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MXC’s valuation gains worth exploiting
Simon Thompson
MXC Capital (MXCP:90p), a technology-focused merchant bank run by a management team that backs investee companies they represent, is set to report a bumper set of annual results for the 12 months to 31 August 2019.
That’s because there have been material movements in the value of its listed investments, the most dramatic being the near five-fold increase in the carrying value of MXC’s stake in IDE (IDE:7.35p), a £29m market capitalisation mid-market network, cloud and IT managed services provider. IDE has gone through a cost reduction programme to create a more appropriate and profitable cost base. It has been successful which has its customers the reassurance they needed. This also means that IDE’s management can now focus on driving the core activities of the business to rebuild value for shareholders. This is clearly happening.
In IDE’s latest annual results, chairman Andy Parker revealed that “towards the end of the 2018 financial year, several of our material customers renewed their contracts, some on a multi-year basis, and at the time of writing (28 June 2019), the pipeline of opportunities across the business both with existing and new customers and partners is the strongest it has been since my involvement.” The improvement in trading has worked its way through to a much improved financial performance, too, as “IDE has been trading profitably at an adjusted cash profit level in the year to date.”
Moreover, following a refinancing that resulted in MXC investing £8m in loan notes to enable IDE to pay off all its bank debt, the solvency risk subduing the company’s valuation has been unwinding, a factor that has accentuated the share price recovery. The point being that all of IDE’s loan notes are held by its largest shareholders, thus giving management the breathing space to focus on the ongoing turn round strategy.
By my reckoning, MXC’s holding of 172.8m shares in IDE is now worth £12.7m, a hefty £10m more than six months ago when I last advised buying MXC’s shares at 85p ('MXC returns to trading profitability', 9 May 2019). The valuation uplift adds almost 15p a share to MXC’s last reported net asset value (NAV) of 97p.
Further balance sheet gains
It’s not the only material balance sheet movement either as Aim-traded shares in Adept4 (AD4: 3.55p), a provider of 'IT as a service' to small- and medium-sized businesses in the UK, have quadrupled in value since MXC’s interim results in May, lifting the book value of MXC’s shareholding from £612,000 to £2.41m. Adept4 is a turnaround situation, too, and its directors recently reported that the business has returned to modest levels of profitability at the cash profit level.
The re-rating has also been driven by news that Adept4 has entered into a non-binding agreement to acquire Cloudcoco, a profitable company that offers cloud and related technology solutions and one with a strong and growing pipeline of business
Recovered a bit into the close.
Look guys we are doing fine here we cant have blue days every day nice though that would be.
People will take a profit or panic when they see red.
Thats ok the less weak holders the better for the next leg up.
A £6m valuation for this company is a bit low dont you think?
£25m mkt cap is only 5p
Rum n Coke nice winter drink.
I dont know Jarv they might be.
AD4 had revenues of around £8m
What if they merged ? Manly and Distil ?
I advised buying AD4 @.3
IDE @.5
MXCP@ .75
Ad4 Is now about 3.5p
IDE was 11p back at 10p
MXCP just been tipped by the Investors Chronicle no at £1.02
I am also saying buy Distill my target is 6p
BOOM Investors Chronicle BUY.
Just out.
Seems to me they have finally decided to kick this company up the backside.
Collaborations between Did and Manly will benefit both and there may be a lot more in the pipeline.
Good luck if you hold.
I'm in.
Meantime AD4 is getting closer to news and it has a lot of upside ahead.
If you didn't get into both as I advised a few weeks back then better to sit tight.
Just because IDE is soaring(I said it would) doesn't mean this this one wont either.
Jumping from one to another will just waste money on fees and then what do you do when this takes off again?
Go and look at what AD4 and Cloud Coco are planning , there will be a of of news flow here soon.
Any selling is a buying opp here imo.
If you want to be into something from the start then take a look at Dis today.
Someone took 3% and it was out of the blue.
They didn't do that for fun.
I'm buying some after being alerted to it by ADVFN posters.
WOW!! doesn't hang about does it!!
Then I hope it will move right on up to £2 after it's had a rest.
After that who knows.
I bought a few more here today.
My first target is £1.60
Closing into strength by the look of it.
See you all next week.
Another week closer to our news.
Might even be Mon.
Long and Strong here guys .
Have a nice weekend , look forwards to next week and some news.
CloudCoco is the old Redcentric sales team.
They worked together for years and are known as one of the best sales teams in the biz.
They are so good that Ian Smith actually hired them for a short time at IDE to nail some big deals for them.
They are a small company with big clients and some major new ones to be announced.
Mct Cap is irrelevant in a buy and build or growth or recover situation.
This is all 3.
You buy for the future value.
You buy at all time lows so you can make large gains.
You buy ASOS at 4p not £4k
You buy Apple at4p
Companies have to start somewhere and if you are in early enough you get to share in the success.
Your risk is limited because they are already trading at rock bottom.
An investor has to take on RISK.
Otherwise there would never be anything to invest in.
AD4 traded at 15p in the past but now it has better prospects than those days.
And the main supporters/backers of the company who own most of the shares between them are not selling a bean.
They only just rescued it.
Quite right DMC nothing wrong with locking in a few profits.
Good price you got as well.
Welcome back Adam :)
It is not surprising that a few are taking a profit here today , not after yesterdays 2p rise.
It will consolidate and then we can look forwards to next week.
News can come at any time remember.
Every day brings us closer to some contract news hopefully.
It will likely get bought back up again when the bargain hunters move back in.