Member Info for Noise

I might buy more Tung, but realistically I don't see much point until April or so. I need to average down slightly, but probably just hold for a while.

My apologies, in my haste I had misread one line. I read that Insight now owned the TEP invoicing and no revenue is incurred. I missed the section that said "featured introductory discount rates". "Revenue from Tungsten Early Payment was £84.000 (H1-FY15: nil). This represents the revenue of invoice receivables financed by Tungsten Bank. The terms of Tungsten's arrangements with Insight are confidential. However, no revenue was recognised on invoice receivables financed by Insight as the invoices transacted featured introductory discount rates. We expect to meet the required hurdle rates in H2-FY16." The key question is now "the terms of Tungsten's arrangements with Insight are confidential." If they were good I suspect they'ed tell their shareholders, as they have not, I have to infer they aren't fantastic.

Some positive news in there. But reading between the lines, they no longer provide invoice financing or make any revenue from it, but their private capital partners will be? So really they can only ever make money by being an invoice processing firm? Valuable, but not super profitable. Assuming very generous growth, say £130m revenue at 10% profit, maybe 10p EPS and £1. Grumble grumble.

Hi K3, I think I agree, I haven't researched Tungsten in great detail in the last 12 months or so. I actually love the concept, but right now I can't see where Tung are actually going. It seems like they are getting institutional access to finance (I assume they'll take a cut), Morgan Stanley seem potentially interested (JV, short term, finance access, difficult to say). Originally, I had assumed since Tungsten were opening with a bank that would be the main source of finance and it would be done in house. Provided Tungsten have a cut in the invoice-financing stakes, I see a strong £5+ future for Tung. If they become a software vehicle for banks, well the banks will still make the money, but may allow a £1.50-£3 future for Tung.

Do Tungsten currently retain the rights to any profit made on the loans? Sure, they can make a few tens of millions on selling invoicing software, but valuations get tasty when considering IF Tungsten are taking a slice of the cake, if they're just a dumb piece of software succumbing to the banking sharks every desire, well then err, it's probably worth 40p.

Expanding on that. Current process: Senior management meeting "Oh SHTI, we've run out of cash, let's discuss this among every manager we have, cut back on everything, next week we'll meet with the bank managers, beg, borrow, plead, delay supplier payments, bank sends senior banking manager who has to fully understand the business, decide the risk, takes a while, demands significant guarantees and stringent T&Cs etc." Potential new process: Supplier has invoices coming in through Tungsten, tungsten know exactly what's coming in, approve a 4 week loan at 8% APR (roughly 0.7-2% commission a month at a guess?), no need for a bank meeting, no need to panic, the borrowed money is automatically deducted from the invoice when it is paid? It is a rather nice concept in theory, how it functions in the real world (and how it will move forward in the future) is TBC.

Eggs, it is a valid point. I think the key is the ease of access and simplicity, the lack of senior management contact with external banking partners that all adds cost, time, reviews, complexity and risk. For another example, while the cash is loaned against the approved tungsten invoice, I assume the invoice is effectively held in guarantee by Tungsten bank until it is paid, this may reduce the possibility of default as Tungsten already have the money and the business may not be able to divert the funds away to other debtors (especially if the business goes under and an array of insolvency lawyers pounce on the carcass).

Kelloggs integrating their support, roughly £8bn revenue and probably thousands of farmers/machinery firms involved? Good stuff.