Member Info for CaneToad

Debt-free by next year?

I used to believe this nonsense spread by IR.

The fact of the matter is the following:

Gross Gearing: 451.9%
Net Gearing: 336.21%

There is *no* possible scenario under which Net Gearing will be negative by next year.

It is very easy for any company to present financial results according to their own convoluted financial definitions. But the market does not care about that.

I'll look to invest here again when I see those numbers coming down. Until then, being debt-free it's a fantasy.

Looks like there's a big background buyer. Looking to increase my exposure now, with stop at breakeven.

Production is significantly lower than a year ago. To be fair, the market was expecting a good well. It still might be good, but clearly this was going to knock something off the price. The price will rise when production is shown to be stable and rising.

'Stable' means not changing more than 20% in a year.

Anybody why this has dropped today?

My guess is that Arden will struggle to breakeven now that the Nomad business is gone and they might even need to be subsidised.

I'll keep an eye on it and will consider a new investment after seeing solid financial results. They've kicked a lot of own-goals in the past 6m and I'll need to see some strong evidence that a recovery is in play before touching it again.

Good luck.

Yes, I think it could go back to private, but more likely I think Hay Wain will participate in a large, heavily discounted raise that would wipe-out existing shareholders. That's my base case. But they will eventually want to crystalise the gain on their investment and it's easier if it's kept public for the whole time. Digital is starting to look attractive and with the economic downturn, I expect that business is booming. On the other hand, I don't know the financial position of Hay Wain or whether or not they have the means and appetite for investing any more to clear the claims. My guess is that they do.

The second possibility that I see is that MCL can themsleves manage the claims, but I see that that possibility as being less than 50%.

Either way, I've taken a small position and I am in profit. I'll add on the way up as information becomes available.

Better days? I'm not yet 50+% sure there'll be any.

One thing for sure is that the CEO and partners will do extremely well. That's usually the way things go for AIM companies.

The problem with averaging-down is that it lulls you into a false sense of security, because it will usually work. But inevitably and inescapably, it will eventually blow you up in spectacular fashion.

In 99% of the time, it's the sign of somebody that has no risk control and hence mediocre- or poor long-term returns.

With Ince, you just have to look at the price history on any time scale to see utter destruction of shareholder value. I'll wait and re-enter if I see any evidence that there's a profitable business. But I'm starting to wonder if this is headed into insolvency.

@manu - Sorry to hear about your loss.

I've had some losses like that over the years. One way to reduce the chance of losses like that is to cut yur losers early. In this case, it was difficult, because it gapped-down after the CEO fiasco. I also took a hit at that time, but I'd reduced the position size in the weeks prior, as it moved against me, so my MCL loss was much smaller than it would have been.

In case you haven't seen it, the following book is useful:

The Art of Execution by Lee Freeman-Shor

@Peaky: I agree with you. But this trade is all about risk/reward. There are very few companies where there's this much upside. Actually, I don't know of any.

Let's say we have a (weighted) coin tossing game, where heads comes up 10% of the time and tails 90%. You pay £1 to play and you win £30 if it lands on heads. You're going to lose £1, nine out of every ten throws, but it's going to be offset by winning £30 on every tenth toss (on average). I'll play that game all day. It's a sure thing. You'll become rich playing that game, even though you'll be losing 90% of the time. That's the way I approach trading.

I have no idea what the chance of this trade 'winning' is, but I think it's better than 10%. It's a punt. This trade would pay out a few thousand quid if it works or else I lose a tiny amount that I won't even miss. My portfolio moves 1-2% each day. If this trade wipes out, I won't even notice it. It looks like a good trade, but admittedly, my emotions only allow me to trade with a tiny stake.

FYI. This is a tiny trade. It's only 1/20 of 1% of my portfolio. It's like betting on a horse.

I didn't have the appetite to do the trade at a normal position size.

My last MCL trade (in this account) was a sale @ 85.38p on 21 Jun last year. It's hard to get my head around that fact.

(1,500% ROI, that is. Entry @ 5.24p, target of 84p)

Stuff it. I've taken a micro trade. No biggy if it heads to zero, but I think that's unlikely. the worst case that I see is a large raise.

It's a nice asymmetric payoff of 30:1, with a 50% stop with a target of 84p, giving a 1,500 ROI.

"The average value of Morses loans is relatively small so any payouts will be small."

True. But what happens if they get hit with the £750 fee from the Ombudsman? That could be painful, even if the claims percentage is quite low. I'm not sure under which they'll incur that Ombudsman fee. Anybody know?

At 5p, with target price of 92p (July last year), it's a 35:1 payoff even if you set a stop at 50%.

It's a great trade, assuming there's a chance of the claims being manageable without a big raise. I don't see any urgency to buy unless there's positive news, as there is heavy selling and it could collapse much lower in the coming days.

@erratum: I am truly impressed by your command of the English language!

I'm not relentlessly negative about Ince. I've been invested in Ince several times over several years. My most recent one was as a Value play with good asymmetric risk, buying in just a couple of months ago. I got it wrong this time - oh well. As a matter of good risk management, I do not continue holding *anything* that drops beyond a small, pre-calculated threshold.

I'll revisit Ince at some point down the track and might consider investing again if they turn the corner. It's already at a substantially lower price than where I exited.

The thing you fail to observe, is that the company has maxed out its RCF, has limited cash on hand and has foolishly paid a dividend, reducing cash even further. This is a common feature of law firms.

In the final analysis, I don't care if they manufacture firecrackers and condoms, but I don't like to see total stupidity, arrogance and disregard for shareholders.

Good luck!

"Remember. You may not experience a loss until you sell."

That's one of the biggest myths of investing. Hanging onto something for years that's heavily underwater means that your portfolio ROI, dies, because your money is stagnant.

Christ, what's happened. Frikkin thing is in freefall for past 2w.

The only reason I can think of re: a delay, is to give it more time for the claims process to play out. Maybe MCL themselves don't yet have enough visibility on the final figure. A 3m delay gives them time to get the final figure. Anybody putting in another big chunk of money willl want that figure, to ensure they can draw a line under it.

They have 180,000 customers. If we assume a 5% complaint ratio and £750 fee per claim to the Ombudsman, that's £6.7m. I doubt they can pay out that much and not have problems. In order to raise that much, it would be a 50% dilution. You can guess what would happen if the figure was higher than 5%.

In my experience, it's common to delay, while organising a discounted raise with a big shareholder and for them to see how it evolves, before committing more funds. If it happened, it would wipe out other investors. They wouldn't care less, nor would the MC management. That's why I think this could go lower. There's no lower limit now. It all depends on selling pressure.

I very much doubt that it would become insolvent as Hay Wain would prop it up; the complaints don't look big enough to sink it entirely. So no - it's not priced for insolvency. It's priced for a wipeout of existing shareholders.

Just my view.