Member Info for StarBright

Ok. Ask them in an email to confirm that the specific information they have published is correct, saying that you are a reasonable investor relying on it to support an investment decision. State that you will deem no response within 48hrs to be confirmation that published information is correct.

Remind them of their MAR obligation if you’re feeling punchy….

“ Reasonable investors base their investment decisions on information already available to them, that is to say, on ex ante available information. Therefore, the question whether, in making an investment decision, a reasonable investor would be likely to take into account a particular piece of information should be appraised on the basis of the ex ante available information. Such an assessment has to take into consideration the anticipated impact of the information in light of the totality of the related issuer’s activity, the reliability of the source of information and any other market variables likely to affect the financial instruments”

@Gallder - you look like the person who best understands this, can you ask the company directly? As the q is prompted by info in the public domain they shouldn't have a problem answering. I guess the most straightforward question is simply whether the info disclosed on the (apparently favourable) new hedges is correct...

Disgruntled neurodiverse ex-employee is my guess.

Ok. I have looked back through your post history and appreciate the contribution you’ve made here. I can also see your - justified!- frustration regarding the lack of understanding on this board over the nature and impact of the derivative contract.

The notion - repeated here so frequently - that ANGS have to produce/sell a certain amount of gas to “meet the hedge” during any period is fundamentally wrong. As an result all posts/posters considering ANGS with this mental model are completely wrong. The payments to Mercuria under the contract will happen regardless of how much gas is produced and sold.

Given assumptions on gas prices, it is possible to calculate all of the future payments under the derivative contract. This is essentially how the £110m loss reported in the 21/22 accounts has been derived.

In a separate initiative to its derivative speculation, ANGS has been fortunate to establish a gas production business at Saltfleetby. This business is highly cash generative and is already providing ANGS with the ££££££££££££££ required to discharge its derivative contract obligations. Should ANGS manage to continue to discharge those obligations through to June 25, it will emerge as a highly profitable company with - potentially - a market cap many multiples of todays.

In the meantime, fluctuations in gas prices will affect both the revenue ANGS receives for its gas AND the amounts payable under the derivative contract.

Am I getting there? Please don’t be shy in pointing out any howling errors I may have made… Thank you for your help so far - I really appreciate it.

Who - from ANGS long and undistinguished litany of leaders - was ultimately responsible for agreeing the terms of the hedge in 2021?

So the 21/22 accounts include all 34 months of the revenues that will be foregone under the hedge, but only one month of the revenues actually received. Next years accounts then will show (as Revenue/Turnover) the full amounts received during the year from the sale of gas at market prices, so a large “Operating Profit”. Below this, under the heading “Derivative Financial Instrument Loss/Gain” will be the net amount arising from the re-marking of the hedge. If the price achieved during FY23 plus the forecast spot price for the remaining duration of the hedge is the same as that used to derive the £110m, then no loss/gain will be reported. If the price of gas has fallen from 30/9/22 based figure, then - somewhat paradoxically - a gain on the derivative contract will be reported here. If gas prices are higher then the loss on the hedging contract will have increased to more than £110m with the additional amount recognised here. What a crazy way to do the accounting. I’m sure it’s driven by GAAP, but it’s manifestly absurd in this particular set of circumstances.

What a mess!

Of course the situation in CASHFLOW terms will be very different. Here we will see the net revenues generated monthly after the amounts paid away under the hedge. With production hopefully exceeding the committed levels such that full market price is being achieved the company should be generating significant free cashflow. Perhaps they’ll accumulate enough cash to be able to buy themselves out of the hedge a little ahead of schedule. In the meantime, valuations of this business should be focussed on this cashflow and not based on reported revenues much less operating profit.

If there’s anyone here with more up to date accounting knowledge than me (mine is YEARS out of date) who is able to comment on my interpretation I’d be hugely grateful….

I (quite evidently) haven’t paid enough attention to the hedging/derivatives issue, so am playing catch-up here and seeking some assistance.

In June 2021 ANGS released an RNS re Saltfleetby that contained this paragraph:

“ Simultaneous with drawdown, the Company has hedged (the "Hedge") approximately 70% of the Company's and its partners' share of future gas sales, estimated under a conservative projection, for three years beginning in July 2022, providing Angus with downside revenue protection, all the while allowing the Company to capture upside in the event of higher gas prices. The average achieved price under the Hedge, including all fees, costs and charges is 43 pence per therm.”

I understand the extraordinary volatility in realised gas prices, and the related impact of swapping floating for fixed. What I do not understand is how the transaction set out in the RNS has created a loss of £110m that has had to be recognised in ANGS 2021/22 P&L.

It’s easy for me to see/understand that the “hedge” has reduced ANGS ability to benefit from the gas price volatility. Much less easy to understand how/why this creates an immediate accounting loss. In simple terms I can see how the “hedge” has reduces ANGS revenues, but now how it creates an actual loss.

I’d be extraordinarily grateful if someone could explain how this massive loss has arisen when reported revenues are just £3.1m. Does it represent the present value of the FUTURE revenues that will be foregone by ANGS because they’ll be paid to the provider of the hedge? In which case the loss is based on future expectations for gas prices which are subject to change, ie the loss could get greater or smaller?

How is the experienced loss consistent with the statement “… providing Angus with downside revenue protection, all the while allowing the Company to capture upside in the event of higher gas prices.”?

Thank you in advance.

The full Annual Report is now on the website:

https://www.angusenergy.co.uk/wp-content/uploads/2023/03/Angus-Energy-Annual-Report-2021-2022.pdf

@MrRipley, has there ever been a share as pregnant with PI expectation as Avacta in early 2023? Expectation fuelled online by individuals making - literally - thousands of posts here and on Twitter. Endless repetition of over-simplified soundbites to a naive investing community; “It works”, “…turned down £Xm of funding”, “The next Roche”, “II’s don’t get it”, “£44/share” etc etc etc. Aided and abetted by a 24/7 volunteer posse of online guards harrying and belittling anyone with the temerity to question the golden narrative. Is it any wonder that hot money was sucked in..?

Avacta is a textbook example of how a share can be pumped until it reaches what @gje306 shrewdly terms its “elastic limit”. The spike we’ve seen is the inevitable result.

All of this can happen to a great company, with great science promising great clinical and commercial success. You and I agree that AVCT is undervalued - even more so today than it was a couple of weeks ago. But the market as whole, not just the hot PI money targeted by well-meaning influencers, doesn’t yet agree. So the hot money is selling - as it always does - into a book with no buyers and the SP has fallen as a result.

In the end, valuation IS everything. When the science is proven to the satisfaction of the wider investing market and the regulators and medical community, and the company demonstrates how commercialisation will be achieved (how, when, how much…) then the share price will reflect this. That will happen ahead of the earnings being delivered, because the market is forward looking.

We will say then that we were right to invest, right to stay invested, that we saw potential before others and had the courage to hold through the noise and hype. I am looking forward to that point!

@Safebreaker, the elevated risks of AIM investments lie in areas like management disclosure, related party transactions, placings, takeovers and other episodic events rather than in day-to-day share transactions.

I know the LSE 'boards are replete with discussions on crooked market-makers reporting buys as sells, fixing auctions etc, all with the goal of stealing golden tickets from honest PI's by making them think that others are selling... But this is just noise generated by confused posters with limited information and poor understanding of the underlying systems and processes. The reality is that the transactional control environment is strong and there is little if any incentive for primary market participants to misbehave as is popularly supposed. The risks for them (as regulated individuals and corporates) are simply not worth the potential rewards.

Rampers, FUDsters and their lickspittle apologists should be viewed with equal disdain @Timster...

Posts about Bronte / shorts / manipulation / FUD crews etc are all nonsense and can be safely ignored. All that has “happened” here is that the SP was pumped to high-heaven by Avacta’s resident rampers and has now deflated. PI expectations - read this board! - were that the P1a results and subsequent science day would result in an upwards inflection, driven by institutional investors “scrambling to get on board”. This was NEVER going to happen. Disappointed punters sucked in by the rampy nonsense about £44/share etc are now trying to sell into a book with no buyers and the price has been marked down sharply as a result.

Companies with immature shareholder bases like this one only get priced properly when there are corporate actions - placings etc. The underlying story is that Avacta did a placing at 95p in q3 last year and now trades materially above this following the release of successful trial results and associated data. My gut feel is that a 40-50% premium to the placing price is justified so the price will likely settle and trade around the 130-140p range until there is material new news.

Holders need only hold, or take the chance to add if they are not yet at their desired position sizes.

@DyamFoolMan - that is just the RNS containing “extracts”, as have been all the other links posted and referenced in this thread. Yes, there are sixty-something pages but these are only extracts…

I’m (still) looking for the actual annual report.

@gallder, that RNS contains only extracts: “Angus Energy is pleased to announce its audited annual accounts for the year ended 30 September 2022 (the "Accounts"), extracts of which are set out below.”

I would like to see the full document - which isn’t (yet) available on the company’s website despite them saying it is…

Only “extracts” in the RNS, and it’s not yet on the website despite the RNS saying that it is…. https://www.angusenergy.co.uk/media/reports/

Does anyone have a link to the actual Annual Report document? The RNS’d version is incomplete and the Financial Reporting page on angusenergy.co.uk hasn’t been updated….

RNS looks great to me. Ignore the irrelevant nonsense about delays.

“…the broker will also push up the stock price.”

How exactly will they do that..?

Interesting analysis - thank you for this.

The sums involved appear material. Were details of the “new swap” RNS’d?

@RAH0084: "I have said (more than once) the utility of preCISION is wide enough to warrant 8.9x"

8.9x is your opinion then, not "..the average industry multiplier" as you have asserted previously...

Gilead/Immuno $20bn was 5x 2024 forecast revenues.

Of course a material part of the disconnect might be that 8.9x is nowhere near "...the average industry multiplier".

Evidencing your 8.9x is data derived from an ETF investing in genomics companies (not Avacta's peer group).

Evidencing the 5x I proposed earlier is data derived from four mainstream pharma ETFs, six specialist BioTech ETFs, eight publicly traded companies and medians for the Drugs (BioTech) and Drugs (Pharma) sectors.

Here's some more.

You highlighted the Gilead/Immuno transaction earlier. US law requires the board of a company that is recommending a takeover to its shareholders (in this case Immunomedics) to file a document* known as a “Solicitation/Recommendation Statement”. In this document the board of the company demonstrates that the proposed transaction makes financial sense for its shareholders - specifically that it isn’t being sold at an undervalue. Immuno retained an IB called Centerview to provide and evidence the required supporting analysis, for which Centerview were paid a fee of $58m….

One element of their analysis was to identify and study EV/Revenue multiples for a set of comparable companies. Here are the companies that they identified, together with their EV/Revenue multiples:

Alnylam Pharmaceuticals, Inc. 5.0x ? ?
argenx SE 4.7x ? ?
BioMarin Pharmaceutical Inc. 3.6x ? ?
Genmab A/S* 8.7x ? ?
Incyte Corporation 3.8x ? ?
Neurocrine Biosciences, Inc. 3.8x ? ?
Sarepta Therapeutics, Inc. 2.9x ? ?
Seattle Genetics, Inc. 6.1x ? ?

Here’s Centerview’s professional opinion: “Based on this analysis and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a reference range of 4.0x to 6.0x 2024E revenue multiples (“2024E EV/?Revenue Trading Multiples”) to apply to the Company’s (i) Wall Street research analyst consensus estimated revenue for calendar year 2024 and (ii) revenue for calendar year 2024 set forth in the Projections, excluding one-time milestones.”

*https://tinyurl.com/427jvzem