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Simon Thompson has provided an update of his recent Buy tip for Litigation Capital Management. The article reviews the lack of impact from the Supreme Court ruling and the benefits of moving from Book Value to Fair Value.

The article concludes:

"Furthermore, having delivered a record performance in the financial year to 30 June 2023, the board plan to declare a dividend per share of 2.25p when LCM releases results in September, a pay-out that analysts at Investec had not anticipated. The brokerage expects LCM to report 70 per cent higher revenue of A$51.7mn (£27mn) in the 12-month period and increase pre-tax profit by a quarter to A$25.3mn. On this basis, expect earnings per share (EPS) of 16.4c (8.6p). Investec expects EPS to almost double to 30.6c (16p) in the new financial year, implying the shares are rated on a forward price/earnings (PE) ratio of five.

So, LCM is well-funded, delivering positive news flow, has a modest earnings multiple and the forthcoming results will reveal material hidden value. The shares also trade on 1.8 times spot book value under conservative cash accounting – and therefore I re-iterate my buy call (‘Litigation funder LCM makes an eye-watering return’, 19 June 2023). Buy."

Hi Helpful. Thank you for your response to my post.

I had known of Geccamines but at the time of posting could neither recall nor find its name. As to the third joint venture partner, I hadn’t been aware of them previously.

For me, the issue remains why on earth have Glencore chosen this path to obtain Musonoi and the other two licences? The acquisition route they have followed appears fraught with the prospect of damaging Glencore’s ESG credentials. Surely an open approach to the joint venture partners would have been more sensible. We've all read the RNS’s “The company has received an unsolicited approach from a global competitor which may of may not lead to a formal offer” Who at Glencore thinks that, what appears to be skulduggery, is preferable?

The only sensible answer that I can conjure is that someone thinks that even at $420 million they’re getting a bargain, that the risks are worth taking, and that an open approach would have been unsuccessful.

If my assessment is correct, Glencore will need to take action to avoid yet another “corruption in Africa involving Glencore” story. I still think an offer for Red Rock would be a means of avoiding this.

As the arbitration process moves towards a conclusion in Democratic Republic of Congo my understanding of events is as follows(hopefully I’ve got the names and figures correct) :

Red Rock Resources had a joint venture partner, a Congolese company;

The joint venture had the mining rights to a block of land that abuts two separate blocks of land where Glencore has mining operations;

During a period of time which included Covid related travel restrictions, the joint venture partner has sold the Congolese assets to a third party, VUM for $20 million;

On the same day as this sale, VUM has sold the newly acquired assets on to a Glencore subsidiary for $420 million;

Red Rock has taken legal action in DRC to recover its share of the money paid to VUM;

Once this litigation has completed, Red Rock intends to take further action against Glencore

The next points are my conjecture:

VUM and the Glencore subsidiary must have had considerable discourse prior to the day of the sale and purchase agreement;

It seems likely that the joint venture partner will have had considerable discourse with VUM prior to the day of the sale and purchase agreement;

Due diligence will have been undertaken by the Glencore subsidiary;

Red Rock’s joint venture ownership of the asset has either been ignored or has been hidden/disguised

Putting aside the shenanigans relating to the ownership of the block, it appears that Red Rock has missed an earlier opportunity to engage with Glencore and sell the block in a legitimate manner. For a company that continuously needs to raise capital in order to further its development of mineral assets it seems to have been a considerable oversight.

At the conclusion of the VUM litigation can we expect Glencore to seek to pursue the $420 million deal? Fight through the Congolese courts? Or, as an outlier, which is entirely speculation on my part, seek to buy Red Rock Resources in its entirety?

If it came to an offer for the whole company, what would you want for your shares?

Simon's updated his VLG tip following todays final results.

He draws heavily on the Cenkos research and concludes the article:

"In other words, the £49.5mn market capitalisation company’s forecast year-end enterprise valuation of £59mn equates to only five times cash profit estimates, or less than half the rating of peers. That’s a low multiple for a recovery play that is now benefiting from tailwinds and is set to de-gear its balance sheet, thus transferring more of the economic value in the entity from debt holders to shareholders.



The bottom line
So, having rated Venture’s shares a buy, at 28p, when I covered the half-year results (‘Nothing ventured, nothing gained’, 22 September 2022), and reiterated that advice at 36p (‘Investors are being too cautious with this self-care stock’, 11 January 2023), I feel that the shares, at 39.25p, have potential to double in value. Buy."

I've bought a few more and have managed to drag my average purchase price down a little.

Simon Thompson of Investors Chronicle has published an update following the Trading Update issued a few days ago.

It's a fairly short article basically rehashing the details issued by the company.

He reiterates his buy recommendation and concludes the article:

"Adjust for cash and Gresham's shares are trading on forward price/earnings (PE) ratios of 14 (2022) and 12 (2023), low ratings for an investment manager with infrastructure funds that are beneficiaries of the high inflationary, low growth economic environment. Prospects for a 30 per cent hike in the annual dividend per share to 13p adds to the attraction. Buy."

Having had a quiet weekend, I've had another look at my holding of Gresham House

I've used the following information:
Gresham House annual report 15/3/22
Proactive Investors interview of Tony Dalwood 15/3/22
Gresham House Energy Storage annual report 6/4/22
Gresham House Business update 12/4/22

The interview of Tony Dalwood was fairly bland, however, there were two takeaways for me:
Analysts are forecasting 20% growth per annum for the next few years and he's "comfortable" with this.
Companies in the same line of business are generally valued at 15 to 30 times EBITDA.

Looking through the annual report, I can't find a figure for EBITDA but "Adjusted operating profit, performance fees and development project gains net of costs" seems to be a good proxy. The value of this is given as £23.657 million.

Applying this to the current market capitalisation of £380 million gives a multiple of 16, just inside Mr Dalwood's 15-30 range.

Gresham reported cash and cash equivalents of £40.25 million in the annual report. In simple terms, this doesn't earn anything for the company. It's around 10% of market cap. If this were to be successfully invested and achieve a return similar to the rest of the group then it would increase EBITDA from 23.657 to 26 million.

If we now apply 20% growth, the EBITDA figure increases to 31 million.

And give this a multiple of 20 (chosen to be an increase on the current 16 and still at the modest end of the range) we get a market capitalisation of £624 million. With 38 million shares in issue, this would give a per share value of £16.43.

The questions to ask regarding the figure I've produced are:
Is the EBITDA proxy I've used reasonable?
Can Gresham invest £40 million successfully?
Is growth of 20% likely/reasonable?
Is using 20x EBITDA reasonable?

I'm almost certain that the share price of Gresham House won't be £16.43 in twelve months time. I do however think that there's a strong case to support a considerable increase in share price from the current £9.95.

I bought a few more during the week at 1003p and will look to pick up more on any weakness.

The update I've referred to was published online. It didn't make it into the printed magazine on Friday 22/4/22.

I expect it'll be in next week's mag .

Hi Lurka

You might have looked at Gresham House (GHE) rather than Gresham House Energy Storage Fund (GRID).

GHE invests in a broad range of industries weighted towards ESG credentials. I'm quite a fan.

In regards to Gore v Grid, I'm currently invested in the former and don't favour one over the other. The point I sought to make was that Grid has had a big rerate of its NAV and that the same criteria may apply to Gore leading to a rerate here.

Damn you Spell checker!

RERATE.

Rightly or wrongly I compare Gore with Gresham House Energy Storage Fund (GRID). They're both in the business of owning and running large batteries in order to smooth the input of renewable energy generated from solar and wind into the grid.

The recent annual results of Grid identify some aspects of battery storage business as:
Frequency response
Dynamic Containment
Enhanced Frequency response
Capacity Market.

The first three of these contribute 85% of Grid's earnings.

I expect that differences in the proportions the two companies have regarding varying aspects of battery business leads to distinct propositions for investors.

However, putting the subtle differences to one side we have two operators in the same market.

Having looked at the performances of Gore and Grid, I see that since November 2018 (the IPO of Grid) both companies shares have appreciated in value in a very similar manner until a step change in Grid's favour. This appears to have coincided with Grid's annual results and Gore's fundraise.

The NAV of Grid has increased from 102.96 to 116.8 during 2021. This has been due to : upward revaluation of projects; improving trading forecasts and; reduction in the discount rate applied to some aspects of business.

Grid has also provided some protections for 2022: revaluations to add 15p; Capacity Market contracts to add 15p.

Taken together Grid are expecting NAV of 124p by 31/3/22 and 140p-145p by 30/6/22

If Grid is able to increase NAV to this extent, why can't Gore replicate the same performance? I tend to think that Gore will be able to do exactly that and that a rerate of the share price will follow.

Simon Thompson of Investors Chronicle has published a further article regarding Gresham House.

The article repeats the details of several recent fundraises and provides some broker forecasts.

Cash adjusted PE for 2022 14.8
Cash adjusted PE for 2023 12.8

Pre tax profit for 2022 +30% to £26.3 million

Assets under management to reach £7.5 billion this year.

He concludes the article by raising his target price from 1100p to 1200p.

So there we have it: final results published this morning.

As anticipated, the final figures show considerable improvement from last year.

Assets under management £6.5 billion +65%
Operating profit £20.2 million +67%
Adjusted EPS 49.4p +50%
Dividend 10p +67%
Cash & liquid assets £78.3 million +73%

All in all a very good performance. They've also rejigged their 2025 targets to increase ROCE and profit margins.

They've also set a target to pay a dividend of 33% of operating profit by 2025.

There's also been a further RNS outlining a relatively small purchase in Eire. Interestingly, the vendors are using some of their cash proceeds to subscribe for Gresham shares at what looks like a 10% premium to yesterday's close.

During the day I've kept my eyes open for any broker upgrades and I've spotted one from Cannacord Genuity. I don't have access to the document but can see that they've set a target of 1418p.

And last but not least, Simon Thompson from Investors Chronicle has provided an update based on the results. He finishes the article:

"...the 1,100p previous target price I outlined is looking increasingly conservative (‘A double bill of fund management plays’, 14 October 2021). Expect the payout to at least double over the next three years, too. Strong buy."

I think Simon's kept a conservative target in order to do a follow up article then push a higher target in the near future.

The shares are currently quoted at 765p giving a market capitalisation of £291 million. Full year results are due tomorrow on Tuesday 15/3.

The outcome for 2021 has been well flagged in a trading update (9/12/21) and a pre close trading update (27/1/22).

The figures that have been flagged are:
Profit £19.75 million
Cash £69 million

I still think a little will have been held back and that the reported outcomes will be slightly higher. However, using the figures above we get:

PE ratio 14.7 (market cap divided by profit)

Cash adjusted PE ratio 11.2 (market cap minus cash then divided by profit).

I think that the two ratios are very generous for a company growing at the rate that Gresham House is.

I'll be looking for:
Profit above £19.75 million
Cash above £69 million
Broker upgrades for 2022 and beyond
A further recommendation from Simon Thomson in Investors Chronicle.

With the shares close to a 12 month low and the prospect of strong results tomorrow I'm expecting a bit of a bounce. I've bought some more this morning.

As I thought at the time of the trading update published on 9/12/21, Gresham appear to have kept back a little of their performance which is apparent in their pre close trading update of 27/1/22

Trading update
... assets under management of at least £6.0 billion.. at least a 50% increase

Pre close trading statement
… Assets under management increased by £6.5 billion.. by 65%..

Trading update
Adjusted operating profit at least £18.5 million

Pre close trading statement
Full year adjusted operating profits expected to be in excess of £19.75

The two recent updates taken together with the recent 33% increase in target of AUM to £8.0 billion indicate a company that's at the top of its game, increasing profitability, increasing margins and increasing assets under management.

I'm hoping that when the good news is understood that the share price will attract a higher multiple reflecting the accelerating growth potential.

As an aside, the original five year target of £6.0 billion assets under management set on 5/3/20 has been achieved in 18 months!

I should look at this more frequently. I've failed to notice the filing of the case against KPMG at the end of November.

To summarise:
It is claimed that audit work carried out by KPMG for 2013 was flawed.
KPMG has been fined by the FRC in regards to this.
Watchstone claim that the dividend for 2013 wouldn't have been paid if the audit was done correctly. The dividend amounted to £6.18 million.
Watchstone paid £2.089 million for the flawed audit, £5.032 million for PwC to redo it, £0.433 million for consultancy.

In total the claim against KPMG is £13.73 million, equivalent to, 29.8p per share.

My fag packet valuation of cash and claims is now:

Cash £14.1 million
Escrow £1.8 million
PwC claim £63 million
KPMG claim £13.73 million
VAT claim re ingenie £unknown
Aviva Canada claim £unknown

Total £92.63 million.

If everything goes in our favour then we could be looking at payments of £2.01 per share. If it all goes belly up then there's next to nothing.

My own view is that the two cases relating to PwC and KPMG have considerable merit and I intend to continue holding until these are resolved.

As ever, patience will be required.

3/1/22 PQEFF has gone crackers and has ended the day at 39c (US). I've been unable to find any official announcement, however, the bulletin board has several commentators referencing a board recommendation of the offer.

I'm disappointed that I still can't trade my PQE.V shares.
I'm disappointed that I can't find any official announcement
I'm disappointed that Petroteq tweets absolute rubbish but chooses to stay quiet on important stuff.

Despite my disappointment I'm delighted it's starting to look like I'll make a profit in my holding

I've been trying for some time to put together a current Sum of the Parts valuation on BBB.

It shouldn't be too difficult with the "parts" being:

Value of Australian and Nordic assets
Cash
Deferred payment for Quickline
Northleaf stake.

Despite what should be a straightforward calculation, I've failed, even trying to reverse engineer an Investors Chronicle article from Simon Thompson.

Despite my failure I have found a sum of the parts calculation from finnCap.

They value the continuing operations (Australia and Scandanavia) at 9x EV/EBITDA to give 74p per share. (They point out that peers trade at 6-16x but don't explain why they've used 9x rather than any other figure in the range)

The Northleaf stake (8% of the company if I recollect correctly) is valued at 13p

Deferred payment for Quickline 9p (they've reduced the likely payment by 50% to reflect underperformance due to the problems with 5G rollout)

Finally they give a target price of 100p.

The target price doesn't quite match with their sums! There's a 6p difference.

The finnCap article gives a current cash holding off £5.1m. I think they may have overlooked this in their SOTP as £5.1m is almost exactly the same as the figure for the deferred payment.

If I add the current cash value to the finnCap calculation I get:

Value of Australian and Nordic assets 74p
Cash 9p
Deferred payment for Quickline 9p
Northleaf stake 13p
TOTAL 105p.

Tinkering with the multiple for the operational bits and increasing it to 12x values this at 98p and would increase the SOTP to 129p.

All in all, I tend to think Nutmeg's target of 110 looks quite reasonable.

I've tried to do some calculations regarding PE ratios and cash adjusted PE ratios in order to get a sensible target price.

I've used:
Gresham House annual report for year ending December 2020
Gresham House trading update 9/12/21
Simon Thompson IC article 14/10/21

On publication of the 2020 annual report the figures for Gresham were:
Share price £8.00
Shares in issue 34 million
Cash £45 million
Profit £12.1 million

This gives a market capitalisation of £272m (8 x 34)
That implies a PE ratio of 22.5 (272 ÷ 12.1)
And a cash adjusted PE ratio of 18.7 (272 - 45) ÷ 12.1))

If the share price remains £9.00 at the end of the year and all of the trading update figures are realised then:
Share price £9.00
Shares in issue 38 million
Cash £69 million
Profit 18.5 million

This gives a market capitalisation of £342m (9 x 38)
That implies a PE ratio of 18.5 (342 ÷ 18.5)
And a cash adjusted PE ratio of 14.5 ((342 - 69) ÷ 18.5))

Attaining a cash adjusted PE of 14.5 twelve months ahead of the Investors Chronicle target ( 14.5 for 2022 and 13 for 2023).

It may be more realistic to apply the cash adjusted PE from 2020 (18.7) to the 2021 figures and calculate a price target.

This calculation gives a share value of £10.92. ((18.5 x 18.7) +69) ÷ 38))

Would it be unrealistic to attribute a PE of 20? Certainly the current rate of growth could support such a multiple. And, what of profit and cash? I tend to think that the trading update will have held a little back: it will certainly be easier to report further outperformance rather than apologise for failing to attain an outcome you'd heralded a few months earlier.

With this in mind, applying cash if £70 million, profit of £20 million and a cash adjusted PE of 20 gives a share value of £12.36

Hopefully the above will provide some guidance as to the likely direction of travel of the share price although perhaps not an exact destination.

Rarely have I read such a positive and upbeat trading update as the one released by Gresham House this morning:

"...the Board expects to significantly outperform market expectations, delivering Assets Under Management ("AUM") in excess of £6.0bn, at least a 50% increase since the end of last year, driving further expected substantial increases in profit and margins. Adjusted operating profit is expected to be at least £18.5m and margins in excess of 32%, not including performance fees."

Expecting to "significantly outperform market expectations"

"Driving further expected substantial increases in profit and margins"

"... operating profit is expected to be at least £18.5m" (Last year it was around £12 million so we're looking to a 50% increase.)

On top of all of that, the shares are available at a 10% discount to the September fundraise.

The share price has drifted lately, however, I think that this absolute stonker of a trading update will reverse this. I've added to my holding

Simon Thompson of Investors Chronicle has published an "Alpha" report on Friday 19/11/21 regarding AEWU.

The Investors has three levels of access: print, online and Alpha. Alpha is a premium service available at an additional cost. It's money well spent in my view in order to get early access to some of Simon's ideas. This latest one is a 35 page pdf document.

The article concludes:

"On a 12 month basis, my target price is 128p which combined with 8p a share of future dividends would deliver a 24 per cent total return"

The basis for the recommendation is:

Secure dividend

Increasing exposure to warehousing which attracts a higher valuation than standard commercial

Current reported NAV likely undervalues sale price as demonstrated with some recent realisations

Relatively low average length of current tenancies providing prospect of upward revisions in rental

Completion of a Blackpool retail refurbishment which is currently costing £200,000 a quarter

All told this strikes me as very positive. I'm content to continue holding for the next twelve months and will look to increase my holding should funds become available or the share price becomes more attractive.