Member Info for Rokerpark68

My pleasure - good to trade views. Much appreciated.

The timelines for existing product development over the next year or so are outlined in the August 2020 presentation on the company's website. There have also been a series of important patent announcements. StemPrintER is clearly a substantial opportunity which is being focused on as well. There seems to be a lot of momentum. Not entirely sure what else the company could be doing commercially and scientifically right now.

Hi again Y-Alam

Do you really think the board is asleep when the executive chairman owns 33% or so? I rather doubt it.

I think the board's problem, if any, is that things have moved so quickly. The amount of work required to negotiate and document the fund-raising and the demerger will have been enormous. On top of that we have had a flow of announcements on other things as well and a major senior management commitment to PR, which whether you like it or not, has raised the company's profile. Also there may be a number of other commercial negotiations going on at the same time.

If I had to guess I would say this board and its advisors will be stretched to the limit .

Morning Y-Alam,

Just picking-up on our exchanges yesterday evening, I agree that the board have taken a mis-step in announcing prematurely the possible demerger of StemPrintER. But as you intimated, we really don't know what is happening behind the scenes. Who knows what the board are being advised they can and can't say to the market?

You also mentioned that raising $57million after the ATM had been used was "plain greedy". In my mind it was a sensible strategic move. It mitigates one of the biggest risk factors for pre-revenue businesses - i.e. funding/liquidity. This money will (i) help the company to pursue an aggressive patent programme, which is obviously fundamental to protecting value (ii) help to accelerate trials and approval processes for its existing product development (iii) fund new product development (iv) possibly fund the StemPrintER spin-out without recourse to an additional equity raise for the new vehicle and (v) give the board crucial leverage when negotiating with big pharma etc.

I actually think the board would have been asleep to miss the fund-raising opportunity. For me it helps move this investment away from speculative to being on far more solid foundations.

Shirazkhan39 - enjoyed reading your post and many before it. Thank you.
I think TILS is a very interesting company and I have invested the largest amount I have ever put in to a company with this sort of profile, so don't get me wrong I think it is potentially a great opportunity.
I'm well aware of how AIM works having invested in it for many years - its imperfections can often provide the best risk/return profiles if you know where to look.
Also, I spent a number of years investing professionally in the venture capital sector and have seen a number of pre-revenue companies which snatched defeat from the jaws of victory! I agree with you that TILS appears to have a good risk/return outlook, but it's never done with companies like this until it's done. That's why in my mind it is still somewhat speculative, but I have high hopes. I'm just not surprised at the price vol.

Y-Alam - I can understand your frustration, but my point is what if the board have been offered alternatives to the demerger which are attractive and have to be evaluated? Sometimes commercial circumstances change timelines.

As for the ATM and the fund-raising, I think any pre-revenue company board would be remiss not to take advantage of favourable circumstances in order to ensure medium-term liquidity.

This isn't a disaster. In early May the share price was trading around 75p and the company had limited funding, no StemPrintER visibility and a relatively low profile for its core business. The share price is now 130p, the company is better known, has delivered on patents for key products and is well-funded and is much better known. The board isn't perfect, but the company has come a long way very quickly.

bottom drawer!

Wondergoals - yes there is, totally agree.
For me the strategy is to fully de-risk if the StemPrintER announcement give the share price a reasonable boost and then stick the remainder in the bottom draw!

Usain - I agree that the delay is frustrating and boards should always try to deliver on their timelines.
However, if StemPrintER is a genuinely interesting asset the company's announcement regarding a demerger may well have flushed-out a number of potential buyers or investors. If that is the case the board will have to perform its fiduciary duty to shareholders and assess the merits of any proposals received. This could take time and the board's advisers should be making sure that the whole StemPrintER process is managed properly.
I'd rather they did that than just try and stick to a timeline which may have been announced prematurely.

I initially bought into TILS in May and have added several times since with an overall average price of about 125p. I sold some at 268p and 167p.
I'm surprised that some contributors are shocked by the volatility here. This is a pre-revenue speculative stock which is clearly very susceptible to swings in sentiment, especially amongst retail investors. It ran too far too quickly based, I think, mainly on probably over-optimistic interpretations of the value of StemPrintER. No-one really knows what this is worth and the company is currently working through a price discovery process for this asset.
I have seen various parties blamed for TILS's price volatility - market markers, shorters, "bedwetters" , the board , institutional sellers and even, most absurdly, "dumb Yanks".
Until the position with and valuation of StemPrintER becomes clearer sentiment will remain weak because an announcement is now , for whatever reasons, overdue. When the relevant announcement comes it will either be well received or not. We shall see.
I only invest a small part of my portfolio in very speculative stocks like these, as they are obviously so risky. I am continuing to hold my remaining position because (i) think the board were smart to take the chance to fund-raise given that liquidity issues can be terribly damaging to pre-revenue companies, even those with good products (ii) the investors in the fund-raise will have done a lot of work before investing and (iii) the announcement on StemPrintER may still prove to be very good for share price in the short-term, which I will use to take some more profit.
Until the announcement, who knows where the share price is heading. I certainly don't, but I'll take my chances and won't be moaning about the outcome if my gamble on TILS doesn't pay off. Because that's what it is for most of us.

So overall I remain keen on FRP, despite the dip since the results yesterday, for the following key reasons, which, of course are merely my own opinions and investors should always do their own research.
• As we know, the corporate restructuring market will be strongly in favour of FRP’s offering over the next year or two.
• As a result there could be some material profit upgrades over the current financial year, especially as the UK government’s support packages are reduced.
• FRP has cash to continue growing by acquisition and has no debt.
• The partners are aligned with shareholders (as long as the Board’s Remuneration Committee does its job!).
• Dividends will be paid quarterly in due course and could be at attractive levels (i.e yield of 3%+?)
• Senior management is proven and experienced.
• Lock-ins are in place for two years.
• The IPO allows for the incentivisation and retention of talent below partner level through sensible FRP share schemes.
• FRP has no audit arm which could cause conflicts in restructuring mandates. They are “independent” in that sense.
Hope you find this interesting.
Rokerpark68

Libero / Forensic505

I thought your exchange yesterday was very interesting – I hope you don’t mind if I add some comments and analysis of my own over two posts.

Partnerships which convert to listed vehicles do raise some difficult issues, especially around partner remuneration.
The FRP partners have traded their full annual profit pay-out model as partners, the historic financial impact of which is illustrated on page 37 of the IPO prospectus, for a reduced annual income (see “Incentive Arrangements” commencing on page 21 of the prospectus) but hugely increased liquidity for their previously illiquid partnership holdings in the form of FRP shares, some of which they sold as “Selling Shareholders” at the point of IPO (see page 78 of the prospectus) and some of which they still hold (subject to certain sensible lock-up provisions as outlined on page 25 of the prospectus). They are therefore aligned with other FRP shareholders in that they have an interest in increasing the capital value of their current shareholdings and maximising dividends to make-up for the dismantling of the full annual pay-out partnership structure.

In terms of EBITDA, on page 11 of the prospectus we have been provided with pro forma numbers showing what EBITDA would have been historically if the revised remuneration arrangements had been in place for the partners since the FYE 30 April 2017 and had replaced the full pay-out model. This produces pro forma EBITDA numbers for the FYE 30 April 2017, 2018 and 2019 of £11.2m, £15.5m and £13.9m respectively. In yesterday’s results announcement for FYE 30 April 2020 the equivalent adjusted EBITDA number for the full 12-month period was £18.5m (second bullet point in “Financial Highlights”). This represents good growth versus the £13.9m pro forma figure for FYE 30 April 2019 in the prospectus.

Libero, I agree the EV/EBITDA figure looks high at the moment. I calculate it as EV = market cap £284m less cash of £21m = £263m divided by EBITDA of £18.5m = 14.2x. However, given this is a capital-light business a very high proportion of EBITDA converts to PAT, so the P/E multiple will appear far less extended. Based on Cenkos’s forecast for FYE 30 April 2021 of EPS of 5.6p (which assumes almost no revenue growth versus FYE 30 April 2020), the forward P/E is 120p/5.6p = 21.4x. I took the Cenkos forecast number from this morning’s buy recommendation article for FRP in the Investors Chronicle.

With regard to EBITDA for FYE 30 April 2021, we know from the annual results that March and April (the two months after IPO at the start of March) produced total EBITDA of £3.5m (fourth bullet in “Financial Highlights”). So that’s an annual EBITDA run rate of 6 x £3.5m = £21.0m for the FYE 30 April 2021 compared with £18.5m for the FYE 30 April 2020. I don’t think Cenkos’s EPS forecast for FYE 30 April 2021 reflects that sort of EBITDA/PAT growth – but I don’t have their report.

Morning Libero.
I think the two month reporting period for earnings post-IPO has indeed thrown some investors.
I think the SP will come back fairly quickly.
The announcement was fine.

Tenth largest holding in The DIverse Income Trust (DIVI).

Just bought some more - re-reading the IPO prospectus has made me feel even more confident that this is a well-run, stable business which has an excellent market opportunity given the state of the economy.

Dividends could be attractive over the next year or two. The IPO prospectus states that dividends are planned to be 70% of net profits and that the company is moving to quarterly payments in 2021. Smaller company income funds may well look closely at the opportunity.

The overall risk/return profile does look good at the moment IMO.

Really looking forward to the results.

Libero - I agree that there is some good value here even after the decent rise post IPO. The company is in a sweet spot just now and they must have tremendous momentum in terms of new business wins. The SP is surely heading north over the coming months. I have bought twice over the last few months at around 125p. I am very surprised the stock hasn't attracted more attention.