The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Hi Yuri. I don't think that's FUD at all. This is not for the fainthearted, nor for the inexperienced. I have a slightly different perception of 'risk' and a higher tolerance of it *if* I think the downside is protected and the upside multiples of my basis. For those interested, you can hold unlisted shares with Interactive Investor (I own Allied Minds, another delisting, with them). I think you'll also find that management will be more forthcoming with information once they're out of the public market as there is a lot more they can tell you. I do agree that crystallising the NAV - whatever that NAV ends up being - will unlikely be timely, or plain sailing. But we're at such a massive discount that it's priced in and worth it IMHO. Even if you deduct runoff expenses, haircut the NAV and discount it at a big cost of capital, you're still well below intrinsic value and that's good enough for me. If this was trading at 3-5p, then I wouldn't be buying it and would be advocating for everyone to sell considering the aforementioned risks vs the potential net payout and likely journey (time, hassle, uncertainty, delisting). I hope that clarifies and I hope the above demonstrates that I don't mind a well considered rebuttal to anything I post.
The "guidance" is a bit of a misnomer! Because of the debt, the NAV is going to be extremely choppy. Think I will pass on this one unless it sinks a lot over the coming days and weeks. I wouldn't mind if the outcome was in management's control per se but it looks like all net proceeds exceeding the debt are contingent upon future performance measures that a). might not occur and b). should they do, might take a very long time. We still have seven figures of equity value here and there's a strong argument that it should be in the five or six figures after today's announcement. Got lucky with this one as I put it on the watchlist and never came round to buying. Feel sorry for long-term shareholders who must be incredibly frustrated with the lack of information and the resulting capital impairment.
Hi Beardozer. I went through your list yesterday. I struggled to find the hidden value in all the names you mentioned. With the exception of GRX, they just felt like a bunch of binary option-like bets. I am probably being a bit dim and I would welcome a bit more colour on what you see in them vs IIP say which has a SP at a massive discount to tangible asset value. Also, with GRX I am long a similar situation that's trading at 1/100 its claim against a government and I think the r/r is potentially better there considering the attractive entry price. Curious to see what happens with IIP.
Hi Kabaa. Quite right and a decent rebuttal. Probably the consensus view if you look at the SP vs NAV. However, I am very happy to bet against consensus here and role the dice at sub 1p vs 15-16p NAV. I could be wrong but I think that covers most negative outcomes.
I love this situation. You have a tonne of net cash protecting you on the downside and multiple near-term catalysts in 2023 that seem pretty likely to play out such as resumption of dividends and re-basing of pension fund payments etc. Reminds me a lot like Coats back in 2016 which was a very successful investment. Yes there are perception issues with the contractor model and yes Costain is in the dog house. But rarely do you get to buy these things cheaply without some degree of 'hair'. If they do start revealing the details of their higher margin consulting biz, this could re-rate meaningfully. And if they just get a multiple in line with the peer group average, we're looking at anything from a 50-100% return with very little downside risk. That seems OK to me. Clearly, inflationary pressures are a near-term headwind and not to be sniffed at. Likewise the issues in government. But I have been encouraged by the commitment to vital infrastructure and Costain made that pivot reasonably early. I would be amazed if this stays at 40p for long as it seems ripe for a take private. Whether the major shareholders will allow it is another thing. Also, i can't recall the username of the insider who was providing some info about cultural rot etc but that seems a bit contradictory to what I am seeing on LinkedIn. However, I would love a counter and if competitors are pinching core members of staff, then that's a risk too. But that's perhaps negated by the share price and the look through implications which are that the Management team are prioritising margins and c/f. Anyway, good luck to everyone here and my fingers are crossed for a positive result in 2023.
Hi. Been buying this. As I have commented on other boards, it lacks some of the downside that I typically seek but I think the franchise is a strong one and that the equity will re-rate meaningfully *if* (big if) they get through this cycle without needing to raise fresh capital. Personally, I do think there's a risk that this could delist and so I wouldn't want to hold this in an ISA or with a broker that doesn't allow you to own unlisted shares. (ii do by the way). It's an interesting risk/reward and I have position sized accordingly and I wish everyone the best of luck and look forward to sharing info / discussing updates etc.
Hi. Buying here. Yes the NAV will decline with the runoff but you're well compensated at these levels I think. Odds of losing capital seem slim at this sort of market cap vs 5-10x option-esque return if we get anywhere near NAV. Happy to buy 500k to 1m chunks if you lot want to sell. Very sorry for those of you who bought at much higher prices. I think the rationale was sound because of the big discount but there's always a risk of being wrong in investing, even at distressed prices. I could be wrong too. But I like the odds so I am willing to play. Good luck to everyone participating.