-in-moment-of-madness
Must have a difficult year for Mr Kitous.
They have pressed ahead with the Stanstead opening being the first since the board changes. Hopefully more expansion to follow.