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Hi Lazz
If the company buys back shares below NAV (18.7p) then it will accretive to Nav per share. The cash pile will decrease but the number of shares will decrease too/more. So a buyback can serve multiple goals (increase price through the statement that it makes, increase price through adding buying pressure, increase price through a higher NAV per share). Right now we only have the first factor to support SP.
Yes the nominal value is an accounting figure, they will most likely buy in the open market. This is positive for SP but the buyback wonāt start for a few months.
Because Dbay own more than 30% any increase in their stake (through reducing the share count after buyback) could trigger a requirement to take the company over, so they need a waiver on this from takeover panel (quasi government)
Truth, I looked at wincanton annual report and saw 160m of borrowings (the comparable figure) but I didnāt look closely at the net debt figure so you might be right. Not a picture of health though, with profit and rev down year on year to sept 30th. This is not my sector so I apologize if details are wrong. My point, which got lost slightly to peopleās confirmation bias on both sides, was that we can debate what the GWS is worth - itās not zero and itās not Ā£1bn - but people should know that 1) itās a different structure to this 2) not clear how and when this structure will see cash flow from it.
Wow, this is quite a toxic message board. Reread my message that led to this number. I said I could make a case for valuing an ebitda 50m company with Increasing revenue and decreasing debt (in an historically epic time for logistics) on 7-10x ebitda. I said others on here disagree, and I said that people should listen to the naysayers who generally seem to know the business.
I think I will leave it there.
Hi all,
There seems to be a lot of confusion here about the basic structure of the company. I am not an expert on this stock but I am a professional investor in a related field.
Although people may not like the message, the structure as I read it is similar to as described by Ely. He/she and I seem to interpret some of the detail slightly differently and the attractiveness of the stock similarly differently.
Below is a quick download of my understanding.
1. This company owns 49% of the holding business for ES and other trading businesses. The results of this holding company were announced yesterday and were strong. There is a legitimate question mark about the value and rights of a minority shareholder.
2. Aside from this the company has about Ā£14m (from memory) in cash after a highly dilutive rights issue/placing. It is worth noting that this dilution means there are roughly 100% more shares in existence than pre Xmas.
3. The company have appointing DBay as investment manager, given this company is now an investment company not a trading company. DBay are entitled to a 2% management fee and 20% profit share on new investments. This is a fairly standard fee structure for private equity. This doesnāt apply to the 49% holding above.
I could be wrong but I think the above are the basics. We then have market forces determining what all this is worth. I could make a case for the holding company being worth Ā£350-500m in this market, when thinking about industry comparisons and a buoyant public and private equity market. One could make a more pessimistic case too and others have. Either way this value wonāt be released until there is a takeover, new IPO or over time in the form of dividends.
Best. N
Ely, also appreciate your thoughts. Your knowledge of this business is deep and seems to stretch back quite far.
For what it is worth, with respect, I am confident you have misunderstood the nature of the 20% carry on profit of new businesses, and this wonāt include marcelos or its holdings. Equally I can absolutely see this being worth Ā£360m to the right buyer (win canton has market cap of 460m on similar ebidta and debt). If the business has grown well since nov then itās reasonable to see 400m, roughly 2x for this stock. That is my target price, though until yesterday I thought it might take 2-3 years.
Just caught up on the announcement. Clearly the market is slightly disappointed (though itās an illiquid stock so hard to conclude much), which I can only imagine would be down to the lack of an announced corporate action. The interest in ES is performing well, surely better than expected. There are 2 mentions of the PIK notes in the announcement though the results only cover the period to Nov so they are coy about these.
Better value today than yesterday, certainly grown into its valuation. Still not screaming value though DBay will look for an exit at some point so there is a potential crystallization event that will underpin the price I think.
@ Ely, yes I got that, thanks. I was replying to truth.
The key question here is what is the operating business worth. Secondary question is how LDG holders get their mitts on it within the confines of the IMA with Dbay.
Eh? Iām literally quoting the āsmall printā. Obviously they donāt get 100% of the total holding for a no faults divorce, they get 100% of the profit share, as defined by section 8. Id read the small print again if I were you...
Seems like you do like picking fights. I joined this conversation by saying that the two of you have talked sense and rightly raised issues with the structure and terms.
No, youāve misunderstood this. 50% of the profit share in certain conditions is 50% of their 20% carry. In other conditions they get 100% of their share. Basically they get half in scenarios they are to some extent at fault (ie ceasing to be licensed).
Section 8.1
In consideration for the services provided by the Manager hereunder, the Manager shall be
entitled to receive the following by way of remuneration, in relation to each New Investment:
I read it as only new investments. You have put this on my agenda though so I will have a closer look
New to this site. I am an investment professional but not in the area of UK small cap. I am invested here in a personal capacity as I heard about the turnaround in the portfolio company (ES) and got comfortable with the complicated and pretty disadvantageous structure.
I think comments by Ely and Truth are worth taking seriously, though I think long term upside here is reasonable. One question I have with regards to the 20% carry interest Dbay are entitled to and to which Ely refers - my reading of the IMA is that this entitlement is on ānew investmentsā as laid in section 8. I donāt think ES will be subject to this - am I missing something?