Member Info for volmer

I think the market is aware of MBU's situation, which is why a sale of some of their BC shares looks likely. The market has held the BC share price down for this reason.

My analysis of Bens Creek is very positive and the business case has been well aired on this BB. I think the management and the assets are outstanding. The one thing which is a major negative for me is the 50%+ MBU shareholding. Despite whatever good intentions MBU has, and I think they have been a good influence on BC, there is always the risk that a dominant shareholder might take actions to suit himself to the detriment of other shareholders. I am not suggesting that MBU would do this but the risk is there. There are other examples on the market where this has happened and the market will be aware of this risk.

If MBU does sell a 30% stake in the business it can, IMO, only be good for the business and share price.

MBU’s net assets could now be around £40m, represented almost entirely by its shareholding in Bens Creek. The group appears to be in a vulnerable position based on interpretation of the accounts filed for the year ended 31st March 2022. It could only require one default on its loan obligations to cause a crisis for the group. Also the group will need a clean audit report of the financial year ended 31st March 2023. We should expect management of MBU to try to take action where the accounts show a going concern and to avoid any possible defaults on its borrowings. It is very difficult to see if this can be achieved due to the illiquid assets, apart from the shareholding in Bens Creek Plc.

If MBU wanted to diversify the shareholder base of Bens Creek it would have done it at 91p not 18p. The recent share sale has all the hallmarks of a forced sale by MBU.

In the reported accounts the Group stated that the investment in the AIM listed company is a liquid asset which the company can dispose, post 19 October 2022, as and when required to realise cash and meet ongoing liabilities. The analysis of MBU’s accounts suggests that MBU has this intention and further sales of its holding in Bens Creek will be necessary.

We do not know the precise financial structure of MBU Group, which banks are involved and whether they could recover their loans through a liquidation. However, any action by creditors could lead to further sales from the shareholding in Bens Creek Plc

Unless MBU’s financial circumstances have changed for the better, it appears likely that MBU Group will sell more of its shareholding in Bens Creek. The market will be aware of MBU’s financial position, just as we are, and act accordingly to ensure that any further share sales are made at the lowest possible price. MBU Group achieved 18p per share for sale of its 5.92% shareholding. If MBU brings a larger shareholding to the market it would be anyone’s guess what price would be achieved.

Unless MBU has been able to sell properties or non-listed investments, it appears to be entirely dependent upon its holding in the AIM listed company to finance the business and to repay loans. We do not know what cash flows from other business activities have been in 2022/2023. We do know that MBU sold shares in Bens Creek at 18p for £4m. Based on the accounts of the Group this sale of shares appeared to be a sale initiated by MBU to repay borrowings (probably to Bluestar Global Capital Limited) rather than to diversify the shareholder base of the company as stated by MBU.

Debtors include £4.8m from entities that have the same director(s) as in MBU. It’s impossible to find out if this debt is good and collectible. Effectively, MBU has borrowed money and then lent it to an entity with the same director as in MBU. We can only deduce this other entity did not have sufficient credit worthiness to borrow the money from a lending bank. So how good is this debtor?

The subsidiary company placed in liquidation indicates the precarious nature of the Groups operations and finances.

Creditors due within this financial year were £22.7m, of which £10.6m were due to bank loans and amounts due to the tax authorities. £4m appears to fall very short of what was needed. So there may be further sales of MBU’s holding in Bens Creek before the end of MBU’s financial year ended 31st March 2023.

In addition, £28.7m bank loans are due to be repaid within 12 months from 1st April 2023. MBU will undoubtedly be hoping to see Bens Creek share price rise in order for it to be able to generate further cash flows through share sales in Bens Creek. It is difficult to see where the cash can come from apart from sale of Bens Creek shares.

It appears from the accounts that the banks have inadequate and illiquid security for their loans totalling £37.6m to the company. They can either wait and hope that the Group’s financial situation improves or put the Group into liquidation and seek to recover their money from the net assets that currently exist, i.e. the shareholding in Bens Creek Plc.
The shareholding in Bens Creek Plc is worth £37.8m at the previous sale price of 18p per share.

Another area of concern is that there are “Other loans” secured by a fixed and floating charge on the company’s assets, which includes a fixed charge on properties and on the shareholding in Bens Creek. We do not know the terms of these loans.

The major concerns about the Group appear to be:
1. It is a high risk and highly leveraged business with total creditors of £51.4m and illiquid assets of £43m, (being non-liquid capitalised development and finance costs and amounts due by joint ventures and associated undertakings and other) and a shareholding in Bens Creek worth currently £41.9m.
2. Some other businesses with more prudent accounting policies might choose to write off property development and finance costs as they are incurred. It depends on the nature of the spending. We do not know what this was for MBU.
3. Apart from the investment in the AIM listed company the business is in property development in the UK and in emerging markets as well as a portfolio of unlisted business investments.
4. With the increase in interest rates and looming recessions the environment for the property market has deteriorated and risk/potential liquidity has worsened.
5. The capitalised development and finance costs of £37.3m will only have a value and cash flow if this cost can be translated into the sale of properties.
6. The debtors falling due within 1 year to 31st March 2023 of £5.4m are mainly amounts due by joint ventures and associated undertakings and appear illiquid.
7. Based on the accounts it is not possible to see how the company can pay creditors falling due before 31st March 2023 of £22.7m
8. The company appears not to have been paying bank interest but capitalising it.
9. Creditors falling due in the year from 1st April 2023 appear to be all bank loans totalling £28.7m. The accounts state all bank loans are secured on properties but it is not possible to ascertain their value and how they can be turned into cash to repay the banks but see note 13 below.
10. The company had cash of £0.5m.
11. During the year the Group engaged in transactions with entities in which there are directors in common. These entities owed the Group £4.8m.
12. A subsidiary company was placed in liquidation in February 2022. This company had net liabilities of £30.6m and this was accounted for as a profit on disposal before tax. The Group said that control was lost at the date of appointment of the liquidator and as such it was deemed to be a disposal. In other words the liquidation relieved the Group of net liabilities of £30.6m and this was treated as a profit.
13. Freehold properties at 31st March 2022 amounted to £172,727 at valuation.
14. The Group has 23 subsidiary companies.
15. The Group has 20 employees and wages and salaries are £2.3m.
16. In 2021/2023 bad debts written off were £4.1m.

“The Group's portfolio of unlisted /associate investment holdings spans several sectors which it anticipates will materially enhance the overall value of the Group as these business progress from start-up / early-stage operations to fully profitable businesses. The Group's investment In these businesses is by way of equity investments and loans convertible to equity.”

Having read what the directors say above, it was necessary to investigate the accounts further to see what facts emerge and what deductions could be made.

At 31.3.2022 the Group had net assets of £185.3m which included Bens Creek valued at 91p per share for £191m. The directors statement said: “Since the financial year end, the Group saw its investment in an AlM Listed company fall from £0.91 per share at the year end to £0.295 per share at the date of signing the audit report. This represents a reduction in the fair value of the investments from £191m to £62m based on the share price at the date of signing the audit report (18th October 2022).

MBU sold 22,222,222 shares in Bens Creek at 18p on 7th February 2022. At that price the remaining MBU holding of 190,579,479 shares (50.8% of the total shares issued) were worth £34.3m. At today’s price (15th February 2022) of 22p the holding is worth £41.9m.

MBU consolidated accounts show:
• Non-liquid capitalised development and finance costs of £37.3m.
• Debtors falling due within 1 year of £5.4m – mainly amounts due by joint ventures and associated undertakings and other.
• Creditors falling due within 1 year £22.7m including capitalised interest of £2.2m – bank loans £8.9m, taxation and social security £1.7m, other loans £9.4m (secured by a fixed and floating charge over the company’s assets including a fixed charge on investments). It appears this charge is held by Blue Star Global Capital (a family controlled company) whose business is described in the return to Companies House as wholesale of perfumes and cosmetics and credit granting by non-deposit taking finance houses and other specialist consumer credit grantors. This is a very complex charge agreement and the Covenant to pay states “The borrower shall, on demand, pay to the lender and discharge the Secured Liabilities when they become due”. But I have not been able to ascertain the date when these liabilities become due as there appears to be no timescale in the Details of Charge.
• Creditors falling due 1 – 2 years (which appears to be in the financial year beginning 1st April 2023) £28.7m – all bank loans. The accounts state all bank loans are secured on properties but it is not possible to ascertain their value and how they can be turned into cash to repay the banks. The accounts state leasehold properties are worth £0.5m and investment properties £properties are worth £172,000. As mentioned below capitalised development costs are £27.8m but we do not know what this represents or whether it is a valid security for the bank loans.
• Tangible fixed ass

I prepared this analysis in mid-Feb that explains the MBU position

MBU Capital Group Limited

As a shareholder in Bens Creek Plc there are two main considerations: the fundamentals of the business which I have researched and reached a positive conclusion; and, the shareholding of the MBU Group and what this could mean for Ben’s share price.

The RNS dated 7th February 2023 stated “the Company's largest shareholder, following demand from institutional investors, has today sold 22,222,222 ordinary shares in the Company ("Ordinary Shares") at a price of 18p per ordinary share, equivalent to 5.92% of the existing issued share capital of the Company, to diversify the shareholder base of the Company”.

Immediately on reading this I thought it did not seem right. Directors or companies sometimes make the statement of selling shares to meet institutional demand when a share price is high and the shareholder can realise substantial gains. It’s usually code for saying I want to realise a good gain without worrying shareholders. In all cases I view such a reason with suspicion. To my knowledge it is unusual to make this statement when shares are sold at a low price.

In this note I have investigated other possible reasons for this share sale to try to understand the situation and whether other share sales by MBU might be forthcoming..

MBU Capital Group accounts year end was 31st March 2022 and the auditors report was dated 18th October 2022 when the accounts were filed with Companies House. The main investment was in Bens Creek Plc where the IPO valuation was £35m.

Previously the MBU Group’s main focus was on property developments. The accounts state that
“It is expected that the purchase and subsequent sale of the property will both be completed during the first quarter of 2023.” and “The group also owns a property in Central London, which is subject to an appeals process, which is expected to be concluded during the last six months of the current year to 31 March 2023. The planning application relates to a commercial building which will be demolished and a new purpose built student accommodation constructed. The planning process and its outcome has been somewhat convoluted over the last two years. having been severely impacted and substantially delayed due to the Covid-19 pandemic along with changes to building regulations particularly in central London. We anticipate a successful outcome to our planning application and consequently expect to generate a profit, during the second quarter of 2023 despite the delays that we have been experienced to date.”

The accounts also state “the Group is now exploring re-entering this property market having targeted a pipeline of potential assets in a number of developing countries.”

During the announcement of the deal with Sebela and the recent placing The Sunday Roast team commented that without the placing the price would have gone to 100p. But here we are with a price of 27.75p and a dribble of sellers. Can we expect the price to continue to drift?

I'm not going to go over the fundamentals of the business as readers will have done their own research. Research by Equity Development gives a NPV value per share of 245p after the recent increase in shares from the fund raising. Also, they expect no further fund raisings.

https://www.equitydevelopment.co.uk/research/onwards-and-upwards

In the FinnCap research note of 27th February 2023 they have an NPV valuation of 285p and they slot in for 2023 an XF-73 Nasal partnering deal. During the recent presentations about Sebel it was indicated that XF+73 partnering deal was running around 3/4 months behind the M3 one, so we may get news in June/July. The XF-73 is a larger market than M3 and the financial deal will be larger.

Sebel will pay $9.5m at the start of Phase 3. The current share price is 27.75p and the market cap £26.2m. In this case Warren Buffet may be proven right about the patient investor. We will see.

The contract intrigues me as well. Exceptional partnering deal for Destiny’s NTCG-M3 product in the USA which provides that partner Sebela Pharma will pay for Phase 3 trials, FDA registration and US launch costs which could be in excess of $60m.

Destiny was required to raise capital as part of the deal so as far as I can see, Destiny is unlikely to raise cash again.

The best part is that future M3 partners for ROW, except Japan, will not need to develop or licence the product so we can expect a much higher up front payments.

With XF-73, and a well funded Destiny, we can also expect a much higher up front payment from the initial and subsequent partners.

With such an excellent management team, 2023 is looking good IMO.

Remember Destiny was floated at 157p in 2017 when there was no deal. What is the real value now?

It looks as if the major XF-73 product partnering deal is not too far behind this one, perhaps a few months. So we can expect something similar but larger.

Good to see directors also bought shares in the placing.

Exceptional partnering deal for Destiny’s NTCG-M3 product in the USA which provides $20m in upfront payments followed by development and sales milestone payments of $550 million plus double digit royalties on sales. Also, the partner Sebela Pharma will pay for Phase 3 trials, FDA registration and US launch costs which could be in excess of $50m. Wow! This is a great deal IMO.

The deal was conditional on Destiny improving its balance sheet through the issue of shares. To get a fund raise away in this market must have been tough with the investors really calling the price.

Not bad as Destiny acquired M3 for $3m in 2020!

The M3 deal was for the USA alone so we can expect similar deals for the UK/Europe and other countries. Plus we have the remaining pipeline of products. This deal is just the start.

This presentation by Mark Mills explains it clearly. Copper starts 16 minutes in.

https://www.youtube.com/watch?v=sgOEGKDVvsg

Destiny came to AIM in September 2017 with shares issued at 157p. The value in the company has increased since then with new products being dev and acquired. So 40p buys today seem good value.

Don't think there are many short term traders in this stock. It's under the radar as small caps go and there are much better stocks for short term traders IMO.

News must be coming soon.

I would never have thought that the share price would fall back to my entry price after a series of RNS announcements of successful drilling. But there again most small caps have seen severe price drops in 2022. Bushranger was purchased for £1.25m in 2020. Since then the company has made drilling announcements where all but one or two had successes to report. It also has other valuable projects in Africa. It's market capitalisation is £17m just now. In the village where I live it would not be difficult to find 10 houses worth that amount of money. I suspect Bushranger is worth substantially more than these 10 houses and this has led me to add to my position recently.

I have done my full research and met management so I am patient. I read some of the posts here and many want jam tomorrow - don't we all! But we know that bar Anglo American buying Bushranger there will be no sale until the Autumn of 2023 at the earliest.

Having scanned through the recent posts, this situation is similar to many that have occurred with other companies. We have a bulletin board full of anonymous posters where we may express our fear, greed, optimism and pessimism in our posts. We do not know who is genuine and who has an agenda. We assess posters and make up our own minds on them. We see who is objective and balanced by their posts.

Previously, with other companies I have developed models to try and project likely outcomes. They were good models as far as they went but I did not have the full facts, data and knowledge of the industry to make them really useful. I concluded that other factors were more Important, especially business fundamentals and management integrity and competence.

I don’t mind seeing criticism of management and other criticisms. But when made anonymously it seems weak to me. We can ask the question was the poster greedy, fearful, optimistic or pessimistic, or just lashing out because he has a paper loss on his investment?

IMO some good points have been made here and on XTR’s board structure.

For my twopenneth so much comes down to management, I.e. Mr Bird. As I see it he has integrity, a good knowledge of the industry, is commercial, appointed a good management team, is experienced in working with other parties/companies and is a good communicator with shareholders. IMO he may be on the optimistic side of the spectrum but there again so am I. I just prefer enthusiasm and optimism. As with other shareholders at the AGM i met him and his team and that helped me form my views, whether right or wrong.

Let’s not forget his foresight in acquiring Bushranger and other valuable projects when others saw no value in them. He has concluded various business agreements with other companies whose managements will have done their. due diligence on those projects and on him. That knowledgable and professional third party endorsement is something I value.

Now I am awaiting further news from the company in due course. Nothing has changed for me with regard to this investment. I wanted 2m tons but expected less as I thought the company would go down the decision to mine route on the basis of lower tonnage. This would probably result in AA declining the option and leaving the company free to negotiate with other companies, before or after any additional work to develop the tonnage further.

No comment on the tweets. Shame we have had no RNS news on progress for the breathalyser, Pulmobiomed, cruise industry contract and Chinese contact for Modern Water to mention but a few. Why mention these business developments if we never hear about them from management again. They seem to disappear into space.

It seems to me that management must begin to treat this like a listed company and not a private one. Just communicate better with shareholders, be more disciplined in project management and in financial management. Who knows perhaps we will get a quarterly RNS update of the business from management one day.

But do keep the tweets on the detail going. Someone must benefit from them but please tell me who?

My friends on the cruise ship have now arrived at Barbados. They are both in separate isolation cabins despite being married. No one is allowed to disembark and all excursions have been cancelled. Assumed the Barbadian authorities will not allow disemabarakation due to rampant covid on board.

In my mind there is no doubt that GB has identified an important market.

What I cannot understand is why shareholders are kept in the dark om progress with major projects like the BT, cruise industry and China Resources for example. They were important enough to be announced in the first place and then shareholders are not kept up to date on progress. Perhaps it would have been better not to announce them in the first place. Best to announce and over achieve rather than announce, nod, wink, wink and then miss any reasonable achievement timescale. Meanwhile on Twitter we get GB posting all sort of detail that few shareholders care about, e.g. we now know that STC has attended it's 79th conference this month!!!

The company needs to take professional advice on its PR, communication to shareholders and to the financial market. I know all small caps are currently totally out of favour regardless of the industry they are in. But there are exceptions such as Bens Creek which is a good case study. There they gave good guidance on their projects and timing, making it fairly easy for shareholders to estimate likely revenues and timing. They also have not yet failed to deliver what they saisd would be done.

In making this point I am in danger of GB coming back and saying shareholders always whinge when the share price is down. But that would miss the point entirely. Any company needs a good share price, as good as can be achieved in the market, not to placate patient shareholders but to allow the company to raise funds/convertible debt on the most advantageous terms for the company and to create the aura of a successful business.