Member Info for iWantThatOne

Very happy with the update today. I wonder at what point share buybacks cease to be the optimum use of capital, as the sp rises? And then how would the free cash flow be utilised? Reduce debt I guess.

HUM’s own corporate presentation contains a slide showing how its peer group are valued. At 200kozs pa, HUM would slot in amongst peers valued at c$300-350m, or c3xEBITDA. That implies a share price of 30-35p once debt is paid off in two years. Dugbe is in addition. So I see 20p later this year and 30p next year for starters, with a significant amount to add for Dugbe from next year - c10pps if sold or more if retained (but that will take time). The mines need LOMs longer than three years, obvs, and meaningfully longer should improve the valuation.

The 8bn payments business is said to be growing at mid single digits - that’s extra revenue. Add the Tier 1 deal to be launched mid-‘24. The DVM deals concluded in ‘23 (including those signed in Dec) will add to the total. 7x new DVM deals in the pipeline compared to one year ago - aso extra there. And Ani Malhotra indicated he’d probably have been ok with the original ‘24 targets, which have been set to “restore credibility”. I think they’ll comfortably beat the consensus forecasts.

I found this morning’s update fairly reassuring - fuel has arrived, mining is ramping up, Kor ramp up schedule also remains intact. I hope HUM has tried to reshape the debt repayments this year as that would really help - and Coris has been supportive so far. Q2-4 would see c45k ozs pq I reckon (20k Yan, 25k Kor) at c$600 margin, so $27m pq which would just cover reshaped repayments if Q1 is removed. Meanwhile Q1 will see much lower production at higher AISCs, probably making zero at best, but the equity raise is there to cover the difference. Again, this year it’s all about fuel supply, getting Kor up to speed and repaying the debt. Today’s announcement says there’s a lot to do but the company is in the game.

They wouldn’t put $2m into Dugbe right now if they felt every cent might be needed to support Kor getting up to speed.

“Earlier in the week, a ship carrying diesel oil had docked. The government said on Friday that, thanks to this arrival, the tanks had been filled and now contained more than 30,000 tons of diesel oil…..According to the authorities, this filling had been possible as a result of the accelerated rehabilitation of damaged infrastructure. “

This from Sputnik News dated 14th Jan. Hopefully some evidence of diesel being somewhat available. IMO it’s all about the fuel. Get the mining fleet going full pelt, dig down just a few more metres, hit the ore body, get up to nameplate ASAP.

Singer’s new share price target is 220p, reflecting the reduced revenue forecasts for ‘24. Given the company’s forecasts are very conservative, as discussed plenty below (ie they can’t afford to miss for a second time, eg due to a delayed major deal), then there should be plenty of opportunity to surpass the forecasts IMO. As Larbey says in the video, revenue flows 90%+ to the bottom line.

I think Simon Thompson has it wrong. The SP crashed on the day of the TU when consensus EBITDA was missed and some were hoping for outperformance. Analysts’ projections for ‘24 had not been issued at that time. And we know the reasons for the miss - changes to revenue recognition, a Tier 1 delayed client and some specific issues relating to the integration that had been missed. Nothing there to suggest the business is hitting any problems - indeed I was told the business is definitely *not* seeing any slowdown. The costs expended in setting up some of the new DVM clients late in the year had met thresholds for revenue recognition but weren’t included due to these new internal rules. So it’s not a case of excessive costs to support these clients. And BGO management has been very clear that cash generated is going to be reinvested in the business to seek to make the platform the de facto industry standard - this is why profit appears low in ‘24 in my view. The benefits will become very evident in due course.

I hope the CFO will not mind me repeating verbatim this part of his reply to me: “….please be assured that the whole team here is beating itself up that a good year has gone South from some last minute items. We are intent on improving during FY24 and that begins with explaining the position to our shareholders.”

If a bid had actually been made then an RNS would have been issued, so I suspect this is just the Takeover Panel trying to properly represent the situation AVO is in, rather than anything concrete. Not sure how the Panel has reported the situation before now.

Meldrew, was that in a conversation with someone at HL?I’m also with HL, my shares too have a value attached (though I haven’t noticed if this ever went to zero) but there’s no message about any takeover. Perhaps just someone misinterpreting the share suspension?

As it happens, this afternoon I got a reply from the CFO to some questions I had on the Trading Update. Tbh there’s little to add to Martin Flitton’s note below, but in summary: no cash call required; v strong pipeline; revenue shortfall partly due to DVM deals concluding only in December; acknowledges the need to build credibility; strategy is to build balance sheet and repay NHN loan but beyond that go full-on to win the subscriptions market and become the market leading platform.

Really good note, thanks, this supports my rough calcs of c$17m EBITDA as a bare minimum. Now need to wait for six months to check they’re delivering it! Ho hum. Chance to top up.

So let’s see - is it reasonable to say that “underlying” EBITDA for 2024 should be at least the $5-6m done in ‘23; plus the $1m for the FX issue that will unwind; plus $1m for the legacy cost of sales that won’t recur; plus $10m expected courtesy of the DOCOMO acquisition and integration? That’d be $17-18m. And that ignores improving margins due to the DOCOMO platform decommissioning plus any natural growth from deals completed in ‘23. And that assumes no other growth in revenue. So “underlying”EBITDA should still be excellent. The fact that the company is choosing to reinvest much of the free cash flow to boost future returns, given the once in a lifetime opportunity to capture the market and build a unassailable position, doesn’t deflect from this.

“Strong cash generation” but only net positive cash in FY 25 implies that EBITDA FY24 will be lower than previously expected, almost certainly because they are putting lots of resources into building the DVM business. With 7x the enquiries compared to 12m ago, this does make a lot of sense. I’m pretty sure the company will clarify this very soon. However they have completely failed to communicate this to the market properly with the results we see today. This has been very shoddy.

I don’t think that’s right, the loan was to accelerate growth opportunities. Also the interims just 3+m ago stated 2024 would see strong free cash flow generation, and one year ago the DOCOMO integration was expected to provide an extra $10m EBITDA in ‘24. Finally, the company could just rein in its spending on DVM if it looks like the cash will run out. So I just cannot see there being the need for an equity raise UNLESS they see the opportunity as being so compelling that it makes absolute sense.

Surprising number of sells today - a huge number, though you can’t believe the stats. This for a company that thinks the super-bundling market opportunity is “vast” and it has the potential to operate the de facto market standard platform. FWIW I think the investment opportunity here is still excellent but pushed out a little.

It’s clear a lot of cash has used (much of the loan plus working capital), so I think the company needs to come out and state very clearly what the strategy is, and that cash reserves are sufficient.

I should try reading the RNS properly instead of jumping in and out…..I notice now that Paul Larbey says that the synergy savings have been reinvested in the DVM. So perhaps a conscious decision to accelerate, given the market opportunity. Fine, but you have to signal that ahead of time, and be more open about it. You can’t just arrive at results day and surprise on the downside.

On further reflection, costs appear to be c$20m in H2, same as H1. What’s happened to the integration benefits? $2m will be the unexpected cost of sales for the legacy business, but I expected more savings. That plus the c$4m revenue shortfall at 90% margin would virtually explain the shortfall in EBITDA I guess (Singer had c$12m compared to actual $5-6m I think). Being squeezed at both ends.

Disappointing TU, but lots of positive momentum. Certainly doesn’t warrant a 28% price drop, that’s crazy, especially when much of the shortfall in revenue and EBITDA seems to be timing and FX-related. Some confidence-rebuilding needed.