Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The cynic in me also wonders whether they are in no rush to put an RNS out as they normally price option grants in early June, if they operate similarly to last year's timetable. As they have already had historic options cancelled and new ones issued in March at 75p I would be extremely disappointed if they were playing this game.
I wouldn't worry about the RNS just yet, as they'll want to see how things have improved over a reasonable period of time to be able to say anything meaningful. Given they are an on demand service they don't really have an order book they can use to quantify current / potential activity levels. As a minimum I expect they'll want to see at least a month's improved trading before issuing any trading update. I therefore am assuming some news relatively soon on the back of April's activity levels. And then we'll see what the activity uptick is - I think 3x might be a bit over optimistic, given that Loop is a niche player and not a freely available general social tool like Zoom. If they don't say anything in May, my concern might be the uptick isn't as material as we might expect. If trading had materially improved they have to update the market in line with LSE rules. And the institutional investors are unlikely to let management take this private on the cheap.
The billion used is 1,000 million, so the reality is that Zoom is trading at a completely barking mad price at 65x last year's revenues. As a comparable valuation its meaningless. I'd love LOOP to have the potential to be a £10 share but it's going to have to grow massively to justify that, probably to revenues of £180m or more and delivering an EBIT margin of 20%. This will take quite some time, as after the covid boost to activity levels there will be a period of consolidation and I anticipate 2021 revenue being below that of 2020. I'm also not sure how big Loop's natural niche is - don't forget there are a number of global players with similar (perhaps not as good) solutions that they are currently offering cheaply / free. I'd be happy for this to get to mid 2's in the next 12 months, and then see where it might go. Can't wait to see an RNS to begin to understand what the new future might look like.
If volumes have risen as materially as we expect then I hope we see an RNS by mid May giving some quantification of the impact through the end of April, and this is what's needed to spur the price on from here. If we don't get an RNS by the end of May, I'll begin to worry that the COVID effect isn't as pronounced as we think. I think we'll get the RNS though.
I guess the profit taking is no surprise given share price performance over the last week.
It's hardly a scientific sample but I noticed there has been a significant increase in the number of Loopup reviews on Gartner's peer insight page for meeting solutions. There are 36 reviews dating back to June 17, but 10 have been added in April 2020 alone, at least anecdotally indicative of client progression. Ratings and comments appear reasonably good too.
https://www.gartner.com/reviews/market/meeting-solutions/vendor/loopup
Other retailers have already indicated they might not reopen some of their poorer performing stores so it wouldn't surprise me if Dixons also decided to close a few more (over and above the Carphone Warehouse closures) when they do reopen. I'm impressed by the resilience suggested in the trading update, both online and the Nordics. It suggests that the risk of DC. failing is now very slim. Get to at least cash breakeven in the near term and then take advantage of the slow recovery.
If they are the 2 that are shown on the IC website it looks like their forecasts were very much based upon business as usual. We could do with an RNS to provide a better view on performance. Clearly, significantly increased current and near term activity levels are unlikely to persist once the current crisis eases but I suspect there will have been a re-basing of activity levels upwards due to changed long term work patterns. This should see long term forecasts, and therefore target prices, increase. I wouldn't value LOOP more than £1.25 if it was just growing a few % over last year with some profit recovery post the integration issues.
I think the level of client and activity increase is key to where the price goes from here. No doubt there has been a significant increase in new activity but at the same time the legal M&A advise will have dropped off, as there are virtually no deals being done. I would still expect a significant volume increase overall and await an RNS to give some clarity, maybe off April's numbers once finalised? Assuming volumes have doubled (a big wild assed guess, I know) then operating profit of c£10m should be achievable. For me this would suggest a price in the £2.25 - £2.75 range, giving an EV of c£140m. Zoom's valuation was always bonkers.