Westminster Group - Time To Buy Before They Fly
On Wednesday 25th June 2014 Westminster Group held their annual general meeting at headquarters in Blackrock hills, Overthorpe nr Banbury Oxfordshire which consisted of the usual publicly listed formalities chaired by Sir Malcolm Ross, the meeting was followed by a dynamic presentation by CEO Peter Fowler exhibiting the operational growth and value creation of the business's potential pipelines, the groups progress has been incredible although off radar. The Banbury based Plc have been making waves in the City Of London as they forge solid foundations as a worldwide security company specialising in Fire, Safety, Security and Defence.
Sir Malcolm Ross, Master of the Household to the Prince of Wales (2006) had joined Westminster Group Plc (2007), whilst Sir Malcolm's legacy working with the royal family leaves a growing footprint, he conveyed a confident yet measured approach chairing the meeting. Afterwards Sir Malcolm proclaimed how surprised yet pleased he was by the high numbers attending this years AGM which comprised of the company showcasing its security capabilities via K9 explosive detection, Airport scanning machines demonstrations by their highly trained personnel.
Westminster hold common,ethical and moral values which set them apart from rafts of cash hungry companies registered on the London Stock Exchange, the humility and compassion shown by the team really knows no bounds as the company are building operations in emerging Africa, Middle East,Americas and Europe they also show a keen but observant eye on helping those that need it most both home and away.
Westminster works closely with Cathrine House and Alan Wolstencroft a Banbury based Rotarian who dedicates much of his free time to the goodwill and growth for Africa (GAGA) charity. Public opinion can state charity starts at home however offering a helping hand whilst maintaining humility,hard working ethics and a strong moral compass is paramount in reaching milestones and achievements in all one endeavours to do. Alan has been transformational with his charities work and a spokesperson for Westminster Groups commented '' Alan is a highly motivated individual and something of an enigma with his energy and care shown to the people of Africa, It has been our pleasure to support and help Alan wherever possible ''
Westminster Group was born out of hard work from modest beginnings, proving a strong family theme as the driving force during austere times, so much so that the share price from Jan 12' - Jan' 14 has risen from a little over 10p to cira of 80p this really has been a fairytale entry into the alternative investment market as the small cap security company appear to have navigated choppy waters well until recently. The company has made no secret that it's is on the cusp of signing any number of significant deals from throughout Africa,The Americas, Europe or the Middle East however the Ebola outbreak has forced their arm somewhat due to the recent events in West Africa. The company is very much protected whilst its team operate in country which gently translates to '' keeping the revenue wheel turning '' If we look at the enquiry line Wsg has it's really not to difficult to see the disconnect between £20m Marketcap company and the £6bn pipeline, needless to say Rome wasn't built in a day although the Vatican deal is pending.
Once the company hammers out its base I'd expect a significant rebound, technically the company is crying to revisit 60-70p short term with a news tsunami having the ability to wash away the pain and deliver a rise into the pounds.
With a sensible stop set at 34p the risk / reward looks well aligned, It's a buy at this level folks
Keep your pecker up
Doc
http://www.valuethemarkets.com/index.php/2014/08/04/westminster-group-plc-interview/
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23 comments
Amazingly this kept going! A flurry of contracts now and a Family Office taking interest
I've been reminded of this thread by a friend this morning. Westminster (LON:WSG) placed to raise £5m at 4p yesterday:
https://www.investegate.co.uk/...
Arden did the fundraise and produced a 50 page ( yes 50 page) note. There's no mention that WSG has never made a profit, that the shares are down 96% from peak, that it's the umpteenth fundraise in ten years.
The analyst claims that it's worth 19p apparently but I wonder how much of his own money he's invested?
This did not age well.
A whole load of tweets this am has reminded me of this old thread. The price today (at pixel) is 13p, which is about a third of the price being discussed in the articles above. Some people who I thought were relatively respectable seem to be ramping this one as well.
In the interims (https://www.investegate.co.uk/westminster-group/rns/half-year-report/201908150700071066J/) WSG reported cash of £0.3m. Not even net cash because it has debt (at least £2.5m). And it's burning cash. And the only reason that the company got through 2018 was because it placed to raise funds, raising £1m at 10p in July.
AIM appears stuffed full of companies that follow the same predictable pattern of later:
1. The share price spikes for some "mysterious" reason,
2. There's lots of "euphoria" about the company on twitter,
3. There's a placing to raise cash at a discount to the "euphoria" price but a premium to the price before spike and hence those people who are sucked in by the "euphoria" end up losing out.
INSP is another case in point which appears to have completed the cycle relatively quickly with a tiny £300k placing this am. AFC also currently looks as if it's at the start of that process. I await the inevitable placing at WSG to confirm why certain people on twitter need to move from my "respectable" list to the "ramper" one.
JakNife
The finals have been released this am:
http://www.investegate.co.uk/westminster-group--wsg-/rns/final-results/201606090700056557A/
I flicked through quickly and noted: significant P&L losses, planned additional projects but inadequate resources to support those projects, the words "strategic review" and a £1.65m (£0.75m drawn) death spiral convertible (the conversion price is currently at 90% of a recent average share price and hence exercise forces the price down which feeds into the next exercise, which feeds into the next exercise, which ..... ).
JakNife
The product side of the business is lumpy and just not big enough to sustain the company if they can't develop the services side.
I'm inclined to the feeling that there is a genuine potential substantial business available for the managed service side. The service model has potential as it splits those awarding contracts (governments) from those paying for them (airlines/airline passengers). This is always a good business move. These types of long term contracts do take a long time to come to fruition but their Long term nature means they do have substantial value.
WSG has been really unlucky with Sierra Leone - an event which means that all bets are off, their financial record combined with the short term issues caused by Ebola could kill the company.
I do have an issue with their early reporting of the impact of Ebola. The facts were strictly speaking correct, they just used year to date rather than month on month sales, which gave a misleading impression. Peter Fowler strikes me as a born salesman, the RNSs just do what sales people do, state the facts but with the very best spin.
I held WSG but got out on a post Ebola Bounce. I may invest again if they can get past the Sierra Leone issues as I feel that they have worked very hard and have a potential very real niche.
Westminster (LON:WSG) I was right in 2014 and the facts remain similar but they do now have some substantial real long term contracts which will kick in over the next year or two. Don't get distracted by silly multi-squillion pound market type claims.
The share price is not 80p (2014) but 5p now. The way I look at it is that the managed service contracts are valuable and real. They have taken c10 years or so to start coming through and that time has been subsidised by shareholders through that period - I'm sorry for them but at least it means I don't have to bear the financial pain of the development cost.
After a period of genuine bad luck (there's not much they could do about Ebola and Covid and Iran was just the inherent risk of their business model) the contracts are now coming through at some level of pace and scale. The timing is largely out of the hands of WSG and they will always be in the less predictable parts of the world - otherwise security would be done by local providers.
So discount the future earnings estimates for the political risk but bear in mind that these should reduce as the portfolio of projects becomes more diversified across different countries.
Strategically I do wonder whether they could do without manned guarding which is a notoriously low margin sector and the product side of the business continues to be lumpy. Training seems to be a good fit with BOT though.
They are very open about managed service gross margins of c50% and margins on the other sides of the business appear similar.
In common with Ra International (LON:RAI) just bear in mind though the inherent instability in their growth models. But with $6m year 1 revenue expected in the soon to kick off DRC contract (which should x2+ in the medium term), $1.1m on the new W African port contract, expansion of the existing port contract in Q4, air traffic picking up in Ghana, for the first time, net cash in the bank, raw materials prices rising (bringing more cash to the parts of the world in which they do much business) and an expanding sales team, the shares are in danger of finally taking off!
I agree. Crap figures today.
The release of the interims this morning has reminded me of this thread. They are dreadful and the share price has fallen to a 12 month low of 38.5p:
http://www.investegate.co.uk/westminster-group--wsg-/rns/interim-results/201409300700249267S/
I particularly dislike (consider dishonest) the way that the key points part of the results tries to highlight everything positive but ignores the continuing losses, dwindling resources and obvious need to raise more equity.
Clearly some don't understand the markets?
Why on earth did they feel the need to do the placing at 40p on 4th August when they must have known they would be announcing the MOU? Surely waiting would either have raised more money or reduced the dilution. Do they care about their shareholders?
No holding.
I've had emails this week from dubious sources ramping WSG. I normally get these sorts of emails just ahead of placings when the broker needs to drum up some interest. Given the weak balance sheet at the last results, the poor cash flow, the outstanding convertible at 35p, etc then I wouldn't be surprised to see a fundraising in the near term. Sadly all par for the course for AIM.
Nice one Doc - seems the company has done almost 40% increase since your article...
More bluster and bluff this morning. When is the next placing
There many issues with Westminster which make it uninvestable for me. The first issue is the size of its actual enquiry pipeline. In May the CEO of Westminster described it as.
"The aggregate life time sales value of our prospective customers is currently over $11Bn and further enquiries continue to add to this “
Above you have chosen to refer to it as "the £6bn pipeline
Clearly the description of the enquiry status seems to vary as does the amount - by the odd 5 billion or so. For a company that only turns over about 7.5 million, these huge varying figures don’t add to the credibility in any way. In fact they have the reverse effect and attract suspicion.
I also notice that they have recently entered into a Equity Financing Facility with Darwin Strategic Ltd. This is relatively new concept which involves some (but not actually quantified) dilution for existing shareholders. I would prefer this to be a little more transparent On a final note I see that the company has a Stockopedia stockrank of 1
This might be a trading share as the share price fluctuates on the prospect of huge future contracts - but I can’t see this as a realistic investment.
Happy to let Stockopedia value it by its ranking 1, none or 21 - I have my own unique way of picking aim companies, However this case is pretty clean cut '' one of the 42 formal enquires converts and the companies profit making ''
Significantly - If that holds no bearing fine.
If you won't invest because you don't believe they can get a single deal over the line then again thats fine but look at the credibility of some of the team:
Royal household, Olympic security, Aviation expertise.
As I say I went to the AGM and witnessed first hand some impressive showcasing of ability
Good luck and many thanks
Doc
The blue sky outlook at WSG is there for all to see, but there are a few red flags.
Never made a profit in seven years, which as a consequence also means they have never had a positive operating cash.
Burned through about £14m in Placing, Convertible, Drawdowns and “strategic” investor funds in seven years, that’s a lot for a company that basically just buys and sells other companies tech along with the service side of the business
For the past few years their tech division has seen the quote bank grow to around £300m per annum and about 300 enquiries per month and yet they have struggled to actually close more than £5m in deals per annum, the last full year results show a year on year decline.
Managed Service division is in talks with over 40+ Airports worldwide, but you have to question how many they can handle tendering for with a yearly drop in the sales team from seven to five. Doesn’t really make sense to see a drop in the sales team at the same time as their quote banks are growing.
There may well be a disconnect between the market cap and the quote bank, but it could be argued that there is a disconnect between the market cap and seven years of low revenues and losses, i.e. the market cap is a little high for a perennial loss making company.
The million dollar question, Can they deliver?
That's a reasonable question, I think you have to look at the change to the equilibrium within wsg.
The company have stated to a very strong audience at the AGM that a deal is all they need to close the gap.
I'm sure if you value the company as an account you may not see the value, however the enquiry line is 6bn coupled to a stronger more influential team.
As you say time will tell
Do you work for Westminster or are you paid by them to write such one sided propaganda?
No i'm sorry to disappoint I wasn't paid, I attended the agm and use the 2yr metrics for my analysis....
Wsg were gaining whilst many suffered at the hands of austerity.
I'm happy to consider all job offers though!
Bests
Doc
Company should delist and do us all a favour
In fairness its opened strong which may suggest some disagree although the testament of time will tell the story
Bests
Doc