George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
Great work @golfnut, that's quite the margin of safety. I'm assuming that accounts for the £177m cash they hold too?
A large part of the issue here is illiquidity & market maker shenanigans. Right now, the bid - ask spread is set at £16-16.80, yet I've just added 1k shares at £16.02... almost every trade today has been a buy, but reported as a sell. I still don't understand why in 2024 market makers can advertise a buy price of £16.80 and then sell shares at £16.02, it's utterly bizarre.
Alpha bounced off £23 resistance (equal to exactly £1b market cap) no less than 6 times from September 2021 to August 2023. The last 2 occasions I watched the order book like a hawk, whenever buyers came in above £23, one of the market makers would drop their bid / offer and start selling shares. This quickly killed demand and led to a pull back. There was plenty of logic as to why Alpha should have re-rated last summer, however it simply wasn't allowed to.
Now part of this could be due to institutional activity, there have been forced sellers in Cannacord, Liontrust & Jupiter, shares which have been eaten up by JP Morgan, ABRDN & others. It feels to me as though market makers are being directed by the demands of these large buyers & sellers and the share price is constantly being 'managed' for the buyers benefit.
The main market move is therefore key, they move onto SETS and the price will be dictated by market participants instead. I can't believe that there aren't European or US funds who wouldn't be interested aggressively buying down here...
And there we have the answer. Never a good look when a company sees a 27% decline in a couple of weeks and then issues an update like that. So they are expecting revenue of ~£50.2m in FY24 vs forecasts in the market (per sharepad) of £60.4m, plus reduced operating margins, although they don't say to what extent. Is this business ex-growth? Also good luck winning business in the US when they couldn't bear Serco in the UK!
Indeed, had they reported in the same manner as Wise then today would have seen revenue of £183m vs £98.3m prior year and that PBT figure of £115m would have been taken seriously... There is no chance that a company with that trajectory is valued on a PE of 8...
Re. Wise, it's a very tempting short in my opinion. H1 interest income was £211m out of total revenue of £710m. The startling fact though was that operating profit was only £206m, so if they stripped out interest income in the same manner as Alpha have then they would have reported an operating loss of £5m! And this is a company on a PE of 30x / £11.8b market cap when taking into account their dual class share structure... Fairly crazy for the UK market!
Then the 'cherry on the cake' is the interest income. I'm actually surprised that the average interest rate has peaked at 3.8%, which is lower than the 4.2% reported last week by Wise. Either way, it provides tremendous optionality moving forwards. Given their huge cash hoard & the prospect of significant growth to come (15k AB accounts with similar average cash balances to present would result in £4.8b cash), are they at risk of an opportunistic bid? If rates gradually pull back towards 3% then interest income would still be >10% of the current market cap per annum.
Can shares get cheaper? Sure. There is still the worst case scenario of a global recession + swift reduction in interest rates hitting all elements of their business. However, you'd still have a huge cash hoard + substantially profitable operation underpinning the market cap.
I'd also say this looks substantially less likely to happen than 6 months ago, given steadily falling inflation & continuing strong employment + growing real incomes. Time will tell.
Either way, I've bought back in today & will check back when the full year results land in a couple of months.
I was very impressed with the strength of the alternative banking performance, H2 YoY growth came in a ~20% and it's contribution to group revenues grew to 33% vs 29% a year earlier. It's worth digging into the numbers in a bit more detail;
FY21 had closing client accounts of 1746 & reported revenue of £20.4m, so ~£11.5k per account
FY22 had closing client accounts f 4200 & reported revenue of £28.8m, so ~£6.8k per account
FY23 had closing client accounts of ~6500 & reported revenue of £34m, so ~£5.2k per account
Why the contraction? Lower AB transaction volume and resultant FX commission. Let's assume they add another 2500 accounts in FY24 but average revenue per account recovers to £6.8k, the result would be revenue of £61.7m on a ~35% operating margin... medium term, if the add 3k accounts in FY25 + FY26, they would reach 15k total, which at £6.8k per account would deliver >£100m revenue. Again, you could very easily make the argument that a business with this financial profile could easily be valued at the current group market cap.
First post here in some time, back in July at £22 I thought the writing was on the wall from a near term share price perspective. Whilst ignoring such material interest income is applaudable & likely unique (I've certainly never seen a company report profit before tax > revenue), it isn't going to attract any speculative money (which is good long term, bad short term). It turns out that was the right stance to take, given shares have since declined over 25%. However, there is no doubt that the medium term value proposition here is very attractive.
The FX consultancy business is a cash cow, £76m revenue showing 10% YoY growth and likely bringing in PBT of >£30m. I thought this extract from today's Liberum update was fascinating;
"Not only did this result in less client activity, management also discouraged clients from using more complex, higher margin derivative products (consistent with their philosophy of putting the best interests of the clients first). Management also reduced its risk appetite, impacting revenues but resulting in the lowest level of client defaults in the last five years. "
That's fantastic from a long term relationship perspective & again shows they are entirely comfortable their strategy vs chasing top line at any expense. IMO such a high quality operation has to be worth a minimum of 20x operating profit, so I think a valuation of £600m for FXRM practically underpins the current market cap on it's own.
P2 to follow
A classic case of what happens when something is pumped by SCSW. £145m debt vs £145m market cap still makes this extremely risky, especially with such minuscule operating margins...
The trading update on Monday was truly spectacular; from £122.6m of net operating income in H1 they now expect to report £290-310m for the FY. This means H2 is on track for £168-£188m in net operating income, for context if we exclude the covid fuelled 2021 period which had half year results of £230m & £178m, the next best result in CMC history was the £155m recorded in the 6 months to 31/03/22. Indeed, the last 5 half yearly periods to 30/09/23 had average net operating income of £138m, so Monday's jump was really impressive.
With operating costs expected to be flat vs H1 (£118m), the updated forecast numbers suggest that H2 pre tax profit will come in at £50-70m, which if realised at the midpoint would result in EPS of 16p a dividend payout of ~8p.
Why is this particularly notable in my opinion? Let's cast back to their 2022 results; "Investment in growth initiatives is expected to result in a 30% increase in net operating income over the next three years."
That was from a baseline of £282m net operating income, meaning their 3 year target for FY25 was ~£367m, or £183.5m a half, which is more or less in line with where H2 24 is forecast to land...
So are they on track for their medium term guidance? A level of income which would deliver operating profit of ~£130m based on operating costs plateauing at FY24 levels? I guess we'll have to wait a few months to find out! However, if they were to hit those targets in FY25 it would result in post tax profit of ~£100m, EPS of 36p and DPS of 18p.
That would mean shares trading at 127p are on a forward P/E of 3.5 and a FCF yield of nearly 30%. That ignores the >£200m net cash on their balance sheet too. It looks to be a very interesting play for a recovery over the next year IMO.
Crikey, just look at the delayed prints from Friday - nearly 800k shares changed hands around the £3 mark. Todays move tells us that either the buyer wanted more or the seller ran out of stock at that level, positive whichever way you look at it :)
Yep, the drag from fund redemptions should certainly ease this year & allow the cream to rise to the top. £4-4.50 should just be the starting point for a re-rate in my view, considering shares spent nearly all 2021 trading at £3.50-4... The strategic progress made in the US since has been stunning & unparalleled in the AIM small cap space.
Over the weekend the Kooth CTO shared an interesting role that they are recruiting for;
https://www.linkedin.com/jobs/view/3798347166/?refId=1U2ci3B7Rm63ADBikIvmXw%3D%3D&trackingId=1U2ci3B7Rm63ADBikIvmXw%3D%3D
"VP of Engineering - Consumer Marketplace - Scale-Up - Remote/East Coast
This pioneering marketplace product is immediately hiring a VP of Engineering to lead its technology division in the U.S., offering a pivotal role in shaping and evolving the innovation of a new platform for widespread adoption in the American market."
"Key Responsibilities:
Closely collaborate with the CTO and CPO to shape the platform's vision and its in-house migration.
Assemble and nurture a team of exceptional, remote, US-based engineers, ensuring the app's delivery and success.
Assume full responsibility for the new and parts of the existing app, previously developed by a third party, and make critical technology decisions.
Embed security, accessibility, and best development practices into their processes.
Build and manage a high-performing, delivery-focused US team within the established European HealthTech brand.
Strengthen ties with the global team, promoting a robust remote-working culture.
Collaborate with the European CTO to develop and implement a robust technical strategy.
Oversee the successful delivery and operations of the application, ensuring compliance and data security."
Appears to be a clear sign that things are full steam ahead...
Someone clearly wants in here, L2 order book is well bid, for a SETSqx share this generally suggests international interest... It still amazes me that we aren't trading at all time highs, however it won't take long to get there if this buying continues & the news flow we expect begins to land.
@Wildtiger, a trading platform makes money based on volatility, not market prices... Q3 was extremely volatile, with a large fall in October strongly reversing in November & December. The large dip to start Jan is perfect for a company like CMC as it will encourage traders to reopen positions etc. CMC has never been cheaper than this on a P/NAV basis, high probability of a re-rate back towards £2 IMO.
@Acuere, I suspect the dates you quoted provide the answer to your question - the Penn contract will be running from 21/02/23-21/02/24, so there is plenty of time between budget approval last month & contract renewal date.
Excellent volume this morning @£3 - potentially from word of the successful launch starting to spread? Presumably any II that bought shares in the July placing will be keen to add at the same price if execution risk is now substantially lower? Canaccord likely still providing supply for now, given that they didn't partake in the placing and have been reducing their holding all year - no doubt selling illiquid positions first to satisfy fund redemption requests. When this supply dries up I suspect shares will fly.
And that's a good point on no news being good news @Nortel, likewise I am very keen to hear what else they have been doing - digging has uncovered their plans with Aetna in Kansas / Illinois, ongoing work in Arizona with the same team that put Penn in place & then there are undoubtedly a significant number of ongoing workstreams with the 30+ other states that are in the process of embracing digital mental health resources. And then we have the international licencing opportunity!
Would be nice of management to update the market on the California launch, all looks to have gone well with a statewide service now in apparently operation; https://solunaapp.com/
Just needs an RNS to reassure the market & highlight that the majority of execution risk has now been removed...
Just needs a little bit of volume and we'll be off...
Excellent start to the year - all systems go...
"Following the delivery of the NoD and in the absence of any meaningful correspondence in relation to this matter from the Government of India or if no amicable settlement is reached, IGPL will subsequently deliver a notice of arbitration to the Government of India. Any such notice of arbitration is anticipated to be delivered to the Government of India in this first quarter of 2024. Under the Treaty, an arbitral tribunal is to be constituted within two months of delivery of the notice of arbitration."
LIT & Fasken are managing / funding the litigation process, PAT are not legal experts and likely have no internal expertise, they certainly won't have much to do with the arbitration filing which will be very technical in nature. Likewise the claim quantum. So once they provide the info, PAT will release it...
Good to see only 3 early sellers & NT for more than 75k shares into close, should make traders think twice about jumping in and out.
Ps. Mickey, there is no £499 man, it's just a common amount for people to buy / top up!
Newsflash;
- PAT will need to spend money over the next few years whilst the claim is progressing... £1.4m per annum in costs is immaterial vs the claim size
- The filing of the claim & quantum disclosure are quite obviously driven by LIT & Fasken, PAT are not in control of this
- Early settlement is very unlikely - probably less than 5% chance. The value creation here will be from the size of claim disclosure & what the market deems PAT's chances of success are.
- Excellent to see a near $600k decrease in exploration expenses, offset to a some degree by a $170k increase in share of JV expenses. Presumably the $71k of unrecognised arbitration cost will be recognised in the following period - shows they are controlling cash burn.
- No more disruption from financial filings until the end of September, in that time period it's highly likely we'll learn the value of the claim & be valued at a more sensible chance of success than ~1.5% chance we are currently priced at (based on a $1b claim)
- if the market prices in a 5% chance of success on a $1b claim shares would trade at £39m cap / 22.5p, GRX currently trades at ~18% chance of success (this would equate to 80p per share based on PAT's current 173m shares in issue.
Bottom line - there should be very significant upside from current levels once the claim is filed
Solid report, should be enough to attract some interest as 5.5p to 38p is decent risk vs reward!
Worth pointing out that Allenby estimate a claim mid point of $750m, given PAT have already quoted the times of India article which stated >$1b you could say this is prudent.
At $750m their methodology gives a target price of £0.29p, however at $1b it would increase to ~40p. As we know, there is potential for higher than this which would stretch valuations even further...Add in the fact GreenX trades at ~19% of it's claim value and the upside increases further still.
Nice to see some stability & signs of upward movement, I suspect the additional £150k at 5p made the game obvious too anyone who has been following. It also explains why shares were obsessively kept down by the MM's in August / September when they should really have re-rated to 15-20p. It's filthy but maybe they owed the backers a favour for showing faith in March when funding was still conditional...
Either way, once that claim value drops we will get significant attention, the wider market is also dramatically improving so there is a genuine chance of a 200-300% move if the numbers align to what we have speculated / suggested by the company.