Adam Davidson, CEO of Trident Royalties, discusses offtake milestones and catalysts to boost FY24. Watch the video here.
Of the menswear 559 items out of stock now, only 264 in stock. For womenswear 1000 items out of stock, 760 out of stock. Seems like an okay way to clear stock lines. I am guessing they only put a fraction of what they want to clear on.
Nice to see a strategic initiative come to fruition.
He made share sales in 2016, 2017, 2019, 2020, 2022 and now 2023. I can see why it makes people nervous but he is pretty consistent.
I think there have only been 2 years in the last 7 he hasn't sold shares. I mean if he was really smart he would have sold the whole lot many years ago.
Theres so many opportunities like this I think. Asos, Boohoo, THG, Just Eat, Ocado, DarkTrace, Alphawave, Frontier Dev, Molten Ventures etc.
Beaten up tech-related names, all massively down from their peak. Choosing through them is the challenge. I've gone for Asos and Just Eat :/ .
Whats the bid premium in Ocado though? I think the rumour mill was £8 buy out, so that is 30% upside? And if the rumours turn out to be nothing, that's 30% downside? So you more than 50% confident the buyout comes through? Doesn't it make you worry that Amazon didn't come out and confirm discussions?
Even still, 30% upside from a bid in Ocado... I mean Asos could put that on in a day as well with an average trading statement. I can see pros and cons with each. Asos probably requires more patience as a restructuring story. Rewards are greater here medium-term I would say, but risks also higher.
Bad companies can be good investments and vice versa.
I am pretty experienced actually. Used to do this job professionally. Did it for 12 years as a UK equity analyst and later on as a European small cap portfolio manager (for a large German asset manager). Before I chucked it in to study computer science.... not that I expect you to believe me :).
Maybe I can explain some of the issues with those numbers you mentioned below... and highlight some of the major red flags.
1) Net-profit. This business capitalises ALOT of costs. In 2022 they capitalised a massive $35.8m (see cash flow statement). Basically they hide these costs as an asset on the balance sheet, and then spread them out over 7 years. The amount of costs they released through the P&L was about $10m. That means in 2022 there was c. $25m flattery (roughly) to net-profit in 2022. Net-profit was probably c. -$10m in 2022 otherwise (not the $15m claimed).
1b) Net Profit was also boosted by writing down the contigent consideration of Versus Evil and Red Ceberus acquisitions . Basically these acquisitions did so poorly they don't have to pay them. That was recognised as a $10m gain. Another artifical boost to net-profit.
2) Cash flow: Given all the funnies in the P&L, cash flow represents a better measure of earnings. The business generated $20m in operating cash flow, and spent $35m (excluding acquisitions). This tallies with roughly -$15m in losses each year. If you strip out the accounting manipulation in the P&L.
3) Book value of $112m. This is effectively $133m in assets. Of this $76m is related to the assets in point 1. Lets cut this to $30m. Add $10m net-cash. Gets you to c. $40m book value. Way less than $112m, but still well above the current market-cap. This is supportive, I agree.
Then there are all these other dodgy red flags. Some are really dodgy....
1) CFO / COO leaving pretty much immediately after each other.
2) The wifes CEO is a related party as a major holder in one the subsidiaries.
3) In 2022, TinyBuild bought a company called Bossa - the Non-exec Chairman is founder and CEO of BOSSA! I mean how dodgy is that. Imagine the CEO buying a company off the Chairman lol. What could go wrong there?
So where do we stand. $15m net-cash and a decent enough portfolio of assets.
However, I think the shares are dropping BECAUSE the market can see them running out of cash. They burnt through -$15m cash on $62m sales, if management don't take action, they will burn at least another -$15m.
As of today, the valuation looks attractive. Someone could buy the business today. Take the $15m cash, sell of the assets for at least $10m+ (implied in valuation). However, where will we be 12 months from now if this doesn't happen? No cash left.
As I said I own this for the bounce & the short-term valuation. If I am still holding this in 6 months its not gone to plan.
I think I am well within my rights to call this share a turd. I mean, it is down 96% since IPO.
So, in my 15 years of (successful) investing experience, I have observed that small-cap companies which primarily operate in less-developed markets, and have CEO's from less-developed markets tend to be lower quality. They also have a tendency to adhere to less rigorous standards of corporate governance.
Cash is a relevant valuation metric, which is why I argued looking at PE is less relevant. I think you would also agree the market is forward looking. So for everyone astounded by how much cash it has, we should consider what the cash balance might look like 18 months from now. They burn through $20m a year? Where will that cash be a year from now?
As I said, I am a holder. Bought in at 8p. A lot of the games this business makes are terrible and could disappear and no one would care. Hello Neighbour is a good franchise though. That alone must be worth something to another studio.
My view is this bounces back to c. 15p. Then I'm out. H1 results will be ugly. They just brought in a CFO who used to be an equity research analyst (lol!). Cash will start dwindling. I don't need to be here to take the execution risk associated with a nasty restructuring. Until then, I am along for the ride.
Some of the research on here is terribly rushed.
"Its profitable every year" - thats my because it capitalises a HUGE amount of costs. It is actually loss making.
"Its go all this cash" - true, but cash is dropping about 20million a year. Most their cash will be gone 18 months.
"Ceo holds lots of shares" - the ceo is a controversial character. Eastern European. Does some dodgy interviews.
Full disclosure I bought a tiny amount yesterday. Mainly on the fact I think the hello neighbour game is worth something to a company like team 17.
He sells every 1 to 2 years. Its pretty regular. I'm not sure it is a big deal.
Personally I don't know why he is still a non-exec. He only owns 2%. He is a natural seller. His only claim to fame is starting the company. He left an exec role 8 years ago. He clearly doesn't care about the boards attempt to convey support for the management team. He is also one of the last 'old guards' on the board that saw massive shareholder value destruction. Aren't non-execs meant to be independent, i.e. not related to the company? Don't non-execs generally do 8 year stints and then move on?
Might send these thoughts to the Chairman.
How come Mike Ashley adding 10% holding barely moves the shares. Non-exec selling 0.2% drops the shares 10%.
There were we talking about where the TR1s might come from. Who is buying up all the shares. Turns out the first RNS out was from a director selling lol.
They are the ones who IPO'd this turd.
Not true. They have not notify when breach 3% and every 1%. It doesn't matter whether they are still building a stake. The whole idea is to make it public so you can't build a massive stake without it being public knowledge. Obviously if you can buy a large stake very quickly you can jump thresholds.
See below.
The UK regulator the Financial Conduct Authority (the ‘FCA’) requires that any person,
1 anywhere in the
world, must report to the relevant UK issuer2 and the FCA the percentage of the issuer’s voting rights
that it holds as shareholder or that it held or was deemed to hold through its direct or indirect holding of
financial instruments, if the percentage of those voting rights:
• Reaches, exceeds or falls below 3 percent, 4 percent, 5 percent, 6 percent, 7 percent, 8 percent, 9 percent, and 10 percent and each 1 percent threshold thereafter up to 100 percent; or
• Reaches, exceeds or falls below the above thresholds as a result of events changing the
breakdown of voting rights and on the basis of information disclosed by the issuer.
Such disclosures are public. The rules of the FCA relating to disclosure of positions also extend to non-UK
companies whose shares are admitted to trading on a UK-regulated market; for them, disclosure is
required when the percentage of voting rights held reaches, exceeds or falls below 5, 10, 15, 20, 25, 30,
50 and 75 percent. For such purpose, the total voting rights of the relevant issuer will be calculated
according to its most recent public disclosure.
I said it before, I said it again.
UK tech stocks have wobble, UK investors misprice them, taken over by international company.
ARM, Laird, CSR, Blue Prism etc, etc. I suspect Ocado soon.
Asos would already have been sold if it didnt have large shareholders.
The board will consider every bid. The board will take serious bids to the largest shareholders (privately). If the largest shareholders do not agree, then there is not enough support. In which case the board will not make it public (and cause unnecessary disruption), unless they hope going public will force out another bidder or lift the shares. The alternative is the bidding company goes public with a hope of pressuring the board, however given the largest shareholders will already have considered it, there should be no pressure.
Therefore the only way this gets bid for is:
1) Company near bankruptcy. Bid the only way to realise any value for equity holders.
2) Company has successfully turned around. Shares recovered to at least £10, and we get a knock out bid of £17+ which the largest shareholders all agree to (as they finally get a price they are happy with).
I actually agree with you. I think Asos will upgrade profit expectations for the year.
If you listened to the conference call there were a lot of comments from analysts about the 'outperformance' on gross margin in Q3. Management said they wanted to keep some in the tank in case promotional activity is intense in Q4.
I think management will beat in Q4 and raise expectations for the FY. However, I also expect them to say next year is unchanged for now as they want to keep some levers left to try and drive a bit of growth next year.