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What’s going on here?

Higher interest rates did Revolut a favor, so the British fintech showed off a wad of profit on Tuesday.

What does this mean?

UK-based Revolut put cash in the bank last year, with a net profit of $428 million. That’s a nice pick-up from its $7 million profit the year before. Revolut makes the bulk of its money from transaction fees when customers swap currencies and withdraw cash, subscriptions, and crypto trading commissions. The company also has a European banking license, so it can hand out high-interest personal loans in France, Germany, and Spain. And last year, higher interest rates meant customers with loans were paying more on what they’d borrowed. It also helped that more folk than ever have been using Revolut’s services: the company now boasts a hefty 45 million users, up 12 million from last year.

Why should I care?

Zooming in: Just keep on rolling.

Reports have suggested that Revolut’s aiming to sell shares at a price that would value the company at $40 billion, 20% higher than three years ago. That’s more than the valuation of some well-known high street banks in the UK and France. And that’s some feat: plenty of private companies are struggling to raise cash or hike their valuations at all these days. Revolut hinted that it might go public to keep the momentum moving – although, waiting for its UK banking license first would likely pay off, literally.

The bigger picture: There’s hope for your average Joe.

Investing in private companies is generally reserved for the rich and famous, as it tends to require big bucks and you can’t simply cash out when you want. (These investments can make up for it with sweet returns, of course.) But this week, Blackrock announced that it might be able to index private markets. That could lead to an iShares-type product – BlackRock’s current offering for exchange-traded funds – being adapted to let everyday investors in on the private action.

Https://www.bloomberg.com/news/articles/2024-05-08/softbank-is-said-in-talks-to-buy-troubled-ai-chip-firm-graphcore?srnd=homepage-americas

Chill buddy - the fundamentals of the biz are what matter. Strong buy here

- reported results were hampered by true one off (deal cost)

- GFK/CPS deals is a game changer for the asset mix

- the move to 1.5x leverage is not an issue when looking at YOU cash generation. It has a 4yr term and will be reimbursed very quickly

- the macro backdrop / sales momentum is improving and accelerating

- they even upgraded their medium term outlook !

- 75% revenue visibility vs 68% last year

At this price it’s a strong buy.

CEO and CFO are continuing to focus on the business and accounting. The sketchy part of Adjustments (non core opex) continues to reduce. AMORTISATION should remain fairly stable you despite the shinez acquisition which imo really moves the needle specially on reducing the reliance on google.

Reported profitability is firmly anchored.

Last year was a tough macro backdrop but still TIG delivered double digit organic growth.

All lights turned to green. I am very bullish over the next 12 to 24months.

There is a bit of confusion out there in the market this morning about trading update EBITDA of $27.3m versus $25.8m.

- They decided to pay $2m worth of bonuses to the wider employee base given the amazing traction in 2023 after the year closed. Half of this, which is non-contractual, is being asked to be accounted for in FY23 by the new auditor despite cash impact being FY24 - makes sense.

- If you search for 226 in the release, you will see that their AWS payments have been redefined; they go from being accounted for in depreciation to being accounted for in opex. The new auditor takes a different view to the prior here, and c.300k has been taken from depreciation and put into opex in FY23 because of this - again, makes sense to me.

- These things together account for the difference, and we are not reading too much into it!

STRONG BUY

From Bloomberg today:

By Aisha S Gani

03/04/2024 10:12:05 [BN]

(Bloomberg) -- Citigroup Inc.’s David Livingstone said his firm’s underwriters and dealmakers have seen a pick-up in activity this year as corporate chiefs around the world have adjusted to higher interest rates.

Let’s gooooo

Long the retail bond because it will be repaid as:

- RGL will cut the dividend

- RGL will do an equity issuance

- RGL will use unrestricted cash

- RGL will continue to sell asset to lower leverage and replenish cash level (more a medium term story)

Molten Ventures is a listed VC fund specialising in early-stage investments with a focus on emerging technologies. Historical investments have included UiPath, Trustpilot and TransferWise. Since IPO, Molten has compounded NAV at 15% annually and generated an average IRR of 30% on the gross portfolio. This strong track record is not reflected in its shares, which are trading at a c70% discount to NAV, the highest in the company's history. The discount is driven by the market's fear over Molten's debt and liquidity position, despite the company having several levers at its disposal to address this. In addition, we believe the market has failed to realise the downside protection offered by Molten's superior position on the cap table as a preferential shareholder in 97% of its investments. We initiate with an Overweight rating and price target of 315p.

Fears of equity raise overblown. Molten has already raised c£57m in equity in late 2023, and we believe it can resolve the liquidity issue with its banks and avoid issuing additional equity and diluting shareholders. Management has also commented that it believes realisations of c20% of the existing portfolio are possible in the next 12 months. This would potentially result in the discount narrowing to c50% of NAV, resulting in c85% upside for the shares. While risks still exist, we believe they are already priced into the substantial discount.

Downside protection against permanent capital impairment. Around 97% of Molten's investments are through preference shares, which protect against a permanent impairment of capital. This essentially means that in order for one of these investments to be loss-making, it would have to trade at an amount below the capital initially invested. We view this as unlikely since the average size of its core portfolio is just c£18m versus an average fair value of c£48m, implying valuations would need to fall >50%.

Well-funded portfolio with strong underlying growth and catalysts. Molten's underlying portfolio growth remains strong and the company expects revenues to expand 50% over the next 12 months. The portfolio companies are also well funded, with 80% having a cash runway to at least September 2024. Additionally, Molten's largest holding, Thought Machine, is growing at >50% and media reports have speculated on a potential IPO this year or in 2025; we believe this would unlock significant value for shareholders.

Valuation. Molten is one of the cheapest stocks in our VC coverage, trading at c70% discount to NAV. We believe this valuation is unsustainable given the number of opportunities Molten has to extract value from its existing portfolio. We value Molten using a blended ROI valuation and a peers-based EV/sales multiple to reach our price target of 315p.

Catalysts. Share price catalysts could come from a resolution to the liquidity issue, better-than-expected realisations from the existing portfolio and news of a substantial exit, such as Thought Mac

Incredible mom UK inflation print this morning - should really be a tailwind … technical and fundamental pictures are undeniably BULLISH ! let’s gooooo

The technical picture looks healthy - steady buying throughout the day, RSI still below 70, MACD looks like it's about to curl up, Stochastic well below 70.

Let's see what next week gives, but a sustained break above the 200 MA and EMA would be very positive!

GROW now trading above its 200 MA, the first time since January 2021 - closing above next Monday (3rd consecutive day) would send a strong signal that the momentum has turned bullish. Next hurdle: 200 EMA to clear at c. 279p. Watch this level ;)

Also, nice to see Martin Davis buying some shares. Insiders know the tide has turned for liquidity/ipo/price of money.

Look mate - I 've always said that this would be a long term holding, this will be the type of position that plays with your nerves (and your PnL). Size accordingly and forget about it. LET'S F- GOOOOOOOOOOOOOO

Fed surprising dovishness will ultimately lead to lower rates thus lower discount rates to calculate NAV resulting in a higher NAV ! all in all a positive, price of money/raising capital is going down. All in all, it's positive

Although at a much lower price than few months ago - reflecting poor management - Ofer has no shame to cash in at this level. lmao

I think a lot of the move is b*sh-t.

Volume bought 370k vs sold 160k.

I am with you, buyer on weaknesses

Lol - looking at your other posts I am not sure you know what you are up to.

Fed Pause + pull back in rates + deep discount to NAV => upward we go.

Well done to anyone who had the nerves to add on the downside.

Our moment is here...

Seasonality is on our side too. LET's GOOOOOOOOOOOO

• ASML is not a particularly informative read across to CML.

• CML’s last update, which was positive.

• The last update from Motorola Solutions (a big player in the Land Mobile Radio market), which highlighted strong LMR demand in both North America and International (partly driven by ongoing P25 upgrade cycle).

https://www.motorolasolutions.com/content/dam/msi/investors/doc_financials/2023/q2/q2_2023_msi_earnings_transcript_08-03-23_final.pdf

https://www.motorolasolutions.com/content/dam/msi/investors/doc_financials/2023/q2/q2_2023_msi_earnings_slides_final.pdf

https://cumberlink.com/news/local/govt-and-politics/cumberland-county-could-have-upgraded-radio-system-up-and-running-by-late-spring-2025

• And this report from FMI

https://www.futuremarketinsights.com/reports/land-mobile-radio-system-market

STRONG BUY !

Today’s move confirms what I have been saying for a while…. The discount has nothing linked to fundamentals but is purely driven by higher discount rates. Once rate volatility settles, so will the price action. Accumulate now. STRONG BUY