LON:ARW | Arrow Global - Maligned And Misunderstood Or Heading For A Fall? | Mark Tughan

9th Nov '18 by Mark Tughan

24 comments 4482 reads

Arrow Global (LON:ARW) had their capital markets day on Wed 8th November.

The presentations and material given are available here:https://fotwlive.videosync.fi/2018-11-08-arrow-cmd-2018?seek=5293

Beware it was a half day and there's 115 slides in the pack. I am not sure how long this will be available for.

It is clear that this is the start of the company's response to the fact that it has recently become quite heavily shorted.

I just thought I would put it out there for interested PI's.

I am a holder, and I went in person because I wanted a deep dive to help me decide the fate of this investment, and to see the management team in action. For what it's worth, I was deeply impressed. To the extent that the short interest gave me serious concerns, these have been substantially allayed. I hope the company makes efforts to communicate a bit more with the PI community.

DYOR could not be more appropriate here. If the short interest fizzles out or is the subject of a squeeze, there could be a swift and significant rerating. If the short case has merit, investors capital will diminish, possibly substantially!

Thoughts, comment and debate welcome!

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mmarkkj777

9th Nov '18

They are the sixth most shorted Uk stock right now (well, on 6th Nov). Interestingly though, less than 1% of its stock, so not really major (maybe the recent dip has cooled short interest generally, IQE, for example, no longer listed amongst the top shorts).

Matylda has also mention Arrow in the IRTNTOB thread, so, Im going to have a look. If those earnings projections are real with the current position of the share price, could be interesting as a potential bounce-back (with some risk), as you mention.

Albertos

Think you may be picking up some duff information there - according to ShortTracker its 10.55%.

Phil

Snoo

After the stuff with CAKE I'm too wary.

The numbers here look excellent on paper. But is there really an endless supply of bad debts at companies that suddenly turn really good? I can't see exactly what it is that can make supposedly bad debts start repaying and that the bigger companies were so wrong in their projections of recovery. Is this proprietary or is the 'secret' transferable with employees?

I have heard of stuff like delinquent phone bills etc being packaged up and sold for incredibly low percentages but I would have thought that getting these to pay would require an incredible amount of carrot/stick, which presumably would have already have been tried by the original company.

The market valuation here seems to be implying it is too good to be true.

Hi Phil,

Thanks, you are right. Just checked on my phone. Also IQE are still there. Just above them at No. 5.

User error I think. Must have had it set on just nov6 shorts placed, or something.

I’m still going to check Arrow out though. But over 10% is quite a lot of short positions.

My initial thoughts on Arrow are that they have massive debt, over 1 billion.
With net profit of 44m last year, they are quite heavily geared.

That level of debt (been growing 100m/year) to earnings and with over 10% (and rising) of stock sold short it’s a bit of a red flag for me. It has made lots of acquisitions, but that’s difficult to assess how they fit and if the management model supports it well enough to provide the increased earnings to reduce the debt levels easily.

I guess a downturn in the economy will present them with more business, but maybe make it more difficult for them to recover debt, in the main debt recovery part of their business.

I’m going to watch with interest though.

Arrow Global - Maligned and Misunderstood or heading for a fall?

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Mark Tughan

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