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A few further remarks:
1 This explains why stock markets are understood as discount pricing mechanisms
2 The role of the discount rate sheds light on the current debate over the effects of very low interest costs on stock market valuations & their susceptibility to any increases in interest rates
3 The analysis of the determinants of the NPV model [by me] wasn't intended to produce a value but rather to cast light on how the NPV value changes as parameters and variables change. The underlying inputs in an NPV model also have value in that they provide a ruler against which to measure outcomes versus projections & therefore assess how the plan is working out.
Dear hyms
I must do some work! So last on this. I'm sceptical about takeover given the complex licencing deals. Exclusive ownership might screw with that. Also, the Team. Seems like the original guys are still there & most of the key players except McGlone & the Chairperson, have been at SEE for a decent time. If they don't know the value of the potential then who does? [Answer Barnden?] So I think there is plenty of patience left to realise a higher valuation & remain independent. I suppose one might argue that Fleet might be sold off / spun out but as to the rest SEE seem able to execute without apparent resource constraints. So why sell out if this is just the start? The IIs might feel the same if they are sufficiently briefed on the real story here. imo, Cenkos deliberately downplay the potential. SEE's commercial discretion remains an admirable discipline - suggests they are very serious about executing & nothing else.
No advice intended of course. Unlike MaxV, I don't know what the future holds.
dear hyms
Of course, I don't really have a NPV for SEE. I could set up a model & refine the inputs as info emerges but a bit early.
I thought more that looking at the NPV / DCF model, it might put some perspective on the issue of dilution and that it was just one variable & that it was not necessarily either value destructive or accretive for the pre-existing shareholders.
I have another more multi faceted model that I use to identify exceptional situations. It is a complicated model of no use to anyone perhaps including me. It emphasises potential mkt size, high potential % of the mkt, gross margins / pricing power / sustainable competitive advantage. Also need resources & the team. The team is key - & hardest to assess. Unusually, SEE seems to tick the boxes. Given all the value added areas that lie ahead, my hunch is that SEE wd be worth in excess of US$10bn if it executes on the potential. The model used by Cenkos seems to focus just on the more value limited DMS - I think the pilot assist / HUD aspect is key tech not a commodity product i.e. high value. Aviation ditto. Fleet needs more aggressive resourcing & marketing [slash the price / scale up / reduce costs rinse & repeat].
For completeness, note the reference to the terminal growth rate in Cenkos [they utilise values between 0.5% to 2%]
This refers to the set of cash flows beyond year 10 [I believe]. i.e. rather than project cash flows beyond year 10, the model just takes the value for year 10 and grows it at a set per cent rate for following years. Cenkos, as is the convention, use very low values. Since these cash flows are so heavily discounted [as explained before] the terminal growth rate [covering years 11 to 20 - I think] don't dramatically affect the NPV
Of course, these are simplifying assumptions in the model. No cash flow projections for yr 11 onwards just use a set terminal growth rate on year 10. In my view, if SEE makes it, I don't think it would be running out of growth by 2031
Therefore, this is another area where the model can undervalue the situation in comparison with doing the NPV in say 2 years time.
Apologies for further remarks on this.
Of the 3 factors used in producing a NPV per share, number of shares & cash flows are linear functions whereas discount rate is an exponential function i.e.
double the shares in issue [but alter nothing else] = half the NPV per share
double the cash flows [keeping the same time distribution] [but alter nothing else] = double the NPV per share
half the discount rate [but alter nothing else] = quadruple approx. the NPV per share
So the discount rate is such a powerful factor. That is why Cenkos upped the NPV SP following the Hermes subscription despite utilising the same cash flow assumption yet allowing for the 10% dilution but reducing the disc rate by 1%. Therefore despite the dilution their model increased from 12.9p to 14.3p
The other thing to note is the cash flows & their treatment. The cash values used are successively discounted in the NPV model. Therefore assuming constant cash flows of £100 pa & disc rate of 10% you get the following
£90
£81
£72.9
£65.6
£59
£53.1
£47.8
£43
£38.7
£34.8
Note that earliest are most valuable. Beyond 10 years [especially at higher disc rates] the values are small.
Therefore, the NPV will be severely reduced if beginning with negative cash flows in early years. Therefore looking ahead at SEE's NPV, it is minimised now by the next year or so but do the NPV beginning in say 2024 & it would be massively higher on the same assumptions.
Of course with actual cash flows imminent, the disc rate at that point also falls sharply i.e. exponential increase in the NPV
A final [repeated point] is that cash flows need remodelling - at the moment nothing added from the Qualcomm deal or the HUDs / pilot assist / OMS etc etc
On shares in issue, I always assumed this baby needed feeding. How many more shares? My guess is not that much more if they can get the stock price up. Equity funding is getting more effective already i.e. raise at 10.5p. Next one I hope will be in the 20p range.
Gdarnit
The NPV model doesn't value SEE at any value. The valuation it produces is a consequence of the 3 variables you insert. These are
1 cash flows over the time period used [typically 10 years]
2 discount rate used [i.e. risk adjusted cost of capital]
3 total shares in issue [i.e. NPV per share]
Your focus on just shares in issue ignores the impact of changes to 1 & 2.
My first contention is that cash flows used by Cenkos don't accord with the intent of SEE's plan [far too low]
My second contention is that the discount rate used by Cenkos is BS. Come on, is this really a high risk scenario now? I think the cash flows here are no more risky than say those of Qualcomm. Just my opinion
My third contention is that given the above, marginal increases in shares in issue [besides itself reducing the discount rate by reducing risk] are minimal impact in comparison to increased cash flows / adjusted disc rate
As to the actual NPV? No number - but lets just say way higher than dreamt of in Cenkos's universe
Somebody needs to buy an economics textbook.
This obsession with dilution is classic PI ignorance.
Where wd Apple, Amazon & Tesla's SP be today without "dilution" along the way? Answer: they wd be valueless since they needed capital raises along the way to fund the plan. They obviously used those equity raises rather well!!
There is a process here. The PIs are leaving & the IIs are buying up the stock. Just check out the register. Good thing too. This situation is beyond most of our understandings
In any event,
Key point, I think, is that they will have done their due diligence. That gives assurance on the current performance & prospects. So this should further reduce the discount rate used to value the Co
"75% of retail investor accounts lose money when trading spread bets and CFDs with this provider."
That is a direct quote from IG's website.
The posters on here pressurising people to trade this are encouraging people to lose big time. This is not emotion. This is the facts.
Holding a share whilst it gyrates up and down is not easy but offers far better prospects if the underlying company has good business and prospects.
Let me repeat this warning to all on here. I am not joking. I speak from long experience of markets. Only the very few are successful at trading stocks - and usually even for those it tends to go wrong in the end. The odds are stacked against you. You've got to beat the spread and dealing costs.
This is not a recommendation on SEE. It is a warning to ignore the BS of the "traders" [In any case, these guys are buyers seeking lower buying prices. You can't really trade SEE given the spread and the inability to go short, only long]
I assess and evaluate the business and its prospects first. If I like that then I look at the share price i.e. is it cheap or expensive? Like many, my investment horizon is co-extensive with the business. The share price ultimately will reflect the underlying business and its prospects. Given the overwhelming obscurity of SEE [still], you might interpret that as instrumental in leading to an undervaluation [besides historic & behavioural factors].
This insistence by many on here that everyone are mugs not to trade SEE is not borne out by the empirical data. Most lose on trading [check out the warning on IG's website]. The spread and dealing costs means you have to be right a lot more than you are wrong. If you are a trader, then why SEE? Ever heard of Bitcoin, Tesla etc etc??
Let's say the obvious. You can't short SEE. The rubbishers on here are buyers or get paid by buyers i.e. like all buyers they want it as cheap as possible. Do they have an impact? Can do - it depends. Here with SEE most PIs depend on chat boards like this for info. When volumes are low then they can create a behavioural effect on those who lack the ability to do their own research.
Moral of the tale: Do your own research - or be swayed by others.
https://www.youtube.com/watch?app=desktop&v=cC6kuNyf06g&feature=youtu.be
This looks to be absolutely huge potential. Just watch the vid - and imagine the collaborations here.
The presumption of the efficient market theory is that the market actually reads all the info out there [hello Wirecard] - and understands it. SEE is just so obscure. Barnden will doubtless unpack this one for us. In the meantime, SEE shd announce a new bitcoin mining division. Then the shares wd go up by 10x. The mkt gets bitcoin - no reading necessary.
Absolutely. The implications are something else.
One of the odd things about SEE is having an analyst like Colin. Given the obscurity of the tech and the secrecy of SEE, how fortuitous to have Colin who is steeped in industry knowledge and has attempted to alert people to DMS over the last few years. It is now clear the he has been bang on about the emergence of DMS as a key and multi faceted tech in auto when nobody else saw it coming. As I noted before, he thinks SEE has a potential value of magnitudes of that envisaged by e.g. Cenkos. I take his view seriously as it is based on real knowledge and his professional standing would be affected if he were proven wrong having taken such a strong stance.