Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
If TRAC wins another contract that is of the same magnitude and continues to indicate more are under negotiation, then I predict this will justify a minimum £50m m/cap or around 100p a share. We know the profit margins are good and, crucially, it's recurring SaaS revenue as well. We also know they have flagged up further potential contracts in both Latin America and the U.S. Exciting times for shareholders.
Nothing is certain and there can be unforeseen hiccups but, if one or two more contracts of the same level come in, then I do believe TRAC will hit 100p a share next year based on exponential growth and extrapolated fundamentals. They may even become a takeover target, but my hope is they can progress and grow over time as this really could become one of the more memorable and highly rewarding AIM success stories.
The valuation as this Latin American contract progresses and other contracts are signed could be more than interesting.
SaaS companies have quite a defined means of valuation. This link looks at valuations from a buyers perspective. If a company has hit £10m annual recurring revenues (ARR) then the valuation ranges tend to be 10/15 x ARR.
Apologies if it sounds a bit 'rampy' but I think it's a reasonable and logical conclusion that the; numbers t42 are looking at, just from this single contract,I s going to mean a valuation that is multiples of the current m/cap. This link suggests a multiple of 10 to 15 ARR (annual recurring revenues) should be applied to a company bringing in SaaS revenues in excess of £10m
https://www.kalungi.com/blog/saas-valuations
The market may want to see those revenues delivered before a full re-rating is given but there should be plenty more upside to factor prior to formal revenue recognition and the prospect of more contracts significant to come. All being well, another year hold or so could see a multiple of the current valuation. Ultimately I can see the Company being sold for £100m plus.
I'm not sure ARM was the best example of poor leadership or a UK company failing to reach its potential as it was sold for $40 billion. I'd be happy with 100th of that with KMK. I'm normally a long-term holder of small caps but, because I am not convinced by the management here, I just trade its range. It's due some updates and there's a chance of a decent move up from these levels.
It could be so much more and if half of what the analyst Paul Hill suggests comes to fruition then there will be a substantial re-rating. For now though KMK need to start delivering . An update on the bio-terrorism detector project would be a good start.
The share price drop is an odd anomaly. I wouldn't bet against one or two holders not doing the sums correctly for the shareholder consolidation and selling based on a miscalculation. It sounds a bit patronising but I would never rule out basic stupidity.
The leading brokers such as iii and HL are not allowing trading in STAR and hopefully once the share price will correct to and beyond pre-consolidation levels. I do think the advisors have been remiss in not ensuring that investors are aware of the precise timescales for STAR to become TRAC and tradable across all platforms.
I think this share price weakness is just a temporary technical blip and once TRAC is tradable the anomaly will be corrected. There is a lot to look forward to here . STAR has aways looked under-valued against peers and now that TRAC will be firmly pitched in the IOT and SAAS tech sectors, then that under-value is likely be snapped up by savvy small cap investors. Contract news should help as well!
It's a 2016 article with Starcom and Maersk mentioned but not necessarily linked. It does show, however, how long Starcom have been preparing for this transformation in shipping containers.
https://www.thefreelibrary.com/Thinking+inside+the+box-a0452586255
A couple of stats that stood out and which smart containers / Starcom products can address included:
Around $50 billion in goods are stolen each year from various points along the supply chain.
Fluctuations in temperature mean that large quantities of pharmaceuticals, and around 25% of perishable food products, in shipping containers are damaged each year.
Couple more links:-
https://www.imbema.com/en/transport-and-logistics/container-42-sbs-container-lock-helps-with-digital-transformation/
https://www.xyht.com/spatial-itgis/container-42-so-smart-it-knows-all-the-answers/
Looks like it was a two year journey / trial for data collection commencing in May 2019 so quite possibly it’s ready for ‘launch’ now.
"The hyper-smart Container 42 will be leaving the port of Rotterdam today for the first leg of a two-year data-collecting"
https://www.portofrotterdam.com/en/news-and-press-releases/rotterdam-sends-hyper-smart-container-trip-around-world
Further coverage of this very clever container:-
https://www.shippingandfreightresource.com/container-42-smartest-container-on-the-planet/
There are two possibilities:- Either Starcom management are complete nutters for randomly naming the Company t42 IOT Tracking Solutions plc or, alternatively, they are getting involved with Intel, Cisco and IBM for what could / should be transformational shipping container business.
I hope and believe it's the second of the two possibilities.
A bit of digging reveals some exciting prospects:-
It's worth noting this link on the former cement works / quarry in Weardale which was previously planned to be a green energy village.
hTTps://www.thenorthernecho.co.uk/news/15470612.owner-working-solution-weardale-cement-works-site-believes-eco-village-never-likely-happen/
The largest shareholder in Weardale Lithium, Mark Tellwright, happens to own this quarry works and surrounding land. See link below.
hTTps://suite.endole.co.uk/insight/company/09466908-weardale-quarry-limited?page=people-contacts
I suspect after the £100m green energy / eco village plans around the former quarry didn't materialise for the local community that there will be plenty of grants available for WLL to accelerate sourcing lithium as a resource to supply green energy to the nearby car / battery plants. Here's the link for the previous plans for the cement works.
hTTps://www.thenorthernecho.co.uk/news/15461279.15-years-millions-spent-nothing-show---frustration-weardale-marks-15th-anniversary-cement-works-closure/
It also looks like Dr David Manning, with funds from Newcastle University, has been involved in exploration in Weardale way back in 2004.
hTTps://jgs.lyellcollection.org/content/164/2/371
It looks like WLL and of course MAC with their 8.7% holding are sitting on an exploration area that was going to be a £100m green energy site.
Yes, it's inevitable that there would be profit takers and traders bringing the over-stretched rsi down a bit. Also, I've never seen a placing where at least some participants didn't take there 10% and move on. That said, the cumulative volume since the placing suggests most, if not all, will have exited now. I'd also suggest by the small number of posts on this board and its competitor that the bullish story unfolding isn't widely known. Either that or investors are cautious and awaiting contracts even if they have to pay a substantive premium for that certainty.
As several others have pointed out the thing that will drive the share price will be contracts, revenues, partners , patents, product innovation and last but not least profits. Share consolidation is fairly irrelevant other than it presents a break from the Starcom era and represents a new start - almost creating the excitement of an IPO if, as I expect, contract news accompanies it.
If I could be bothered to do a extensive research (which I can't) I suspect I would find as many shares priced at 10p going to 100p as 1.5p priced stocks going to 15p. I've no wish to be too harsh on the poster, but the series of posts qualify for Private Eye's 'Great Bores of Today' column . They are just an irrelevance and distract from the fact that t42 are seemingly on the cusp of achieving several transformational contracts. Now that's what will genuinely impact on the share price / market cap.
Whether Lokies will be one of the initial substantive contract remains to be seen but from the chairman's results statement on August 27th the trial to "ascertain Lokies's fit for DHL's monitoring of its fleets operation, is expected to be completed in the next couple of months." So the timing would fit for this month.
Regardless, I hope and expect that the timing for the name change GM on the Nov 19th is likely to coincide with contract news or follow news. They will want to launch the new name/branding with some positive vibes and, also, I don't think they would announce such a quirky name (t42) without being able to talk to the press etc about the reasoning behind it once the change is voted through. As discussed on here it looks almost nailed on to relate to the exciting Container 42 project.
The Aug 27th statement gives some context to the later announcements highlighting the prospect of contracts:-
"Marketing and business development efforts continued, and the pipeline of potential future deals is now at an all time high, although timing of conversions into revenues is still uncertain with some of these prospects. In particular, there has been increased interest and sales of our Lokies product from several sources.
Further to the previous announcement regarding the cooperation with DHL, we can now update that DHL's proof of concept ("POC"), intended to ascertain Lokies's fit for DHL's monitoring of its fleets operation, is expected to be completed in the next couple of months."
I'd say the obvious contenders for the anticipated contracts would be DHL and the Container 42 group / Port of Rotterdam. Can't rule out contracts associated with the Russian Railroad project though. The only geographical information we have, at least for one or two of the contract discussions, is U.S. and South America.
I think it's too coincidental for Starcom to reveal the new name is t42 and not be involved in the Container 42 project. Just getting a contract or being a partner in the projects with this group alone with the likes of IBM and Cisco as partners will be transformational. Starcom are clearly looking ahead or have responded to contract opportunities / overtures as it will be a new era for shipping containers and the technology will even eventually cater for autonomous vessels / freight.
https://www.xyht.com/spatial-itgis/container-42-so-smart-it-knows-all-the-answers/
I suspect Starcom / t42 will be taken over at some stage by a larger group.
Great find and more information on container 42 is here under the heading"the smartest container the planet has ever seen."
https://weare42.io/?utm_source=MTBlog&utm_campaign=Blog&utm_content
Some heavyweight companies involved in the project as well:-
https://weare42.io/partners/
The name doesn't exactly roll off the tongue but it might be all the more memorable for being a bit quirky. Anyway, that's not the important thing. The crucial thing is T42 IOT will, I assume, be designated a 'Software and Computer Services' company and gain a rating that is fitting for that sector, whereas good old Starcom was stuck in the doldrums with a m/cap of little more than 1.5 tor 2 times revenues in the Technology Hardware and Equipment sector.
They didn't waste time with the name change and rebranding so I am sure the chunky contracts that inspired the rebranding will follow reasonably soon. Exciting times and there is a huge demand for high growth SaaS companies, so it will be interesting to see if STAR management will stay the distance and build or sell for a significant premium as they did with Pilat Media to a bigger player.
The re-branding is both sensible and imo indicative that STAR anticipate SaaS revenues are set for strong growth.
I'm not sure how different multiples are in the UK compared to the U.S., but the median multiple for ARR (annual recurring revenues) for publicly listed U.S. SaaS companies was 16.6 in 2020. On that basis, it wouldn't be too much of a leap of faith to see STAR as a £30m to £50 m/cap company on the back of decent contracts and anticipated good SaaS revenue growth.
https://www.kalungi.com/blog/saas-valuations
There are of course lots of variations for the multiples depending on the sector, profitability status etc. etc. and profitable small caps with decent growth will obviously get a higher multiple applied as the Jim Slater adage, 'elephants don't gallop', applies. Some analysts appear to prefer to use MRR (monthly recurring revenues) as the basis for applying multiples.
The bottom line is that if STAR rebrands as a SaaS company on the back of one or two long-term lucrative contracts that highlight future growth and a move towards profitability, then the Company is set for a substantive re-rating.
Star have always promised but never quite secured that elusive blockbuster contract or captured the imagination of tech investors. The latter is a bit surprising given existing management past success with Pilat Technologies , their ability to develop quality high tech products with minimal cash burn and the low ratio of revenues including SaaS revenues to m/cap. Their pr and, frankly, at times, poor presentation skills haven't helped.
I just get the feeling, however, that this uplift is the start , at long last, of a sustained re-rating but they will have to deliver on one or more of the flagged up contracts for the impetus to gather pace. Given they seem pretty certain about rebranding and the 35% premium to the placing then maybe these contracts are in the bag. It's a bit of a leap of faith to think that given past disappointments but I am minded to think this time they are going to deliver.
Ideally DHL will be one of the parties they are in contract talks with based on the competitive and prestigious DHL competition win and the July rns announcing that DHL were trialling Lokies in Singapore.
The case for a substantially higher share price is far from baseless bloodninja.
Market cap £1.8m but MAC has a (conservatively estimated) £4m nav based on the below.
The Company now has Luke Johnson on board so both his business acumen and name should bring more deal flow.
If Future Biogas does IPO does proceed this autumn, and my understanding after inquiring about participating in the funding is that it probably will, then MAC could be looking at a substantively valuable holding in this Company in relation the the current m/cap. Could it be another high % stake post funding just like WLL?
A share price of 4p to 5p would reflect the current assets then add on a premium for the business model that accrues stakes in good companies without dilution. Add in a premium for having Luke Johnson on board such a microcap.
Also, I anticipate that WLL will follow the same path as Cornish Lithium (currently valued at £80m). I would imagine the low priced warrants will prevent dilution as WLL will need more funds to reach that kind of valuation. In fact if MAC are involved in future fundings the stake could potentially increase. My understanding from public domain info is that WLL is a year or two behind Cornish Lithium. The 8.7 % holding in WLL would then be worth circa £7m to MAC. CL of course had a recent £6m funding that sold out in 20 minutes.
Cash circa £400,000
WLL value £1.5m. (potential to have a multifold if, as envisaged, it follows the same path as Cornish Lithium)
Burgh Hotel. circa £800,000
Warrants value for all holdings?
Future Biogas stake value? Due to IPO this autumn
Fast2fibre stake value?
Various hospitality holdings value?
Pipeline deal flow value?
Well, it's excellent news and the shares will be in sticky hands. Also, at least now that gives some context to why the shares had 'coincidental' brakes applied with some, at the time, inexplicable sales, but the funds will be useful and no doubt Luke Johnson sees significant upside from here.
I think we will see an Autumn IPO . Tennyson / Shard Capital are the brokers.
MAC is substantially under nav now with the WLL stake alone matching the MAC m/cap. Then there are warrants for a variety of holdings, stakes in the Burgh Hotel, Future Biogas (likely autumn IPO) , Fast2Fibre , 3 other IPO's / trade exits flagged up. I think the board could / should be more expansive and hopefully they will give more details on the lithium stake which underpins the m/cap by itself and is an exciting prospect that can cater for high demand in the area given the high tech battery / electric car plants coming to the north east.
I wonder who the seller is? Seems to have a decent supply. Not you is it Baz?
Agreed bloodninja, there will be volatility and spikes but these should be more sustainable given the newsflow will have substance and a realisation that MAC is increasing its nav and focusing on the green energy sector. The last two spikes have been deflated by Chris Akers pulling out and the director sale. Two 'one-offs' so future significant uplifts should be more sustainable and, really will just be correcting the discount to nav and reflecting the new emphasis on the green energy sector..
Currently, the recent £1.5m + warrants / 8.7% lithium investment stake in Weardale Lithium ltd (WLL) acquired without cost or dilution nearly covers the market cap. Future Biogas plans to list with a £60m valuation with an up to £35m fund raise. Marechale are listed as having an advisory capacity with Cairn Financial taking the lead for the IPO. I assume MAC have prepared the way and are helping with the funding from their client list. I'm not sure what % stake plus warrants MAC will have in Future Biogas but, once listed, the value will be clear and it should be material.
Additionally there is the Fast2Fibre investment with 10% holder, Baz, highlighting they could go for an IPO on the back of a potentially lucrative German contract. That would be another of the four alluded to by MAC in the results for an IPO or trade exit.
On top of that there is the 4% stake plus warrants in the Burgh Hotel which could be worth £800,000 plus the value of the warrants based on a £20m hotel valuation that has had multi-million pound renovations. Best bet would be a trade exit for that one given the increasing emphasis on the green energy sector.
I suspect the strong pipeline MAC have referenced will focus on the green / renewables / net carbon sector. There seems to be a move away from pubs and hospitality and a trade exit for the Burgh Hotel will highlight that as a switch in focus. There should be an increasing number of clients in the renewable sector as well who will look towards MAC for their services and to tap into their high net worth list of investors.
So lots of news for patient holders to await and clearly a substantially higher nav than the market cap - a nav that is set to rise once the IPO's and exits materialise. MAC seem to like to operate under the radar and no doubt being discreet and cautious appeals to their network of high net worth investors.
I'd like to see them be a bit more expansive though. For example, there has been little detail of the potential resources WLL has acquired. For a £19m valuation they will certainly have good prospects. I believe WLL is about a year or two behind Cornish Lithium in its development and the latter is valued at £80m.