The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Anyone find a recording of the Cotect update?
Perhaps pointless, but my effort of theorising what the selling could be, I welcome if anyone has any other ideas or further research on the below:
1) Selling of HyproMag consideration shares?
9,742,031 shares issued as part of £1m share payment. Statutory hold period expired 3rd December so you'd have thought this would only explain selling after this point, but I don't think this stops them from forward selling or shorting in advance of this expiry and then offsetting the short with their holding. Whilst the RNS mentioned a 1 year lock-up until August 2024 I believe these lock-ups are very often ignored and aren't enforceable.
2) Talaxis?
Could be using it's shareholding to "make a market" or keep the share price where it is? It isn't uncommon for very large shareholders to use a portion of their holding to go against the direction of the market to avoid spikes. But the selling was initially bringing the share price down to 8p so if Talaxis perhaps it's more of an exiting or another strategy.
Does anyone know much about Talaxis? It's a subsidiary of Noble Holdings Group, which seems to be now called Noble Resources. Looking at their website / accounts, Mkango looks to be tiny compared to their core assets. So I doubt they have any need / interest to sell or make a market.
Appreciate Talaxis / Noble operates in China, but looking at the Board I doubt there's a sinister "China influence" at play.
3) Other shareholders selling?
Could it be 4.66% shareholder Steward Newton, who didn't participate in the latest fundraise (and hence notification of holdings RNS showing reduction in shareholding), selling down? From what I can see he bought in 2021/2022 at 25p so he wouldn't be taking profits.
Or Mr Michael Geoghegan who's initial notification was 4.04% in Nov'21 and MKA website shows 3.81% latest.
Again all rather pointless but interested to know if anyone has any other ideas on this
Julian Treger (Cotec CEO) once again very bullish about Maginito in their webinar update on Friday. Some of his words below:
- Already starting to generate revenues in the UK
- Very promising discussions with members of the US government recently
- Over the next couple of months we expect to progress the initial contacts we had with potential e-waste partners [highlights potential newsflow next year]
- All signs are that the US government are very keen on this
- There are lots of other industry players, OEMs, which are intrigued with the idea that we can bypass the Chinese restrictions and recycle the waste we already have within our economies to create new magnets
- Very confident and very excited about the way in which this business is going to develop in the next 12 months and the enormous value which we think we'll be able to create for Cotec shareholders through this investment
- Ultimately we think Maginito alone will result in a value many multiples of the current market cap of Cotec
- The US joint venture has the potential to be worth several hundred million dollars
For reference, the Cotec market cap is £23m. Cotec own 20.6% of Maginito and effectively 60% of the US joint venture.
His words say a lot about the undervaluation of MKA (£28m market cap) right now.
No I wouldn't get your hopes up on an RNS. I know where some of the buying volume is coming from (perhaps 30% of todays volume so far) and it's not driven by an impending RNS, it's just position building. I suspect there are a few who have waited for higher volume / signs of seller exhaustion to build a position
That being said, obviously it's a rich newsflow period in the next couple of months
Just a point of reference, but helpful to see Cotec's Q3 report (released today) shows a revaluation of Cotec's 20.6% stake in Maginito to 9.5m CAD which puts an effective valuation on Maginito of £27m and MKA's 79.6% stake at £21.6m or 8.9p a share.
A point to note is Cotec doesn't attempt to put a value on the US Joint Venture i.e. it effectively excludes this value. Which perhaps helps to explain why the Cotec market cap is 38m CAD vs it's reported NAV in these latest accounts of 30m CAD (of which Maginito is 9.5m).
Sort of agree. There's:
1) price of last transaction which is what Cotec currently use in the accounts and what you're referring to
2) what the market values it at. I.e. does the market agree with NAV or does the market apply a discount / premium because of a belief that management has overvalued / undervalued the asset
I would suggest 2 is the most important. Typically for asset managers (which effectively is what Cotec is) you'll see the market applying a discount to NAV. Interestingly the market values Cotec above it's NAV (currently +50% premium vs Jun'23 value of net assets). Clearly Maginito makes up part of that NAV. Don't know how much of the premium (if any) is attributable to Maginito though.
Either way at some stage you'd expect to see Cotec investors interested in MKA given the "cheaper" valuation. I can't see the share price staying at these levels when this all becomes more transparent.
For me one thing which might hold back a re-rate, and very much welcome anyone's view on this, is whether MKA is burning a lot of cash still and will need to raise money again soon. Difficult to know when cash flows from recycling will become positive and cover the corporate costs (and in the first instance if there is significant working capital requirement which will needed to be funded)
Bonker - when you say 8p is 1p above marked to market valuation how did you get to that?
The notes I have down is:
- The recent conversion of £2m loan into 10.6% Maginito equity values Maginito at £19m (but based on Feb'23 valuation principles)
- Which infers MKA 79.4% holding valued at £15m or at c.6p (but based on Feb'23 valuation principles, see below)
- This £19m Maginito valuation was agreed in Feb'23 and the "live" value must be higher (e.g. purchase of HyproMag Germany, US JV progress, MSP announcement etc)
- The latest Cotec accounts I can see (Q2 Jun'23 accounts) show Maginito valued at cost rather than marked to market
- The market values Cotec at around CAD40m which is is notably higher than it's latest reported NAV (Jun'23 NAV of around CAD26m which includes Maginito but doesn't include the US JV as a separate asset yet)
- On the September Cotec webinar which Julian Treger did, he mentioned that they think the Maginito US JV already has a value which dwarfs the market cap of Cotec (i.e. the CAD40m / around £25m market cap).
- On the October Cotec webinar Julian Treger spoke about the Maginito value on their books requiring revaluation given the developments since the latest valuation was agreed (but I'm not sure how this will be done; perhaps we'll find out in the Q3 Cotec report which last year was released 4 November)
Given Cotec have 5 or 6 assets it's hard to know how Cotec investors are thinking about or valuing Maginito & the US JV. But a good sign that the Cotec market cap is greater than latest reported NAV. Please correct me if I've got anything wrong!
Is someone able to advise (@GLR perhaps you know?) on the below:
- The DFS RNS on 5 July 2022 has a table showing pricing assumptions for first 5 years. From this am I right in thinking the DFS assumes an Nd oxide price of $210/kg ? The text before the table references pricing of $156.8/kg in 2022 increasing to $215.5/kg in 2025 and $266.0/kg in 2035.
- Does this compare to current pricing of $88/kg per Trading Economics and $75/kg per Metal.com?
- Hopefully I've got the above wrong, but if not does this not make Songwe uneconomical in current pricing?
It was interesting hearing JT (in today's Cotec talk) say he thought the JV already has a value which dwarfs the market cap of Cotec (c.£26m?) and he expects to make 100s of millions of dollars (albeit not sure if he was also referring to future JVs they are planning in iron ore & copper space).
He mentioned key part of Cotec role was managing [third party] funding which will involve continued marketing. Also mentioned seeing increased interest from investors. Eventually you'd have thought this will lead to increased interest in Mkango & share price going up
Alamo55 - please could you elaborate a little more on what this info is / when you think this update will come out. Is it Avacta specific or positive for Abdx also.
Thanks in advance
Good post TeelaBrown. A few points below I suggest considering. Most importantly, I would argue that you should be using 157p per share not 128p per share in your return calculations, and therefore the upside is even greater.
The current sum-of-parts valuation of 128p per share is based on: (Afterpay market capitalisation x Clearpay proportion of Afterpay business x TSL's ownership in Clearpay) x 20% liquidity discount + cash on TSL balance sheet and other liquid assets
The few points I'd add are:
1) Most important point: the 128p per share includes a 20% "liquidity discount". This is purely an accounting concept and would not apply when the transaction occurs. Excluding this discount the value is 157p per share. This better resembles the value of Clearpay (+ the liquid assets on Thinksmart's balance sheet) if someone were to buy it today.
2) The assumption used for the Clearpay proportion of Afterpay business is 10%. This was determined by the "third party global professional services firm to independently value Clearpay" as part of the June 2020 Thinksmart accounts. This will evolve and one would expect this 10% assumption to be conservative at June 2020. Roll forward to now and this should be very conservative given the high growth of Clearpay vs Afterpay businesss. By the time Afterpay buys Thinksmart's stake in Clearpay it should be higher.
Context: for the quarter to June 2020 Clearpay made up 5% of Afterpay group sales. By November 2020 it made up 10%. One would expect this Clearpay sales % to continue to increase vs the more mature Australian / New Zealand core business (noting there is also the US business which is growing at a rate between the mature AUS / NZ business and the very young UK business).
3) The Thinksmart legacy business, which has been allocated NO VALUE as part of the 128p / 157p per share calculation, is winding down but is still generating cash. Any cash generated would be incremental to the value stated above. The Board is also "exploring options to realise value in our proprietary payments technology" which would be incremental to the above value.
Hope that's helpful, open to any comments
Am I right in assuming that there has been no participation from the Board / Management - given it isn't referenced anywhere in the announcement?
I'll probably still be a buyer, but not the best endorsement if they aren't buying at "discounted price"
Good to see Holland & Barrett products have been back in stock online (having shown as sold out a week ago) and selling well.
Not sure if this has already been shared here but in case it hasn't it's worth sharing that Holland & Barrett advised me they are bringing in a new range called SlimExpert in the new year (which contains OptiBiotix ingredients). They couldn't confirm the date but said keep an eye out on the website / stores.. hopefully that means a decent launch with some new marketing.
Ewan - any update on the company progress recently? You mentioned the April company email was positive, what were the May and June updates like?
Thanks
Misterh - where did you get the information that one of the valuation principles is the market capitalisation of Afterpay? I've looked in the various RNS's and reports and didn't see info on what the valuation principles were, but perhaps I missed it?