The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I would tend to agree but they have seriously upped the quantities over the last few days, so what would explain that? I also struggle to see what else they might do with all the cash. They're not acquisitive and Morgan seems to prefer to roll out organic growth quite cautiously. There are hundreds of millions available, with more coming in thick and fast. In a highish interest rate environment a big cash pile is ok but I'd rather see buybacks, especially when the shares are still quite cheap. I don't see why they can't spend the windfall from interest income on buybacks and use other profit and existing cash to fund growth.
They are making exactly £20m per quarter in interest (2bil X 4% ÷ 4). There are 65 working days in a quarter and 20m ÷ 65 = ~ 300k. So with the sp at 2000 they can buy 15,000 shares a day indefinitely from the interest income alone. If they do that, hard to see the SP doing anything other than keep going up...
I'd say I nailed this decision. Congrats to all those who sold out. Bad luck for any holders.
The brokers have consistently got this company completely wrong and the shortest have consistently got it right. When this IPO'd the brokers were forecasting a CAGR of 64% (and that was prior to acquisitions). As it is, EPS fell by about 64% between 2021 and 2022 despite spending 600m on acquisitions. I own about 30 companies and this has been the worst of the bunch. The lesson I've learned is not to buy things based on potential and broker forecasts. Consistent profit growth and rising dividends are the only things that matter and on these grounds this company is an abject failure.
In April 2022 they forecast revenue in excess of $500 for 2024 and margins to have increased from the 32-36% they forecast for 2023. The latest results are miles off. And they blame China which they've been trying to get out of almost since they first listed. And we're in the middle of an AI boom they say they're right in the middle of. It's pathetic. Anyway, telling themselves these results are ok are lying to themselves.
This company consistently rises on hope and sinks on results. Let's face it, it's a serial disappointment. All around it competitors are booming on AI but AWE manages a profit warning. I also can't stand the way they report. Cumulative revenue over the lifetime of the company, bookings, design wins... It's all irrelevant when you've gone from net cash of 500m to -100m and are issuing profit warnings. I've held for years now and I'm sick to death of this terrible company.
I'm always amazed how shorts so often target companies with very weak sentiment whose SPs are already very depressed. Sure, you might push it down even further but there's the danger of a turnaround. It could also be here that they're betting on AI disruption, but it seems to be it's too early to tell how that will pan out. Personally I think that for a company to be growing organically in a difficult context and to be generating tons of cash on a p/e of 5 makes no sense. Fair value would be somewhere in the £10-16 range. Under £7 is still a bargain though I'm not necessarily expecting a rapid recovery yet. That will probably only happen if and when we get into serial interest rate cut territory.
Surprising too see director sells though. Maybe it was just to raise some cash.
I think there's a reasonable chance that the recent dip in the SP to the 15-18 range will prove similar to the one of summer 2020, which was followed by a long rally. I'm hoping the main market listing and growing awareness of how good a company this is will power this up to around £35 which strikes me as a more realistic valuation.
Can now buy at 18.80
I agree. This has breakout written all over it. I just tried to buy a few but there's nothing available... I can sell at 18.50.
Looks like I was wrong about this one maxing out at 23%. It's now nearly 29%. So the SP would have to rise 40% to close the gap. Buybacks are obviously one way forward. At a certain point in ridiculous cheapness it would even make sense to sell holdings to buy back your own stock. Not sure how often that happens but there's definitely an opportunity here for some sort of arbitrage.
I'm trying to work out whether to hold or sell my remaining shares, having already sold 40% this morning. I'm tending towards sell on the following grounds: 1. I'm not sure Mondi can outbid IP's bid; 2. At 3.93 it's close to IP's bid already and I don't want shares in a US company; 3. It's not obvious who else might enter a bidding war; 4. If everyone walked away, as they did with Curry's, the shares could drop back to say 3 quid, so downside risk seems higher than upside. Any decent counter arguments?
Amazingly the SP to NAV divergence is still widening. It's now 27%. So for 1.89 you get 2.59 worth of bluechip green investments. Interesting to see how this one plays out. On the face of it, though, it's a real bargain.
I think viewing this as an FX company is the basic mistake. It makes more sense to view it as Fintech and it is sometimes described as such. A big part of the company's success is it's technology platform and the ASS could well drive growth going forward. Personally I'd compare it more to Wise than to, say, Argentex. But then the incredible fundamentals come into play. Wise made a PBT of 145m Vs 116m for Alpha. But Wise has a market cap of 10 billion. Wise may perhaps have better growth prospects but I also think it may face more competition going forward. But yes the combination of amazing fundamentals + huge growth prospects + interest rate hedge + great management + bargain basement price makes this by far and away the best investment I can see right now. It's 9% if my portfolio but I'm still going to add as I struggle to identify any major downside risk, all things considered.
You're right. No one would!
There's been a lot of focus in the chat about the treasury income and how to value Alpha. But it's worth thinking about it's growth prospects too. The land and expand strategy has great potential. As it is, London generates £35 mil of the FX revenue. With offices in several European countries, including Germany now, plus Sydney and Toronto, the hope is that these can replicate London's success - bearing in mind they still consider London in an early growth phase. They also reference using the Madrid market as a base for other Spanish-speaking markets, which could bring offices in south America into play. Longer term, there's no reason they couldn't expand into Asia, Africa, and the US. They've made a few mistakes (Toronto) but it's a learning experience and if most of these offices come good then there's probably scope for increasing revenue by 10-20x. If you think about where this company could be in 10 years time by doing little other than repeating a winning formula, it's really very exciting.
A few points:
1. It is indeed amazing that for FY2025 (hardly the distant future) net cash could equal half market cap. I wonder by when it would be 100%? End FY2028?
2. Divi increases are modest and the buyback is limited to 20m. I wonder what they'll do with the war chest. My suspicion is they're working on very ambitious expansion plans which will be announced in May with the move to the main market. Could be exciting. Personally I'd like to see them get a licence for the US (and then list on the Nasdaq with a market cap of 10 billion).
3. I'm not sure it matters how you value it. Whichever way you slice it it's a bargain. But yes it makes no sense to do a standard P/E valuation on a company that will soon have have 50% of it's market cap in cash. I also think to value the net treasury income at 3x is far too low, especially given it's a stream that should increase as it grows and in the meantime is so rapidly shrinking the market cap minus cash equation.
Just wondering but is there any rational explanation for this fall? The results are too complicated for me to travel through in full but the headlines all seem very positive. It looks to me like the fall is being driven by sentiment, technical factors, or perhaps forced selling. Personally my only concern here is geopolitical. That aside I think this is a screaming buy. I also take comfort that the initial market reaction was positive. It suggests to me that the fall in the sp has not been driven by the results themselves but by the other factors I mentioned. One final point - it's worth noting that the COVID low was 7.10 on March 18th, almost exactly four years ago. That could provide some support. Beyond that the graph suggests a potential fall down to the 5 quid level. But given the numbers, I can't see why that would happen. Interesting also that most brokers have price targets around the 15 quid mark. Sure, you should take those with a pinch of salt but it's worth noting that this has to be the FTSE 100 share with the biggest divergence between broker targets and SP. Suggests to me again that this really is a bargain.