David Talbot spoke at the London South East-Red Cloud Securities Global Mining Special. Watch the full video here.
FNX to power mobile donations to the Bob Willis Fund fighting prostate cancer, with a new price point added this year:
As per his bi-weekly column late yesterday afternoon. Here's what Robbie has to say - very encouraging to hear the positive vibes about ADF from industry insiders:
"Trade of the day idea vote of the people went to Vikesh for Facilities by ADF, (ADF)
We were lucky to have a couple of very experienced TV and film professionals who both confirmed new productions were booming especially with new channels like Paramount.
That's important for ADF which runs the trucks and equipment needed for outside filming.
Both pros also gave the thumbs up to ADF which apparently has a good reputation in the industry.
A good look at the fundamentals reveals a company in great shape.
It seemed an excellent one to buy on the dips after the big sell off in small caps.
ADF should recover back to the 80s in time which is where I think it belongs."
by Mark Watson-Williams - it's worth reiterating that (1) WH Ireland state their assumptions on CPO pricing and costings are conservative, and (2) this year's net PBT will include increased cashew launch admin costs which will obviously be much less significant as cashew production grows:
"Dekel Agri-Vision (LON:DKL) – doubling in size within three years
Last Thursday’s announcement of the 2021 finals from this West African sustainable products group showed record results.
The group’s established palm oil operations reported a 66.2% increase in its revenues at €37.4m (€22.5m).
After a loss of €0.4m, its new cashew processing operation, following some initial hassles, is now underway and looks to be a real potential winner for the £16.6m agribusiness group.
In fact, the cashew side is said to be a business doubler within the next few years.
Analysts Nick Spoliar and Charlie Cullen at WH Ireland see cashews moving to centre stage.
For the current year to end December they go for revenues little changed at €36.3m (€37.4m) with adjusted pre-tax profits halving to €0.4m against €0.9m in 2021.
However, it is the next year that will see a big turn-around in results and operations.
The brokers look for revenues to rise to €50.4m in 2023 and then €58.9m in 2024, with profits of €4.2m then €7.2m respectively. That would put earnings up to 0.5c then 0.8c per share.
They have a fair value assessment of 9p per share compared to the current 3.25p.
In March this year the group’s shares peaked at 6.67p each, so the fall back in price actually offers ‘penny stock’ investors another opportunity to buy into a potential mover."
Excellent AGM statement - unusually confident and assertive.
As well as the good news on revenues and margins, I particularly like the hammering home of "a much broader base of recurring revenues" and also "the value of our products and the lack of direct competition".
Hi Gold....we already know what the prelims will show on 6th July from the trading statement, i.e a return to profitable $0.3m EBITDA and $7.2m revenues, ahead of prior expectations, following a vastly improved H2. That would reflect an excellent $0.9m positive EBITDA in the last H2.
The significance will come in the outlook, as this H1 should continue to show considerable improvement, and in commentary on commercialisation of the gamechanging SABER technology.
The maiden post-IPO AGM will be on 29th July - hopefully there'll be an accompanying trading statement:
Great news as regards (1) the statement about continued "very strong demand", (2) the securing of $150m of revenues from Anglogold and (3) the new customer and contract win from B2Gold plus the MSALabs extension.
The revenue visibility going forward for CAPD is now extremely large following the Anglogold contract win. The markets should respond well to this.
Happy with that - better than I'd expected given what we already knew about global supply issues and inflation in H2.
3.1p underlying EPS is very acceptable and a good base going forward given the new contracts being won and implemented in TP and the recovery in Aerospace.
Good to see $2.75m coming into the Group post balance sheet date due to a sale and leaseback of the Tucson TP site.
Also to note that the pension contributions have now peaked and will fall this year and next to stabilise at £3.5m. Great to see the IAS19 pension deficit fall by a third in just one year.
REAT had already flagged that contracts won would benefit H2 and that H1 would suffer from the additional investment in preparation for those contracts, so hopefully that's already in the share price.
Confirmation today that trading is in line with expectations for the full year should reassure the market.
Plus there's news today of "three contract wins in the education sector across four sites with a total value of approximately GBP798k" post the 31st March period end.
LaddersFree has also integrated quickly and well, and is set for a "record period of performance".
Very cheap imo - hopefully this will grab some more attention:
"Only two brokers follow the stock – Peel Hunt and house broker Shore Capital – and both rate the shares a 'buy', with a mid-range target price of 121p compared to the current share price of around 82.5p.
'Given Sureserve's earnings quality and long-term growth prospects – enhanced by the recent growth strategy – we believe the valuation is compelling,' Shore Cap said, citing a price that is barely more than 10 times projected earnings per share for the current financial year.
Peel Hunt says the stock continues to offer 'significant value given potential for double-digit organic growth in our view, supplemented by M&A [mergers & acquisitions] given the company's cash resources and FCF [free cash flow]'.
The company has high revenue visibility from long-term, regulatory-led local authority and housing association contracts.
Leadership positions in non-volatile markets with recurring, predictable revenues should ensure long-term sustainable growth while the sizzle should come from consolidation opportunities in what is a highly fragmented and regional market."
"? Undervalued: Shares trade at 4.8x FY23 EV / EBITDA compared to a peer average of 7.3x, which is not reflective of the Group’s attractive growth opportunities or cash generation, in our view. The average of our valuation estimates (peer mean EV/EBITDA, DCF, regression analysis) gives an estimate of 60.1p per share, or 126.8% upside to today’s price. In the long term, we believe the company could reach £50m in revenue and 30% EBITDA margins, with the scale provided by acquisitions and organic growth. Valuing this long-term potential EBITDA (£15m) at sector mean multiples (7.3x) indicates an enterprise value in excess of £100m."
FYI here's Zeus summary from their initiation a week ago, with a 60.1p valuation:
"Initiation of coverage
SysGroup is an award-winning provider of managed IT services, cyber security, cloud hosting and IT consultancy. The Group offers investors an attractive business model with high recurring revenue and a diversified customer base. SysGroup is competitively well positioned to benefit from sector trends and is investing in sales capacity to take advantage of cross-selling opportunities and a recovering market. In addition, the company has opportunities to make highly accretive acquisitions and its shares trade at depressed multiples that we believe do not reflect the company's strong fundamentals.
? Financials: In the year to 31 March 2022 revenue declined 18.7% to £14.7m due to customers temporarily delaying IT refresh programs and scaling back contract sizes through the pandemic. However, most of this impacted lower margin Value Added Resale revenues rather than core Managed IT Services revenue, leading to only a 15.1% decline in gross profit to £8.9m. Managed IT Services revenue declined 10.5% to £12.8m and earned a 66.3% gross margin, whilst Value Added Resale (VAR) revenue declined 49.8% to £1.9m, at a 21.5% gross margin. Good cost control and the realisation of headcount synergies from prior acquisitions meant that adj. EBITDA decreased by only 3.4% to £2.8m and adj. PBT decreased 2.4% to £2.0m. Strong cash conversion (88% of adj. EBITDA to adj. CFO) led net cash (excl. leases) to grow to £3.3m at 31 March 2022.
? High revenue reliability: SysGroup has high revenue visibility (87.1% recurring revenue in FY22, supported mostly by contracts with a typical 36 month life at inception) and high cash conversion (88% in FY22). In addition, SysGroup has diverse industry exposure (largest sector is only 10% of revenue) and low customer concentration (c. 6% in FY22, with a target of <5% going forward).
? Forecasts: We forecast a 39.0% increase in revenue to £20.5m in FY23, driven by the post-Covid recovery in SysGroup’s existing business and two acquisitions made in April 2022. A structural shift in revenue mix (due to acquisitions and the recovery in VAR) means we expect gross margin to decrease to 55.0%, with absolute gross profit increasing 26.5%. Adj. EBITDA increases 18.9% to £3.3m in FY23 in our forecasts, accounting for some cost inflation and strategic hires. We expect FY23 closing net debt to be £3.1m (ex. leases), reflecting M&A outflows and conservatively recognising £3.1m of contingent consideration as debt. We expect this net debt balance to quickly reduce as SysGroup achieves 80-90% EBITDA to cash conversion with minimal required capex, notwithstanding further M&A. The high cash generation and banking facilities provide the firepower for future acquisitions that are not explicitly included in Zeus forecasts, but provide upside earnings potenti
"Management also flagged some risks from the broader energy crisis as well: “Market conditions, including record high commodity prices, have led to some customers delaying renewals of supply contracts, which is predominantly the point at which assurance customers contract with the group”, Inspired said in March. It added this was likely “a point of timing” issue rather than any greater demand drop.
Clear competitors for Inspired aren't obvious – there is eEnergy (EAAS)eEnergy (EAAS), a smaller Aim-traded company that does similar consulting work with a net zero carbon emissions focus. Others include in-house units from engineering giants such as Siemens, although these are focused on selling products internally. eEnergy also noted an uptick in interest because of the energy crisis. Inspired does have plenty of parallels with IT firms. Its software services division had a cash profits margin above 70 per cent last year. Sales are only around £2mn but this is a handy contributor to the overall profits figure, something the ESG division will not be for some years. Investors would be getting a stable company with longstanding clients. The Gazprom risk is clear – although the market reaction was muted after Inspired outlined the sales and profit knock from a potential collapse – and out of management's hands.
The company is on a good path in terms of ESG reporting and has headroom in terms of debt if acquisitions in that space look like an easier way of building scale. As the reality of these new climate reporting guidelines become clearer through this first annual reporting season with them in place, we imagine boards will be running to Inspired's door as well, especially those who already do business with the company."
"Inspired aims to get its enterprise value from around £200mn to £500mn in about five years. Obviously, this could be done by piling on debt and going on an acquisition spree, but Dickinson said he was keen for a “quieter 2022”, after raising equity in 2020 and making a handful of bolt-on acquisitions during the past two years.
The ‘assurance’ division is Inspired’s bread and butter. It has the strongest cash profit margins – near to 50 per cent – and contributes the most in revenue. The ‘optimisation’ unit, which sells energy efficiency advice and equipment, is set to overtake it in terms of sales by 2023, but with a far lower cash profit margin of around 20 per cent. The catch is Inspired sees the assurance market as “mature”. This means it might be good for 5 per cent growth a year in terms of sales, but won’t deliver serious increases. Where added sales are more likely to come from is cross-selling between divisions.
The new environmental, social and governance (ESG) unit is largely built around quantifying companies’ carbon output, a growing slice of Inspired given the tighter and tighter regulations around releasing this kind of data. Sales for the ESG division were under £1mn in 2021, but this was double the year before. House broker Shore Capital sees sales hitting £4mn in 2024. The outlook is very positive for this area. The government brought in new rules around climate risk reporting earlier this year, extending the Task Force on Climate-related Financial Disclosures (TCFD) rules to all listed companies, where previously only those with premium listings in London had to present a higher level of information.
Greater demands for climate risk data is already driving sales at Inspired: Dickinson said companies coming in the door looking for ESG reporting help and then paying for services from the assurance and optimisation divisions afterwards. “Does a company figure out how to comply with legislation themselves? Or do they give it to someone like us to do, when we’ve already got all the data,” Dickinson said.This approach is where Inspired aims to become so invaluable that companies will be unable to unbake the proverbial cake,and choose to go without Inspired’s services.
Contracts remain fairly small compared with overall revenue as well, mitigating risk from bigger clients pulling contracts. There is one significant risk in the wings, however,in the form of Gazprom Energy, the Kremlin-owned UK gas provider. Inspired said in March that 5 per cent of its revenues were linked to Gazprom contracts, through clients' supply agreements. If Gazprom was to go under this would knock up £3mn from 2022 cash profits. Since March, GazpromEnergy has remained trading and now the German government has taken control of its parent company, in an agreement set to last until the end of September."
Here's the full tip FYI:
Get defensive with Inspired
Energy company orders climb as clients need to find savings on power contracts, while tightening ESG rules mean carbon tracking division is set for growth
Who doesn’t want help with their energy bills? For businesses, which don't have a price ceiling in the UK like households, gas and electricity costs are eroding margins across most sectors, alongside higher labour and transport costs.
In January, we suggested gas producer Serica Energy (SQZ) as a way for investors to make some gains on the back of spiralling energy costs. A significant increase in Serica’s share price has now been wiped away as the market has priced in the new windfall tax (Stifel even knocked its target price from 453p to 350p in response) but strong earnings remain locked in.
The fortunes of Serica are indicative of the risks involved in buying into cyclical and politically volatile industries. Following the energy cost theme, Inspired (INSE), formerly Inspired Energy, offers another ‘inflation winners’ bet. It acts as a middleman for companies negotiating power agreements and also advises companies on cutting their power usage. The recent surge in costs has seen interest rise in its ability to cut power bills, as well as the ‘optimisation’ division, which advises companies on cutting power use. Inspired also puts together carbon emission reports, a growing requirement for listed and private companies, with carbon metrics used increasingly as a performance metric,even being linked to debt costs for some companies.
The chair of Marks & Spencer (MKS),Archie Norman, put it plainly last week:“The cost of doing business is going up,taxes are going up, regulatory pressures are going up”. The winners would be those who“can trade well in the downturn” and have “efficiency opportunities”, he added. This is basically a stump speech for Inspired.
Chief executive Mark Dickinson said one major retail client had paid around £300,000 for his company’s services and saved around £20mn over five years as a result. At the same time as these services have come into higher demand – demonstrated by the order book for January and February almost doubling in value compared with last year – Inspired’s share price has come off a quarter, and the 14p share price level is not far off a 12-month low.
As power prices are set to remain high, this gives investors an opportunity to buy in at a value level.Growth is not spectacular on a year-on-year basis, in terms of sales and cash profits, but zoom out to a five-year horizon and it starts looking flashier: sales CAGR over that period is 26 per cent, while cash profits is 8 per cent. The cash profit tumbled in 2020 due to the pandemic (falling from £16.7mn to £11.2mn) but has quickly rebounded,with the consensus forecast for 2022 at £21.6mn as well. There are growth plans:"
Nice mention on Friday from Andrew Hore on i.i.i as one of three great AIM stocks to watch:
"Domain name and online marketing services provider CentralNic Group CNIC has been the subject of forecast upgrades this year, yet the share price has still fallen – even if it is by a lower percentage than AIM. The prospective multiple is 10, and that undervalues the potential growth."
Grgrantsu, completely agreed re ANX too!