focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
Thanks Treven, but that meeting is the AGM. Last year the Trading update came 13 days after the AGM, and I am expecting similar this year. The year before, 2022, they did them together. However, the financial calendar is indicating this is not going to happen in 2024.
SMT1, I am sure that a new Labour government will increase CGT to align it to income tax. I am a little surprised that the current government didn't do it when they were looking for extra taxes!! So if you are PR when you are given the option to exercise and sell your options with a guaranteed buyer. Why wouldn't you want to do it before the CGT rate went up?! Let's say he and his partner have £3m profit, pay £600k now or £1.2m in a years time. We must remember he is a cautious accountant. He will still have exposure to £5m at the current share price.
I can see why people would be disappointed that the CFO and HR Director have sold their share options! Having had a think about it I have drawn the following conclusions. The company has offered the directors the opportunity to sell option that where set at very low prices and the company has bought 235k out of 254k of the options exercised and sold. The market would have crashed if they had sold them in the open market. So they had to sell now to ensure they didn't cause problems later. It also crosses my mind that the number they sold will be replaced by other options, so they are still retaining their exposure to the company. In the CFO's case he still has around 300k shares (including future options.) This is £5m in the company. Most importantly for an accountant he now has around £3.4m to diversify. He will have to pay CGT at 20% on his profit. If Labour get in at the next election, I am speculating that he will pay CGT at 40% NOT 20%. This is what I think he is thinking about in his decision to sell. If a good % of your pay is coming in options then you can't live off paper profit, you have to keep cashing some of your options in.
The company has today spent £4m cash, buying back shares. I am hoping they will announce they are going to buy back significantly more in the market. Then you will see a very positive share price move!
Thanks SNN, I am really pleased that they are getting consent at the AGM for a share buy back of up to £30m. That will enhance the eps, not just this year but in all future year. A good use of cash while we are around 10x p/e!!
Thanks again Dave, I appreciate your post! I have been looking back over the last 12 months, as you re-posting my comments of last May has made me look at things again. I notice the AGM/Trading Update last year was 31/05/23. The day before the TU the share were £4.60, one week later they were £6.70. A nice 45.7% rise on the back of an 42% eps upgrade from 43p to 61.1p for y/e 2023. (Actual result 182.2p in the end!)
I hope this years May TU results in a 45.7% rise, that would put us at just under £27 and a p/e of 15x. (Sounds about right to me!) Six week on Thursday I am expecting Liberum will have to hike the eps estimates for 2024 for the first time since the 2023 finals.
This time last year Liberum were expecting Yu Group eps of 43p in March 2023 for our y/e on 31/12/23. We all know now that the eps was in fact 182.2p (a little higher than I was going for in the May!) That is why in my post 'Things have Changed' 29/03/24 I talk about eps for the current year (2024) of 348.5p PROVIDING we reach 100,000 meters at the end of this year.
If that figure of 100,000 meters is met in 2024, then we should have eps for 2025 of 522p. Also, worth mentioning that on the company update call on the 19th March they were asked what the conditions were for the hedging agreement with no collateral being posted with Shell. The company need to hold one months working capital at all times in cash on the balance sheet. So don't let DD try and scare investors with his ridiculous rantings about that. They also pay a small commission on each hedge placed, much like private clients used to when buying shares. There were 30 in-house Shell lawyers checking everything regarding Yu Group and the expected growth for a year. Shell think the turnover will go into the billions over the 5 year contract and so do I.
We have come along way, BUT, we have so much further to go! I hope everyone enjoys the ride on this little gem we all hold. Well, nearly everyone here holds!!!!! Those that don't should find another beach, and try shouting at the tide over there! Before they drown.
Thanks Dave, I appreciate your re-post of 10 months ago! I hope the posts I made on the 29th March turn out to be correct to, and you are able to remind me of those in 12 months time!! I know my 4 posts while on holiday in Anglesey got right up DD's nose! He now thinks I'm on drugs, according to his posts on the other board!! He really is like King Canute wishing the Yu Group tide would go out!
I truly believe that Yu Group have been held back by the old hedging agreement. I think the amount of collateral they were posting which was £52m has meant that they have been restricting the amount of new business they have written in the last half of last year. I think the new hedging agreement will let this business fly. They can now drive for meter growth. I think they know they will blow through the 100,000 meter target. Hang on to your seatbelts this ride could get very exciting!!
What does 15x p/e look like in share price terms: It would be trading at £27.33 now. In a years time Yu Group would be £52.27. In two years from today we would be £78.30. Then if I were BK I would take £100 per share from Shell for the whole business and ride off into the sunset with my £880m and have a wild time!!
We should also remember this is just working on 15x p/e not 30 or 40 times p/e!! The main thing to watch in this thesis is the figure of 100,000 meters by the end of 2024. If this happens the game is on!!!
Remember this time last year Liberum where expecting eps for 2023 to be 43p they ended at 182.2p per share.
If what is set out below happens in 2024 then Yu Group will start 2025 with 100,000 doing £11,700 per meter, so contracted revenue of £1.17bn of revenue already in the book for 2025. If Yu Group achieve the 100,000 meters by the end of 2024 then they will try and reach their 5% market share target of 165,000 meters by the end of 2025. If achieved then the average meters during 2025 will have been 132,500 meters. Again times that by Liberums £11,700 per meter and you get £1.55bn revenue for 2025, at 7% net EBITDA margin then that is £108.5m, take off 25% tax and add £6m for interest. Then the EPS for 2025 would be 522p per share. Just 15x p/e for this kind of growth? I think II's will be happy to put this on a better rating. Don't get scared by the current share price, this little gem has a lot further to go. Also, be wary of Liberums eps forecasts of 186p for 2024 and 211 for 2025. They will upgrade significantly over the next year or two.
From 43p to an actual 182.2p need I say more?!
Always be wary when someone says things have changed. BUT for Yu Group things have changed! The movement since the results were reported is different. The share price in the past has been driven by individuals, private clients who have got seen an opportunity, a share price that has fallen a long way and a company that is righting the wrongs of the past. The results on the 19th March have changed everything. Yu Group became the cheapest it has ever been, and the people now looking at this company have also changed from private clients who say I can't buy this stock, because look where it has come from to now institutions looking at a company on it's fundamentals and saying this share is too cheap. A company that is classed as a disruptor in the SME energy sector should be trading on a p/e multiple of a lot higher than 9.89 times and if they do the 100,000 meters by the end of 2024 then this share is unbelievably cheap at this share price and looking to what it will be worth in the future not where it has come from over the past 5 years.
Yu Group now has a market cap of over £300m and the free float is £150m (taking BK's shares out of the equation.) The cash at the end of the year will be around £120m after paying ROC and dividends. They have a new hedging agreement with Shell who want them to grow their market share quickly and have not restrained them with margin payments as Shell are producing the gas and electricity anyway, and want a guaranteed market price to sell into one and two years out, to allow them to have price certainty for their products.
So going back to the institutions now looking at a company that was too small to consider, what do they see now? They see a house broker that is comfortable predicting that Yu Group are aiming for 100,000 meters at the end of 2024, a company management that is very pleased with how the year has started, and very comfortable with a 100,000 meter target. They also look at Liberums research note and see that in 2023 each meter averaged £11,700 of revenue. They then look at the meters at the end of 2023: 53,400 and the 100,000 target which if met will mean that the 2024 average meters was 76,700 (53,400 + 100,000 /2) this is the calculation Liberum put in their note of the 19/03/24. They then multiply 76,700 by the liberum figure per meter of £11,700 and see a turnover figure for 2024 of £897k. £520m of this £897k 2024 revenue figure was booked at a net EBITDA margin in double figures! If we assume the 2024 net EBITDA margin is lower say 8% (management are comfortable between 6-8% then you get around £72m, take off 25% tax and add around £4.5m for interest. That means profit will be £58.34m for 2024. There are now 16.74m shares in issue, so eps for 2024 would be 348.5p per share.
Institutions know that the p/e on a disruptor growing at this rate is worth over 15x p/e and they don't care where this share was 5 years ago they only care about where they think the share will be in the futu
IPC, it reads well don't you think? There is a lot of "our very conservative.....this and that!" I think they have indicated they have left a lot of room for upgrades in their forecasts. I'm still very comfortable that the EPS will be 300p for 2024 rising to 500p for 2025, if they get close to their 100,000 meter target by the end of this year. It is amazing that this share has bounced back to the level it has over the last 5 1/2 years and is now cheaper than at any time during that period. This could trade on low to mid teens P/e and still not look in anyway overvalued. What a gem we have!
Great presentation today from Bobby and Paul. You could feel how excited Bobby was about how the company had performed and continues to perform. The Shell deal is a massive deal. Shell as a producer of gas and energy wants to have a known market to sell into. Octopus Energy provide this for B2C and now Yu do the B2B side. Shell knows what they are producing and they can know now what price they will be selling it at years in the future. It works for Shell and works for Yu! They did want to do a JV and buy part of the company, but it is too early for BK to consider this yet. Too much growing to do in the short to medium term!! The agreement is very capital light, requiring very little capital indeed to be held on the balance sheet.
Smart is now beginning to get the engineers they need, partly to do with the training school Yu Group have set up. 50 people at the year end, already up to 77 at the 19/03/24 and hoping for 200 by the end of the year.
The 100,000 target was reconfirmed (or there abouts,) if it's in the 90's I don't think he will get a hard time, but the main reason for it is to have something to aim at. They do however think they will manage to get there!
The EBITDA margin of 10.9% may have been because one or two things assisted the figure, and can't be relied upon to happen again, 6.5% to 8% is what they want people to work with. With the sound that it will be at the top end, rather than where Liberum are, but that is for prudence and we are still early in the year.
There don't appear to be anything to buy with the cash, the smaller companies will fall by the wayside and the likes of Yu will get bigger. They will continue to take share from the big 6. So, with nothing in the largest 17 looking attractive, and the smaller suppliers gradually failing. The cash will benefit the shareholders either in special dividends or share buybacks. They want the £11.9m from the share premium account, available to distribute.
The TPI's encourage businesses to move at the end of the contract, so they justify there fee's, so churn is around 55%. The aim is to get the retention around 70%. Again an internal target that they want to try and achieve.
There were around 15 people on the call, and I don't think anyone will have gone away failing to be utterly impressed with what has been achieved so far. And if I got £1 each time someone said but why is the company so cheap, I would have been able to get a nice bottle of wine!!!
There was nothing not to like about the presentation to analysists today, I will be very surprised if we don't get some more Institutional involvement over the next few months/quarters as they build stakes. It may also mean that BK needs to let a few go. This would not be a negative, and should not be viewed as BK wanting to cash in. There is still too much to do, and the team seem totally focused on delivering it for us shareholders.
There is nowhere better in the market to have your cash IMHO, but DYOR!!
Just been reading the deck that SNN posted prior to having a chat. These targets are great to read. Ambitious and if hit should mean that eps for the current year will be over 300p. Fantastic net EBITDA margin of 10.9% in the second half of 2023. I just don't see this falling back to 6.5% like Liberum think. The digital by default quote has the margin built into it, and this has been steadily building due to the lack of competition. I know they are spending money recruiting staff for Yu Smart, but this is not falling to 6.5% for 2024.
I will post after meeting Sparky.
Hi Sparky, if there is any info on either a share split or a main listing that sort of thing will be in the RNS at 7am on Tuesday 19th March. I shall ask if they think it will be end of 2025 or 2026 that they reach 165,000 meters, which is their medium term target of 5% of the Total Addressable Market. Not wanting to pre-empt the answer, but I would hope it is during 2026. End of 2025 would really be going some!