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Hi Sturdz,
The results presentation can be found here:
https://investors.manolete-partners.com/results-reports/results-centre
You'll see (p5) that they've had a major step-up in specialist lawyers post-IPO, and have a couple more in the pipeline, but I'd expect them to pause now while they get their Regional Network up to capacity and streamlined. Currently, insolvencies and bankruptcies are down (see p 9) as the furlough scheme and bounce-back loans keep firms afloat. However, if the predictions of a large wave of post-Covid insolvencies and bankruptcies arrives, it is likely that a further ramp-up of capacity might be required to satisfy demand. They should then have some advance of this, there will always be a delay whilst the Insolvency Practitioner (IP) is appointed, evaluates the firm and decides upon an asset recovery plan.
In the meantime, the next few reporting periods will reflect the previous ramp-up and we are yet to reach full capacity. This clear line of sight, and current low valuation, de-risks my investment - which suits my conservative stance.
Regards Maddox
Spot on, but you'll also notice that MANO tend to get their 'costs', that is, their investment in the cases back early. On this one today it only cost £120k and they'll get that plus £1.25m back next week. On the cash front, they have only drawn £8m of their £20m debt facility, and an additional £20m if they want it - so plenty of capacity to fund this current ramp-up.
The payment schedule for this Significant Case is more typical of what we can expect. MANO have 40 cases with anticipated gains between £1m and £40m, so whilst they take longer to complete the ROIs are huge but it'll take the defendants time to liquidate assets to settle. We should start to see these close on an increasingly frequent basis. So the newsflow will also benefit as well as the cashflow.
I've published an article on Stockopedia on MANO and the evident anomaly between the share price and its value: https://app.stockopedia.com/content/manolete-partners-mano-a-price-versus-value-anomaly-updated-with-latest-results-696638?order=createdAt&sort=asc&mode=unthreaded.
You can a two-weeks trial with no up-front payment if you haven't got a subscription and want to read it.
Regards Maddox
Spectacularly good 1H21 results today:
· Revenue growth of 153% to £19.0m (H1 FY20: £7.5m);
· Gross profit up 44% to £9.5m (H1 FY20: £6.6m);
· Gross profits on realised cases up 440% to £4.0m (H1 FY20: £0.9m);
· EBIT up 47% to £6.6m (H1 FY20: £4.5m);
· Profit before tax up 49% to £6.4m (H1 FY20: £4.3m);
· Profit after tax up 49% to £5.2m (H1 FY20: £3.5m);
· Basic earnings per share up 49% to 11.8 pence (H1 FY20: 7.9 pence);
· Cash generated from completed cases up 45% to £4.2m (H1 FY20: £2.9m);
· Interim dividend proposed of 1.17 pence per share, 134% higher than 0.5 pence per share paid for H1FY20
· Investment in cases has grown by 55% to £39.3m since 30 September 2019 (H1 FY20: £25.4m);
The deployment of IPO cash to expand capacity and ramp-up the business is starting to show in these results. Looking at the leading indicators I think we can see that the growth trajectory is set.
Hopefully, with the share price at gain levels this will be the catalyst to spark a re-rating.
Simon Thompson tipped SRT in his Investors Chronicle column today as a 'deep value' buy. I'm not sure a deep value investor would agree with the use of that term - more a speculative buy with a huge risk/reward profile. The '£550m validated sales pipeline' for a firm with a mkt cap of £62m that looks anomalous. As Simon says 'I estimate that these contracts should contribute upwards of annual revenues of £50m and operating profit of more than £10m. ' this is in addition to the transceivers business.
https://www.investorschronicle.co.uk/comment/2020/07/13/deep-value-buys/
Unite has acquired a new 300-bed development site in central Edinburgh 'delivering a development yield in line with the Company's enhanced 8.5% target for provincial markets'. This follows three new sites recently acquired in London.
It appears that Unite are taking further advantage of Covid-19 impact on the wider-Commercial Property Sector to pick-up prime sites at a reduced prices.
Unites' existing development pipeline of 5000+ beds will be delivered on a target initial yield of 6.8%. Whereas they are now targeting enhanced returns on new developments with yields on cost of 7.5% in London and 8.5% in provincial markets and 100 basis points lower for University partnerships. The Covid cloud may thus have a silver lining for Unite.
BBC Radio 4 Today Programme interview with David Spiegelhalter, Statistician and Chair, Winton Centre for the People’s Understanding of Risk, Cambridge.
“If we look at school kids there has been three deaths, fewer than die of flu each year. If we look at fifteen to twenty four year olds, there is about seven million of them, thirty two deaths nearly all of those people with pre-existing medical conditions. So there is about one in a million healthy people that have died from Covid.” “This is that same risk that everyone faces every day from dying from non-natural causes, and we find that quite tolerable.”
“we have to distinguish between the risk to young people, that is extraordinarily low, and the risk to others.
Https://www.bbc.co.uk/sounds/play/m000k8bv 1:54:00 right at the end to the programme.
The focus should be on creating a big campus bubble and then protecting the staff that might be vulnerable and those that might spread the virus outside of the uni bubbles. Let the students have a normal university experience and normal tuition they are at virtually zero additional risk from Covid unless they have pre-conditions.
Jo Johnson Con MP, former UK Universities Minister(and Bojo's bother)interviewed on BBC Radio 4 Today Programme 15 June - he sees a 'hostile environment' for foreign students coming to the UK, listen 2:34:00 in:
https://www.bbc.co.uk/sounds/play/m000k2s0
"there is a lot of red tape and off-putting regulations that reduce our competitiveness in the market for international students, we should remove that because international students are good for our universities, good for our economy and also good for the learning environment of our domestic students - there really isn't anything not to like."
"As a country we should be going all-out to attract them, they are one of the strongest elements of soft power we have as a country, and if we're serious about Global Britain, we should be seeking to maximise the number of Intl students in our system not try and put them off."
He's written a report published by the Policy Institute at the University of London and Harvard Kennedy School:
https://www.kcl.ac.uk/news/how-government-can-help-universities-bounce-back-after-covid-and-brexit
A sensible move last year reversed "the frankly disastrous decision" (made in 2012 by then-Home Secretary Theresa May - also responsible for the Windrush Scandle) that forced overseas students to leave four months after finishing a degree. He argues that the Post-Study Work Visa should be doubled from the current two years to four to make us competitive again against Canada, Australia and others.
"This would be a total game-changer, this would be sensational for the ability of our Universities to go an market UK higher education."
JJ sites his brother as a supporter and he has received his report.
To put the risk that Covid presents to students I'll point to this analysis by David Spiegelhalter, Statistician, communicator about evidence, risk, probability, chance, uncertainty, etc. Chair, Winton Centre for Risk and Evidence Communication, Cambridge.
https://medium.com/wintoncentre/how-much-normal-risk-does-covid-represent-4539118e1196
It shows that the risk of death that Covid presents to 20 - 24 year olds is lower than the normal risk of death that they face. The chance that a young adult of that age will die in that same year is normally low at c. 3 in 10,000. The risk from Covid is even lower at c. 1 in 10,000. Now you are probably thinking Covid is a new risk factor so you should add these risks together. But no, these figures are averaged across the group - whereas the risk is likely to be concentrated in those with underlying health conditions. So there will be overlap in these risks and the threat to healthy individuals will thus be even lower.
Putting the Covid risk further into perspective we have another report:
http://www.youngpeopleshealth.org.uk/wp-content/uploads/2019/09/AYPH_KDYP2019_FullVersion.pdf
This shows that more than half (56%) of the normal risk that students face is from potentially preventable causes - that largest category being suicide, followed by accidents, transport accidents, then drug abuse and lastly assault. It thus appears that Covid-19 presents far less a risk than other risk factors and the extreme social distancing measures that are going to ruin their uni experience are not proportionate. They want to meet new people, socialise, have fun, party, and put the world to right into the early hours of the morning.
If universities don't provide students with the full-fat student experience they will not want to spend the money going away - its not just about the studying or the qualification - it's the whole experience that matters.
Regards Maddox
'A new survey of international students by the British Council has found that nearly 14,000 fewer students from eight countries – including China, Singapore and Malaysia – are likely to come to the UK in 2020/21 in the wake of the coronavirus pandemic.
The decline of 20% in students from east Asia would amount to a 12% fall in overall international student numbers, causing a £460m loss of income from tuition and living expenses such as accommodation.
While the fall in student numbers appears smaller than some institutions are anticipating, one worrying sign from the survey is that nearly 40% of those coming from China – the UK’s biggest source of overseas students – have yet to decide.
“Prospective international students are facing a lot of uncertainty, but many are clearly trying to find a way to keep their overseas study plans,” said Matt Durnin, the author of a report for the British Council.
“There is a window of opportunity over the next two months to create a greater sense of certainty about the upcoming academic year. If responses are clear and quickly communicated to prospective students, UK higher education will face a much more manageable scenario.”
The survey of prospective students found that 29% said they were likely to delay or cancel their plans to study. A majority of postgraduate applicants said they would rather postpone the start of their studies until January 2021 than begin with online teaching in autumn, while 46% of undergraduate applicants agreed.'
https://www.theguardian.com/education/2020/jun/08/universities-face-460m-loss-from-expected-drop-in-east-asian-students-coronavirus
A few points to highlight:
>> Universities need to get their act together is they want their foreign students to turn-up; and
>> Students find online learning unappealing.
>> A 12% fall in foreign student numbers is bad but a lot better than some previous estimates.
This is a survey however and students' attitudes and intentions might change rapidly for better or for worse. Hopefully, Unis will wake up and smell the coffee soon. Students are at very little risk from Covid-19, they don't need extreme social distancing measures. The measures that are needed are to shield other vulnerable people that might interact with them, such as elderly lecturers, administrators, wardens, cleaners etc. Campus style Universities should find segregation a particularly difficult task.
Regards Maddox
UTG were very quick to respond positively to the predicament that both Universities and Students faced as a result of Covid. By waiving their contracts they will have given great relief to Students that will have been facing major stresses. However, at that point there was huge uncertainty as to what this and Covid would cost Unite.
Today's update provides a much clearer picture, albeit uncertainty remains, and guess what - the impact isn't as bad as first estimates, or anyway near as bad as the share price appears to reflect. Also, the mitigation measures that Unite are taking are producing results:
>> Cost-savings measures of £12 - £15m (on-top of £6m Liberty synergy savings);
>> Pay cuts of 30% for Directors and bonuses deferred (20% cuts for Snr Mgrs);
>> Development pipeline deferred to save cash; and
>> Switching focus on recruiting UK Students to displace the anticipated fall in new Intl. Students in 20/21 academic year.
This accompanied by reassuring comments from Richard Smith, CEO:
"We are committed to doing the right thing for our customers, colleagues and other stakeholders, despite the unprecedented times we face." and "We will emerge stronger from this challenging time, building on our enhanced reputation with students and Universities."
Having confidence in the management team is an absolute must for me as an investor. How a team responds to an unforeseen crisis is an 'acid test' moment as it reveals whether they can make the right often difficult decisions quickly and implement them effectively.
Unite have risen to the challenge and are clearly managing the crisis effectively and communicating well. This is an excellent confidence builder in the midst of this awful crisis.
Hope you all are staying safe, well and Covid-free.
Maddox
Quarterly valuation update on Unite's funds.
As at 31 Mar 2020 the two funds are:
USAF – Unite own 22% - like-for-like asset value decline of 2.2% for the year; and
LSAV – Unite own 50% - like-for-like asset value decline of 1.5% for the year.
The property valuations are directly linked to the rental income that they deliver. Obviously income has and will be hit by Covid-19 and the decisions that Unite have taken in response, specifically:
>> Free cancellation of rental contracts for the final term for students wishing to return home;
>> Significant reduction of income over the summer break period.
Unite's proactive early decision to forego rental income among other's will have been welcomed by their tenants. As Joe Lister says,
"our actions will ensure that we emerge from this uniquely challenging period with our reputation with students and Universities, not only protected but enhanced"
So, Unite are doing exactly the right things in response to Covid-19.
Hi Guys,
I'm having many more Covid-19 driven online conferences using a range of providers on-top of what I normally have - which is quite a few. The quality has deteriorated significantly - due I understand to bandwidth demand. It really has been difficult to communicate effectively on a number of these calls. If you listened to BBC R4 Today this morning - you'll have heard them having problems as well.
This bandwidth issue really plays to LoopUp's strengths, as uniquely,they route the voice channel over normal (PTSN) telephone lines - so are not competing for limited bandwidth.
Covid-19 presents a very timely opportunity for LoopUp - every 'cloud' as they say....
Regards, Maddox
Hi Guys,
In this market there is no knowing how low a shareprice might decline. However, the EPRA NAV at 31 Dec 2019 was 853p. Now this will be influenced by rental income and Covid-19 will have an impact. Now, their update on this on the 16th March stated that their sales for the next academic year remain at the same level as this time last year but there is going to be a negative impact on summer sales of otherwise vacant rooms. This is only 3% of revenue overall - so hardly significant in comparison with the sp collapse.
On the otherhand, we have greater clarity now on the exam situation for the A-level intake:
>> There will be no exams this year;
>> They will get their results in August 2020:
>> There will be an appeals process for students unhappy with what they are awarded.
My interpretation:
>> They award A-Levels based on predicted grades;
>> They will use external exam boards to deal with/oversee appeals.
>> A-level students will be able to go to University in the Autumn.
As always DYOR - good luck and hope you make the right decisions.
Regards Maddox
With the completion of the takeover of Liberty Living on 29 Nov an additional 72,6 million Unite shares were admitted to the stock market. This has thus lifted the market capitalisation significantly (Mkt cap ?on 16 Nov19 was £3.41bn (sp 1176p) on 7 Dec 19 mkt cap £4.49bn (sp 1234p).
???This together with the subsequent share price appreciation has led Unite's market capitalisation to rise to £4,84bn currently - where it is knocking on the door of the FT100 index.
The next quarterly review of the FT100 constituents will take place on the 11 March - so just three weeks away. As things currently stand Unite is larger than the bottom nine firms in the FT100 but ranks 6th from the top of the FTSE 250 index. So promotion is far from certain and Unite may just fall short and end up on the FT100 Reserve List.
On the other hand we may see a run-up in the share price as Financial Institutions position themselves to take advantage ahead of the Tracker Funds.
?Anyway nice to have a nag in this derby!
?Regards, Maddox
Excellent Q1 trading update today. This provides reassurance that the transformation is being successful and the investment is paying-off. Key points:
Recurring Revenue +10.7% - indicates that the SasS transition is proceeding at pace;
Total Organic Revenue +6.7% - better indicates the underlying growth rate (ignoring the switching of existing customers to SaaS contracts);
Sage Business Cloud +12.7% - indicating the strategic shift to a Cloud-based product offering is proceeding well. This is where SGE is 'perceived' to be weak and behind their competitors Xero and Intuit. In fact Sage are fast building a powerful Cloud business with an attractive offering of products built on a common platform (an IT service fabric as they describe it).
So, whilst we're conceding a slower growth in dividend returns whilst investment in the faster pace of transformation takes place - its working well and building future value.
We also have a return of capital once the SagePay disposal completes of c. £250m to come. We don't yet know how SGE intend to make this return however, if returned all in cash would equate to, I estimate, 22p/share (current div is 16.91p).
Regards, Maddox
ERGO's acquisition in US is a strategically significant move. Should allow ERGO to compete for larger contracts currently out of reach due to lack of US presence. Not cheap 1x rev but $10m affordable out of existing resources.
Regards Maddox
Mr Market and the majority of the brokers appear to dislike these results.
However, IMHO Sage are doing exactly the right thing and also exactly what they set out to do. Which is investing in sustainable long-term (high quality,high margin) revenue growth. This hits the margin in the short term. It costs roughly twice the annual revenue to recruit a new customer but you then get 10 years plus of that revenue from that customer. So it's a highly profitable investment but you pay for it in the first year - hitting the reported margin and slowing the growth in dividends.
Mr Market and the brokers analysts are being very myopic and short term. And there-in lies the opportunity for the patient far sighted personal investor. The shares are off 33p down to 708p as I post, and with a cash return in prospect from the sale of SagePay. So I'm buying.
Regards Maddox