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Hi Hedge,
I think 33% is reasonably accurate (some models will hold value better, some worse). The concern for me with the rental market is “Rental income” minus “Depreciation” = “profit”. So the depreciation is quite a critical factor.
It’s why I’m not a big fan of the business model. And completely agree with regards to cash generative sales,
My view is that they should keep it simple, and stick to buying the phones in and shifting them ASAP before depreciation has chance to erode any margins significantly.
Hi Hedge,
Could you point me to the time I asked you to take my views over the accountants? I missed that bit.
FYI - it’s not anecdotal, you can find the depreciation data on music magpies own website if you care to look. I have also been in the used mobile industry for circa 20 years.
The fact is, the accountants/auditors are using one method for revaluing their balance sheet. I am not questioning this is correct from an accounting perspective. But When it comes to actually realising the values of those assets, if you believe they have all depreciated by exactly 33% each year, I would question if you have any prior experience with the erratic price movements of the secondary used phone market.
From what I’ve read in the accounts they aren’t constantly subjecting the assets to constant revaluation. They’re just writing 33% off the value per year.
33% depreciation is borderline I’d say. It’s very model dependant.
Apple could well depreciate less than this as they tend to hold value well.
Google, oneplus, oppo etc would likely depreciate more than this.
Fold / flip phones have depreciated A LOT more than 33% in the past year.
One of the biggest risk factors in used handsets is price volatility, and I think there’s a danger in using a broad brush calculation of 33% to measure something which is very variable and has a significant impact on the P&L.
Personally I’d prefer to see them focus on getting stock in and shifting it ASAP. So was glad to read that they seem to be focusing less on the rental space based on their EOY report.
I’d say it’s swapping out for past revenue, not future revenue.
They buy an asset. Rent it out for a year. After that year, the rental income hits the P&L, and the depreciation (33%) also hits the P&L at the same time.
As you say, the value of the rental income should exceed the depreciation (or they will be making a loss). But it wouldn’t be in exchange for future revenue. Because as the asset continues to generate revenue (assuming it continues to be rented out), it would also continue to depreciate.
Personally I’m not sure I agree with the 33% depreciation figure. It would be interesting to see the split of models out for rent, but if they are newer models that’s quite ambitious I’d say.
I’d have to disagree when it comes to the depreciation of the rental assets.
Used smartphones do depreciate, so those losses to equate to a reduction of capital within the company and are genuine losses unfortunately.
The majority of those buys were mine. Nothing fancy I’m afraid, just bed & ISA. Sold roughly the same amount a few days prior.
I was told at beginning of year that the EIS would be submitted in Feb/March, after which there would be a 42 day period for public consultation.
In terms of when an announcement would be released it would be if and when it was adopted by FIG.
Hi All,
Just wondered if anyone knew of an app or service which provides a notification as and when an RNS comes in?
It was only by pure luck I wasn't caught out by the 12PM arbitration RNS, as I know a lot of people were. So would be great if there was a way to get real time notifications to avoid that happening in future. Any info much appreciated.
Cheers
"Why would a Canadian investment company comes all the way to the
Falklands ? What is there to making them to have this commitment?
Why didn't they go for Bor ? Or, Rkh ?"
RKH Market Cap = ~£83m
BOR Market Cap = £17m
JHI have around £15m cash, so clearly could not afford BOR or RKH even at current market cap let alone the premium they'd need to pay to buy them out.
I would imagine the main reason for them choosing Argos, is because it cost them bugger all, because Argos are being wound up as a company. That is about as bad as it gets. It's not a great prospect, or an exciting share. It's a company that has gone bust and is being bought for next to nothing because they can no longer afford to operate.
Everyone can already vote if they hold shares. Anyone's votes you managed to pool together would be trivial because they wouldn't have a large enough combined shareholding to have any influence over the company. So what are you aiming to achieve?
There's no impending take over. And even if there was, people are already able to vote on it if they hold shares. .
I think if anyone has a minimum target of £2 a share for a potential takeover, then you may as well just say you're going to vote against any potential takeover.
Would love to be wrong. But there's nothing to indicate any one is interested in buying RKH at the moment. Let alone at nearly 20x the market value.
Garbled - it was a light hearted joke, based on a fictional (obviously sarcastic) board room conversation - lighten up pal!
Although over the years I think you have posted just about every possible share price, at various time-frames which have all been and gone. So if I really had the time to trawl through your 1000's of posts I'm sure I could.
Living in cloud cuckoo land would be assuming that a potential buyer of Rockhopper would be monitoring an internet forum of mainly small PI's and basing any kind of decision off of that.
I can hear the conversation in the multi £bilion private equity firms boardroom now.
"OK so we've just finalised the paper work of our offer to buy the company for £300m. Let's just give them a call and... wait a minute, Garbled just posted the share is heading for £2 by next year. Call the banks we need to raise some more funds!!"
Seems to be a case of sell the news I'd say which is often the case with RKH from my experience.
Quite often when there is impending news, the share price steadily rises in the days/weeks before it (as we saw here). My view is this is probably from people taking a punt on the share in the hope they can make a quick buck when the next RNS is released.
When the actual news gets released, the price usually drops a bit or holds steady. (Unless it's hugely significant news, e.g the big Arbitration win). It's happened a few times in the past few months/years where we've seen a fairly positive RNS, such as Navitas agreeing to the deal, only to see the SP fall or stagnate afterwards.
Appreciate these videos. But think there has been a few misunderstandings in the past couple.
I'm not sure you are understanding the below correctly:
"A final hearing in relation to Italy's request to annul the Award is scheduled to take place in Q1 2024. Guidance given by Rockhopper in the Company's 31 October 2022 announcement that the entire annulment process is likely to take 18-24 months from that date remains in place."
This doesn't mean the matter will conclude in 2026. Although it is slightly confusing, I believe what the paragraph is stating is that guidance given by RKH on 31st October 2022 that the entire annulment proceedings were likely to take 18-24 from that date (i.e 31/10/22). Not 18-24 months from the final hearing date in Q1 2024.
I would say regardless of any previous disappointment, and aside from any surprises (which I definitely wouldn't rule out).
The future of this share price could easily tank or fly. If we get a good OM result, or a confirmed deal - it's going to shoot up. If we get bad news from OM, the deal falls through, or a fund raise, the SP is going to fall. A combination of a few of those things could wipe the company out IMHO.
It's up to each individual to decide the likelihood of the various scenarios happening.
It's a punt, and no sane investor would have more than 1% of their portfolio in this share. (Yet here I am with ~50% of my holdings in here and considering topping up)
Falky,
I didn't claim that you had made any of those statements. But I don't even have to look further than this thread to see a bold claim with no evidence, or facts to support it.
"RKH is on a verge of issuing life changing news"
All I'm saying is a lot of posters post "this is dog sh**e, insolvent blah blah blah" others post "100p on production!!".
Other posters give balanced views, quoting sources or their own expert knowledge in the field. I would personally prefer to read those posts rather than the endless mudslinging, name calling, and unsubstantiated price/insolvent predictions which nobody could possibly know without a crystal ball. But that being said, everyone is entitled to post their opinions, which is all I am doing here.