Member Info for MB10

However you look at it, if a company can be self sustaining for cash, make a profit and grow that profit year on year, then it should attract investment. The brokers note is the first proper sign that lvcg has not just recovered from covid but has completely turned around. The awful comms from the company don’t tell that story at the moment (and yesterdays comms was but one small example) and the market cap has sunk to just a tiny £4 million (it was only £3million at one point yesterday) which for a profitable growth company is just ridiculous. Sure not everything in the garden is rosy, and pretty much everyone detests DC, and nobody trusts him as well as their comms are dreadful, but he has been working to out the building blocks in place especially for KPOP where lvcg get much bigger upside from these concerts. If the company was valued at tens of millions of pounds even I would accept all the moaning and whinging, but it’s not. It’s a tiny £4m market cap and by the end of next year the conservative brokers note says that the profits will exceed that market cap.

6 weeks ago the share price was pulled down significantly because of a placing fear, and plenty of the trolls came on to spread even more fear about a fundraising. DC made a clarifying statement that day, which made it clear there wasn’t going to be a fundraising and there hasn’t been one. Did the trolls admit that they got it wrong for spreading that fear? I think you know the answer to that already.

But here’s the gaping chasm on the communications, the last thing they said in an RNS was they were “in active discussions to replace the funding”. DC made a clarifying statement and was clear that those discussions were that he had deferred the StartArt consideration to later in the year and that would get them over the cash crunch until Madrid receipts were available in August. But they haven’t said a single thing about those changes in an RNS anywhere, so anyone doing research won’t know that. Same with the brokers note, it’s been buried on their website and announced via a tweet. How many investors have even looked at the lvcg website, never mind navigated their way to where the brokers note was published? Bottom line is that there’s hardly anyone that knows that new financial guidance has been issued that has turned the company around into a cash generative, self sustaining, profitable company.

IMO once the company actually start communicating this turnaround properly (actually not just properly, but at all!), this will become a very compelling investment. I’m still anticipating that this will be the turnaround stock of 2023.

With the share price at historic lows, 100% of investors are underwater (aside from a few who might have bought the interday dip yesterday). I can’t imagine a single one of them that’s happy with the share price. I know I’m not.

And to clarity my remark, it was aimed specifically at those who are not invested.

But I will agree with you that the publically portrayed position of the company is as you say, however there is a gaping chasm to the actual position unfolding. IMO it needs DC to get out there and communicate the change in direction of the company. It’s not rocket science.

No question that the comms are shockingly bad. IMO the publicly available information on the company and what’s actually happening are two completely different things.

But here’s a question on todays RNS, especially for the trolling crew. If the old auditors had actually found something that they were prepared to “resign” over and walk away, why did they apparently wait until LVCG found new auditors and got them to agree to take on the task in a way that there was no gap? Look at when the SNP party auditors resigned, they were left scrabbling about trying to find anyone to even take them on.

The reality is as JS says, the company were doing a planned change to the auditors to upgrade them to a top 10 auditing company, they had done their due diligence which passed with flying colours, hence why they agreed to take them on, but clearly a little more time is required for these new auditors to complete the audit, hence the delay. The old auditors were clear that there were no issues to be raised.

That’s a totally different story from those pushing the doom and gloom. Drop is totally unwarranted IMO, just means that there’s an even bigger mismatch between the share price and the value. But in a share with a limited free float, what goes down quickly can equally go up quickly once sentiment changes.

I’ll just finish by noting that you can judge someone’s true character on here by looking at what and when they post.

Exactly JS. There’s no question that their communications are an absolute disgrace.

What they mean to communicate and what they actually say ends up being 180 degrees apart. That needs to change if anyone is to trust them enough to invest.

But with a market cap of only £3 million there’s no way that this company is only valued at that, even if what was communicated this morning was the real story, which it’s not.

After over 5 years of the challenges of the early years of being a start up (from the IPO) and getting to the cusp of making a profit, covid hit and devastated the revenue stream of the original business. 3 new business areas were added during covid in potentially high growth areas, and the overall business had to effectively cope with 3 more start up challenges.

But now, after making consistent losses over the 5 years and investors funding the aquisition and the start up costs, lvcg is on the cusp of making a profit in 2023 and making significant growth in profits in 2024 (EBITDA predicted to grow by 250% in 2024) as well as being highly cash generative and becoming self funding and paying off all their loans.

That growth is based on some very conservative forecasts, so there’s plenty of upside potential to add to that, especially from live streaming. Then add that there’s a nice “moat” around the most profitable part of the business which is going to be KPOP as tiny lvcg have set up and exclusive relationship with SBS that guarantees good access to the bands and their management. You only have to look at Frankfurt to see how important that access is, but there are other operators that are struggling to get the access to artists too.

Let’s face it, that’s a transformation of the company by anyone’s standards, and even the conservative brokers note recognises an over 500% upside in the short term (target price 11p) Investing in a growing company with growing revenues, growing profits and building a business to sell is the holy grail of aim, and this comes in a company where the market cap is under £5 million. And whilst comparisons are never especially relevant, I noted a cash offer today for BOTB (which was a lockdown darling) based on a profit of what LVCG will generate in 2024, that valued BOTB at £50 million, which is a fair valuation for a company generating that sort of profit.

But of course the communications coming out of the company don’t match the story being unfolded. That’s frustrating for sure as the share price is walked down by the market makers. There’s obviously an overhang from a seller, but even if it is Miton, that overhang won’t take long to churn through IMO. And the poor comms from the company won’t last forever either, especially with the haranging that some of us are giving to DC. If you like that risk/reward then hold tightly until the price matches the value or add more, but honestly if you can’t see the transformation of the company and the value being generated it’s time to give up investing.

The brokers note valuation of 11p was based entirely on fundamentals of the earnings growth, and excluded sponsorship, merchandising and streaming (live or otherwise) making that a very conservative valuation.

Their prediction of the 2023 position was EBITDA of £1.251, net income of £0.14m and the cash growing to £0.899m which in itself is a pretty impressive turnaround for lvcg.

That makes the current share price chronically undervalued, never mind understanding what value to put on the stock of bricks and models (more than twice as much as the current market cap itself) or the long term partnerships and commercial agreements like 10 years of exclusive rights for formula E or Japan KPOP or, the partnership with SBS for supply of the KPOP artists. Frankfurt shows that those commercial agreements are clearly worth a lot.

But what if the actual budgets were even better than that. If Madrid and London sell out, those estimates for this year won’t just be exceeded, they will be smashed out of the park IMO. And if they have live streaming that could significantly add to that again (remember they get circa £10 per stream, so just 100k subscribers would add a further £1m profit).

So far what’s publicly announced via RNS is not the same story as the brokers note tells. That public position is that they are still in a cash crunch, funding is tight, that there are issues with Frankfurt and Japan, and there is still no financial guidance out there. That position will change, hopefully very soon. I’ve been talking to them about the webinar, so it is being planned, although frustratingly it’s still not announced. That can only be because they want to wait for the inclusion of some other news IMO before doing it.

Well I know from his previous trips and trying to connect with him, that his schedule was pretty packed. Add to that I expect that they will want to have a few of them together for the presentation if it’s to be meaningful. That and the time difference means that it’s probably better planned for when for when they can give it their full attention and (hopefully) properly publicise the change in direction of the company more widely than they currently have. But wtfdik.

I know they have been preparing for it, but DC was in Korea last week (not sure he’s back yet tbh) which prevented them from running this last week.

Except their reported previous holding is incorrect. As of 4 April they had 5.5%, so have sold 1.8m since then. I suspect that they sold most of those in April/early May and have only just realised they needed to post a tr1?

This article worth skimming. I don’t always agree with Charle’s analysis, but there’s some good advice in there

https://investingstrategy.co.uk/financial-news/technical-analysis-doesnt-work-on-aim-heres-why/

The debt at LVCG is small and the company have been steadily reducing that. That debt helped them get through covid without too much dilution. It’s due to reduce even further to £1,097k by the end of this year, £597k by the end of next year and fully paid off the year after. That is all at a low level of interest. That’s got to be seen in light of the growing cash position of 2023E £899k, 2024E £2115k and 2025E £6003k which could see that small debt paid off even faster, and if they beat the conservative financial guidance, which they will if Madrid sells out, then it will be paid off even faster imo.

From the brokers note:

Borrowings: A reduction of £0.3m, left borrowings at £1.4m at the end of H1/22, from £1.7m at the end of H2/21. This is comprised of £1.18m left on the Close Leasing Ltd. hire purchase facility provided in August 2020 (originally £1.5m) on a 5-year term with a 5.14% effective interest rate, secured by stock and charge over assets; and £0.21m CBILS loan agreement with NatWest Bank (originally £0.25m) that is unsecured for a 6-year term and effective interest rate of 4.08%. the £0.5m loan with Chairman, David Ciclitira, from April 2020 is no longer outstanding.

But I tell you what is drowning in debt, and that’s Mothercare. They are fully drawn down on their £19.1 million facility which is being charged at a whopping 18.2% interest plus they have a £39 million deficit owed to their pension fund.

Lvcg’s sole corporate broker are CMC Markets uk Ltd. The note was produced by SP Angel.

Worth noting the headline growth in the cash position

2023E £0.899m

2024E £2.115m

2024E £6.003m

I.e. over the next 3 years they are generating more than the market cap in cash (nearly 2x)

EBITDA (adjusted) growth is good too

2023E £1.251m

2024E £4.327m

2024E £7.043m

With the associated net income growth I.E. lvcg is predicted to be a profitable company whose profits are growing considerably):

2023E £0.14m

2024E £3.177m

2024E £4.488m

These figures are noted as being very conservative, but based on that conservative fundamentals they give a target valuation (price) of 11p. They expect the company to beat those figures, especially as streaming, sponsorship and merchandising are not included. It’s clear that most of that growth is coming from Madrid and London, ie. The lux division where lvcg own 100%.

Those are pretty impressive growth figures, which if achieved make the current tiny market cap look extremely undervalued. Market is asleep to the opportunity here. It’s hiding in plain night

Been badgering them on comms (again), hopefully details of that webinar will be published soon.

“LVCG is the marketing partner for the event and receives a fixed fee and a percentage of profits. (Final percentage yet to be agreed)Furthermore LVCG incurs no further costs towards the event.”

The planning assumption in the brokers note is minimal profits from Frankfurt.

Only minor acts had been announced until an addition act was announced alongside the postponement. If they (lvcg) do get much bigger and better acts from SBS involved for October there’s time to sell this event out and add to the significant upside from Madrid and London (which lvcg get 100%).

I had sent them a couple of examples like that to challenge the Nomad, but I’ve not been able to find a company which BC are the nomad for that have put out an RNS for research.

Hard to say suedee, but I know they are having a battle with the nomad about what they are allowed to RNS, with the Nomad saying that “it’s not their news”. Hopefully that changes next week; at the very least they promised to have an investors meet within a week of publishing the brokers note. If they are smart about it they can refer to the BN in an RNS about it being to discuss the transformation of the company.

They have at least put the research note on their website, but I reminded them, that the market dosen’t look at something buried on their website. It’s got a whiff of the hitchhikers guide to the galaxy about it where the plans for the demolition of Arthur Dent’s house were publicised in the basement in a locked filing cabinet in the dark in a toilet with a “beware of the leopard” sign.

The zero risk, zero cost annual liscence fee model is beginning to stack up.

£800,000 for a single concert in Japan.

£100,000 annual liscence fee for lvcg Japan

£100,000 annual liscence fee for kflex Korea

£500,000 annual liscence fee for startcoin

Plus they get an annual £300,000 (€350,000) to stage the formula E Cape Town.

That’s £1.8 million in annual recurring payments. More as they get a fee for Frankfurt, but I don’t know what that is.

If you compare the brokers note figures, for 2021 with the accounts for 2021 you can see what is included in their admin expenses figure, which is operating costs of - Depreciation and amortisation of non-financial assets 393k - Bricklive admin 920k- LCSE admin 309k - unallocated (central costs) 1256- Total 2,880k

That admin figure for 2023E is just 3,633k which given that they have also added the KPOP division shows good control of admin costs, a good chunk of which is depreciation (bricklive assets). So the liscence fees offset the admin costs very considerably, leaving them to cover £1,800k in costs from all the divisions to get into profit, which the brokers note forecasts that they will, and worth noting that they have forecast that depreciation and finance charges will be just under £1 million.

That note is very conservative. LCSE and StartArt plus bricklive figures will be fairly accurate as most of the activities for 2022 have either taken place, or are already booked (clearly some upside of more bricklive tours are starArt events are announced. I think about £1m in profit from those divisions based on the fact that there haven’t been many bricklive tours being built and they are renting out assets already paid for. Thus it looks like SPAngel have assumed about £1m profit from the KPOP division overall. That will mainly come from Madrid and London., which is very conservative, and also excludes streaming, sponsorship and merchandising.

Based on the SP Angel valuation forecasts, which has been done entirely in the profit generation and ascribes nothing to the value of the assets or the value of the partnerships or IP or rights for holding events such as Cape Town, the current share price is already massively undervalued. If Madrid and London sellout (which looks likely) and if they get live streaming going along with sponsorships deals and good merchandising sales, then they should smash that forecast out of the park.

The market still thinks that lvcg are going to fail as the new financial guidance hasn’t been publicised widely. Indeed the company haven’t said a single word about it so far, no tweets or social media. At some stage the market will cotton on to this massive turnaround and the unfolding growth story.

Much of this was covered by the brokers note that shows lvcg get a $1m payment (and no costs) for the KPOP concert in Japan as well as a £100,000 annual liscence fee payment.

So lvcg get circa £900,000 a year for the Japan KPOP concert every year, with zero costs. Plus revenue from sponsorship, merchandising TV broadcasting and streaming and a profit share

KPOP lux was announced on 6 Jan 2023. This is 100% owned by lvcg.

Live company Japan was announced on 3 Feb 23 and pays lvcg a £100,000 annual liscence fee as well as had £650,000 working capital invested in it, and covers KPOP in Japan and also StartArt fairs in Japan. That division is on a 50/50 basis.

Then on 13 Feb 23 the concerts with Birdman was announced. That pays KPOP Lux $1 million. Plus additional revenue will be generated via merchandise, sponsorship (Birdman Inc will receive commission for any Japanese Sponsorship they arrange) TV broadcasting and streaming and a profit share.

Frankfurt produced a profit and the figures have been published, but the German promoter is apparently very difficult and tried to source acts without using SBS and haven’t been able to. Their control of costs when it moved to 2 days wasn’t good.

I guess that answers the question of the value that lvcg adds and what their usp in the market is.

It’s also the reason why DC has gone for the LUX division so that lvcg get all the profits for doing all the work as well as to control the costs. And there’s plenty of figures on Madrid already published and those figures are built into the forward projections in the new financial guidance that shows a move to being highly cash generative this year and beyond.

The Japan deal is different in that lvcg get $1m upfront, plus £650,000 working capital irrespective of when and where it’s on. So if that is delayed then it makes no difference to lvcg.

As to “several” have been delayed, it’s only Frankfurt that has been postponed so far. Madrid and London are going ahead to the dates published are they not?

While it’s frustrating to see that share price dropping back, there’s a massive turnaround from the darkest days of covid into a growing, profitable and highly cash generative company and also one that’s got through the short term cash crunch. As others have pointed out, it would be a different story if it has a bigger market cap, but that sits at only £5 million, which assumes that it’s going to fail. On any metric, this is massively undervalued.

RNS of 26 April: “The potential profits of KPOPLUX Madrid could increase disproportionately as and when KPOPLUX moves beyond 1-day.“