George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
I found JB (former NTBR chairman) on LinkedIn and spoke to him. He's in "no rush to sell" his remaining shares which are now a "small part" of his portfolio and he is "happy to hold them". According to Hybridan, the stock is trading at 4x next year's earnings.
According to Hybridan in their latest research report, “Northern Bear is currently trading at 4.2x P/E multiple based on our forecasted earnings share of 14.5p for FY25, the first full fiscal year following the share buyback” and at 2.6x EV/EBITDA compared to 5.0x EV/EBITDA for the two cited comparable companies, Epwin and Kinovo.
“In summary, we think that the investment case for Northern Bear’s shares is attractive given the limited risks, attractive valuation, and high dividend yield. The majority of Northern Bear’s revenues come from the public-sector including the NHS, councils, and schools. We note that 10-15% of revenues come from new build housing, albeit in the North East and Yorkshire markets which have historically been less volatile than the South East. Most importantly, we think the buyback of up to £3.1m speaks of the management and the Board’s confidence and commitment to the growth of the Group.”
I was also pleasantly surprised to see that the cost of the buyback is £200k rather than the £400k previously reported.
Apologies, total cost rather than the cost of administrative expenses alone! Yes, and I agree they could have undertaken this offer years ago or continued to pay the dividend without pause. I disagree about any concern regarding gearing since net debt would increase to £2-3m, whilst twice the half-year operating income just announced is £3.4m to £3.6m, so future gearing is under 1 time operating income.
The below math is not correct. The buyback offer will cost 2.1p per share (not 18.5p per share) since the £400,000 maximum cost (which seems characteristically over-conservative on the part of the Company) divided by 18,725,276 shares in issue equals 2.1p which seems like a reasonable cost compared to 33% EPS accretion forecast by Hybridan.
Per the Hybridan research report (one assumes, based upon guidance from management): "We also assume a dividend payout of 5p per share (including a 1p special dividend) declared for FY23 to be made in FY24." 8.8% dividend yield at today's midmarket share price.
Hybridan released its research report following yesterday’s tender offer announcement. Their EPS estimate for next year “increases from 10.9p to 14.5p or +33% EPS accretion” assuming the full buyback whilst the P/E ratio declines to 3.9x at today’s midmarket share price. Assuming the full buyback “yields a valuation of 117.8p” or “an upside of 108%” based on their DCF analysis.
Hybridan further assumes "a dividend of 5.5p for FY24 and 6p for FY25".
Hybridan released another research report today following the results, increasing their DCF valuation to 101.4 (up 2.3p from their 99.1p prior DCF valuation). One of the comparable companies used in their valuation for both reports, Sureserve Group (SUR), was acquired by private equity on 11th July.
Hybridan initiated research coverage on Northern Bear this week in a report titled Ready to shine: attractive valuation, high dividend yield and predictable profitability. Below are excerpts from the report.
Our DCF model based on a WACC of 13.31% and a 3% terminal growth rate yields a valuation of 99.1p, an upside of 100%. We believe Northern Bear’s business performance and dividend payouts, coupled with better capital market visibility over time, will gradually drive up its share price.
Northern Bear is currently trading at 0.15x EV/sales, 2.58x EV/EBITDA adjusted and 6.26x P/E multiple based on our FY23 forecasts and the closing share price on 10 July 2023.
Notably, even at our DCF valuation of 99.1p, which is approximately double today’s share price, Northern Bear still would be trading at a discount to the most relevant comparable companies.
[Comparable companies cited in the report include Sureserve (SUR) at 7.2x EBITDA and 14.1x P/E; Water Intelligence (WATR) at 6.6x EBITDA and 15.6x P/E; and HomeServe acquisition recently completed at 17.7x EBITDA. Private equity is active in the specialist building services industry at c.13.9x EBITDA, citing the Lincoln facilities services index.]
call it what we will (royal british shell or simply shell plc) but it is one of the cheapest oil companies out there at 4x EBITDA and 7x earnings with activist pressure to spin out the petrol stations or unlock value with other manoeuvres after simplifying the structure.