Small Cap Value Report (Thur 30 May 2019) - VLE, DISH, SONG, BUR, BRY, WOSG
Morning all,
The main news on my plate has been the announcement by Volvere (LON:VLE) of a large tender offer.
Other things which have happened today:
- BigDish (LON:DISH) has made another rollout RNS.
- Hipgnosis Songs Fund (LON:SONG) has acquired another impressive music catalogue
- Burford Capital (LON:BUR) announces the successful conclusion of a large case
- Brady (LON:BRY) updates in line with expectations at its AGM
- Watches of Switzerland (LON:WOSG) (new ticker) - Watches of Switzerland achieves a market cap of almost £650 million at IPO.
Volvere (LON:VLE)
- Share price: 1253.5p (+2%)
- No. of shares: 3.1 million
- Market cap: £39 million
(Please note that I have a long position in VLE.)
This is by far my largest single holding, and it feels like this has been true for a while. It has been in my portfolio for three years.
Yesterday's announcement was released just after 3pm - perhaps a little unusual, but there you go.
Volvere has been discussed in this report twice very recently: on May 22 by Paul and on May 24 by myself.
On May 22, I said:
I would support another share buyback at the current share price... My reasoning is that the cash balance is just a bit too large for it to be used within any foreseeable timeframe, so it makes sense to return a bit more of it to shareholders.
I don't know if management read this report, but they evidently agree with my thought process. The latest buyback announcement is for up to 41% of shares outstanding, with a return of £16.6 million.
Reason for the Offer
Please check the archives for a complete description of the background story. As the tender offer announcement states:
The Group currently has approximately £36.2 million of cash but believes that the appropriate level of cash available for investment on an ongoing basis should be around £20 million and accordingly, the Group has funds surplus to its current operational requirements.
That is perfectly clear and simple.
And I'm glad that the company has settled on a figure on £20 million. One of the big question marks has been whether management can scale up their strategy to work with larger funds under management.
While £20 million is still larger than they have historically managed in this vehicle, I would say that they deserve the benefit of the doubt that they will be able to put it to good use.
Shareholders will have to wait and see what ideas and plans they come up with for this amount - we already know that they are interested to expand their activities in the food business, but they have also had a lot of successs with "people" businesses.
The Maths
NAV was £40.4 million at 2018 year-end, but this includes the interests of minority shareholders at Volvere subsidiaries. Excluding this, Volvere shareholders had equity of £39 million.
The company then generated £2.55 million (net) from the sale of Sira Defence. I don't know what Sira was in the books for, but I assume that the profit on the sale was well in excess of £2 million. This would put Volvere's adjusted NAV in excess of £41 million, or c. £13.20p. This is also before taking into account any P&L at the food business in 2019.
The tender offer is fixed at1290p, a circa 12% premium to last week's share price, but I doubt that it is higher than the current NAV per share for Volvere shareholders.
After the transaction, assuming that 41% of shares are bought back at the offer price, the company would look like this:
- 1.83 million shares left outstanding
- Cash balance just less than £20 million
- Cash per share of c. £10.70
- NAV per share slightly increased (assuming that it is currently higher than 1290p per share).
I should probably highlight that the NAV per share is using balance sheet values only for the food business (a bit like the way Berkshire Hathaway has been measured). It doesn't give any value for the potential earnings power of the food business and how those earnings might be capitalised in a successful disposal at some future date.
One other thing I noticed in the offer announcement (hard to miss it, as it's in bold):
If the Tender Offer is not accepted in full, the Board... reserves the right in its absolute discretion to purchase in the market, up to such number of Ordinary Shares as is equal to the difference between the number of Ordinary Shares successfully tendered in the Tender Offer and 1,283,927 Ordinary Shares...
So we might see the buyback taking place in the market, if investors don't want to take part in the tender offer.
Directors' intentions - the Lander brothers intend to tender "some" of their shares. They participated in the last buyback, although it left their percentage ownership of the vehicle unchanged. Maybe they will do the same this time?
My view
To reiterate, I fully approve of this buyback, as the cash balance was indeed looking too large relative to the opportunities available to management.
Even utilising £20 million will be a challenge, as the directors have proven that they prefer to do nothing rather than make a mistake. But it will be a much more manageable amount, rather than £36 million.
I haven't decided yet if I will take part in the offer. Some reasons to take part:
- The price being offered seems quite reasonable. It is close to my estimate of adjusted NAV per share.
- The shares are very illiquid, so this is a useful liquidity event, for anyone who needs some cash.
- Management intend to take part, as they did in the previous buyback. If they are happy to sell some of their holdings, other shareholders might reasonably decide to follow their lead.
- Volvere hasn't made an acquisition since H1 2015. The lack of acquisitions suggests that value creation could be about to slow down.
- Shareholders can tender any number of their shares, so it's not an all-or-nothing decision.
These are all good reasons to take part.
On the other hand, not taking part in the offer means that investors can see their ownership interest increase in this vehicle, with perhaps a small boost to NAV per share.
On balance, I am leaning towards not tendering my shares, but I haven't made the final decision yet.
I am looking forward to the AGM on June 24th.
(This section is by Paul Scott, who has a long position in DISH.)
BigDish (LON:DISH)
- Share price: 6.27p (+18%)
- No. of shares: 286 million
- Market cap: £18 million
BigDish to Launch Nationwide Rollout
BigDish (LON:DISH) is a very interesting concept - yield management app for restaurants, allowing them to offer discounts at specific days/times. It cropped up on my radar earlier this year, so I decided to download the app and try it out. It's absolutely fantastic - easy to use, and providing large discounts, at good restaurants, mainly at off-peak times.
Even though the business is generating negligible revenues at this stage, it's started a UK-wide roll-out. Today's RNS says they are expanding the regional roll-out managers from currently about 2 or 3, to adding 10 more - so a significant stepping up of the roll-out pace.
How to value the shares? On the historic numbers, you would probably value it at nothing! So it's all about what potential people see for the future. This is how I see it;
Bull points
- Great app - simple, easy to use, and free for customers
- An easy sell to restaurants, as only charges 50p to £1 per diner seated, and boosts their profits from bringing diners in at otherwise quiet or empty times
- Restaurants are fully in control, so can customise offers to suit them
- New CEO is experienced in sector, and formerly at TripAdvisor
- Cheap tech team in Manila
- Attractive sector, with premium-priced takeovers of other similar companies, even early stage ones
Bear points
- Easy to replicate the app, so...
- Better funded competitor could copy the idea, and eat its lunch
- Negligible revenues, and loss-making (although cash burn is quite modest- due to small team)
- Not clear what the marketing strategy is - how to tell consumers this app exists? How much will a proper marketing campaign cost? Will it be effective?
- Claims to be fully funded for now, but will clearly need to raise more cash at some stage, to fund marketing, and faster roll-out. But given share price roaring up, should be easy to raise say £2-3m if necessary with not-too-bad dilution
- Rampy RNSs, and management seem a bit too excitable: big ideas, not enough execution in the past (although new CEO seems more hands on, I'm hoping to meet him soon)
- Highly speculative, and almost impossible to value at this stage!
The share price has been rising on heavy volume for several days now.
What's it worth? No idea! I bought some shares (average 2.7p) because the app is so good, and the UK roll-out was just about to start. That seemed to me a good time to take a highly speculative, punt on this.
This share won't suit most people here of course.
(Back to Graham.)
Hipgnosis Songs Fund (LON:SONG)
- Share price: 104.24p (+0.2%)
- No. of shares: 341 million
- Market cap: £355 million
Acquisition of Music Catalogue
This quirky fund announces yet another acquisition.
Hipgnosis has a March year-end, on the basis that it published interim results to September 2018. It will be good to get my teeth into this company's accounts and learn more about the yield it's achieving on these investments.
If the yields are attractive, I think this fund could re-rate to a significant premium to book value. For now, I'm in wait-and-see mode.
Burford Capital (LON:BUR)
- Share price: 1673p (+2%)
- No. of shares: 219 million
- Market cap: £3,658 million
Burford sees successful end to Teinver annulment
Much bigger than what we usually look at here, but this is a widely followed share.
See if you can follow this:
Burford previously sold a case for $107 million, and recognised $100 million of revenue for it. It didn't recognise the last $7 million, because it estimated that was the value of the buyer's put option (its right to sell the case back to Burford - don't worry, there won't be a test).
It is now recognising the last $7 million of revenue, because the buyer's put option has expired following a decision by the World Bank arbitration panel against the Republic of Argentine.
Burford goes into some detail regarding how it has historically valued the case, to illustrate its "longstanding and conservative valuation process".
Burford is impressing me more and more. I'm warming to the idea that it has generated, through its size and wide range of capabilities, a real competitive moat. And I appreciate the efforts it takes to explains its work to investors.
It feels like I'm very late to the party, and the valuation still feels rather punchy, but this is a stock I could potentially add to my portfolio.
Brady (LON:BRY)
- Share price: 57.25p (-1%)
- No. of shares: 83.4 million
- Market cap: £48 million
Brady plc (BRY.L), a leading global provider of trading, risk management and settlement solutions to the energy and commodities sectors is holding its Annual General Meeting ("AGM") at 12.00pm today.
The Chairman reports "substantial progress" to the end of April, which is in line with expectations.
I await further evidence that this company is worth almost £50 million, or c. 2x forecast sales. It has been loss-making for a while, but is hoping to break into a small profit this year. Let's see.
Watches of Switzerland (LON:WOSG)
- Share price: 270p (IPO pricing)
- No. of shares: 239.5 million
- Market cap: £647 million
Watches of Switzerland Group, the leading multi-channel luxury watch retailer in the UK and a leading retailer of luxury watches in selected regions of the US, announces the successful pricing of the initial public offering
Details for this IPO:
- £155 million in gross proceeds for the company. Net proceeds only £139.5 million after fees and expenses.
- At least £220 million (maybe more) for existing shareholders to sell down their stakes.
So it's a good mix of new and old money changing hands in the IPO.
I've downloaded some trading information and the prospectus from the company's website, which informs me of the following:
- FY April 2019 revenue was £773 million. The revenue growth figures in the trading update are unclear to me, because the official reported basis seems to differ from the company's own view. Like-for-like revenue growth is 9.2%.
- Net debt will be £120 million after the IPO. This figure is estimated to be 1.56x adjusted trailing EBITDA, so I guess that trailing EBITDA must be c. £77 million, on a heavily adjusted basis.
- Operating profit from continuing operations was £22.6 million in FY 2017, rising to £37.4 million in FY 2018. In the first nine months of FY 2019, it was £34.2 million. Financing costs ate up most of this - the IPO will deleverage it substantially.
My view
Ultimately, this is a distributor and this is reflected in its gross margins of c. 9%. I don't think I would pay a very heavy multiple, but there is probably a level where I would have some interest in it. Worth keeping an eye on.
Following on from my "Red Ink" comments, I see that the FTSE has recovered by 50 points today, making my trade around mid-day yesterday look much more clever than it really was. It's still too soon to say whether I got the timing right. But I'm glad I was there to take advantage of some temporary weakness in sentiment!
All done for today folks, thanks again.
Graham
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35 comments
Re BigDish (LON:DISH) I’d have thought a big risk here is that some gorilla like just eat, with all the relationships with restaurants, brings out its own app. I would be surprised if that’s not in their roadmap, equally if not they might just snap up big dish.
I have a small holding in Hipgnosis Songs Fund (LON:SONG) for the non correlated quirky reasons. I remember Merck saying he wants to get to £1bn invested which will give them 20% of the total market at which point he thinks they will have the weight to drive extra returns. So I think it's best viewed as a long term investment in that light. From memory they are at about £300m so far raised.
The KIID rates it as 6 out of 7 on the risk scale and says that "Investors in the Company are expected to be institutional investors, professional investors,
professionally advised investors and highly knowledgeable investors who understand, or who have been advised of, the potential risks from investing in the Company"
For that reason I think ability to purchase may not be routine - I seem to remember I had to qualify in some way as someone who had previously bought high risk investments to be able to buy it through HL.
https://www.jarvisim.co.uk/assets/ipo/170802%20Hipgnosis%20Songs%20Fund%20Ltd%20-%20Marketing%20Flyer%20-%20Intermediaries%20Offer.pdf
https://doc.morningstar.com/document/709168e096f40ca5e564e6200f769f79.msdoc/?clientid=invescoperpetual&key=986ddb4ddb528acc
Hipgnosis Songs Fund (LON:SONG) - as someone recently "in the music business" I really should have supported at IPO but have just picked up a small holding and will add as and when other dividends arrive.
As a point of interest, and maybe not generally known, PRS royalties for live performances in this country have very recently increased by 40%. That's for popular music in concert halls/theatres not pubs, small clubs, or classical music. Royalty rate for festivals actually went down slightly - but ticket prices are only going one way.
Royalties are a percentage of ticket prices/sales which have been increasing far more than general inflation so definitely an element of inflation proofing and not really correlated to business generally. There's a truism that entertainment does even better in a recession.
Interesting interview with Merck Mercuriadis, founder of Hipgnosis Songs Fund (LON:SONG) https://www.thetimes.co.uk/article/interview-merck-mercuriadis-the-man-mining-gold-from-old-hits-zfcmqmpd9?shareToken=229ce56c6c080e810e1b3629e983392c (subscription site, but allows 2 articles per week free if you register).
I've held since late last year but it isn't the easiest stock to trade - two of my online brokers don't recognise it. Frustratingly I can no long find the IPO prospectus which described the business model, and risks, in more detail. Understandably they're reticent about how much they pay to acquire each song in a catalogue but we should be able to impute something from the initial results. I'm hoping for a gradually rising income as legal streaming becomes ever more mainstream. As far as I know, these are worldwide royalties with the UK representing just a part. They seem to be able to raise sizeable additional capital for their war chest quite easily. Surprisingly, one their larger holders is CCLA which manages funds for some seemingly very staid and risk-averse organisations!
I think I see what you did there Laughton..
https://www.thepatchbeercafe.com/
If I was in Lewes there is only one sort of beer I would be drinking and it wouldn't be craft beer.
Ah well hayashi22 - in that case there's no shortage of establishments more than happy to meet your needs.
He does do an excellent breakfast though - and I don't think there are any Harveys pubs locally where you can have a pint with your full English (actually that's called a "Full Patch" here).
I'd add a link - but that would be blatant advertising.
I wish you well with venture,,anyway it's only my taste. Just happen to be a big fan of Harveys.
Hi
I know Focusrite (LON:TUNE) holds interests for some.
Half year results (period ending 28/02/19 so includes Xmas), seem quite good. But, not so much on revenues, but on fall-through metrics which are encouraging. Although comparison previous period was 'that of the record revenue last year' (according to RNS).
Extract from RNS ......
Financial highlights
· Group revenue up by 4.1% to £40.4 million (0.5% at constant currency1) (HY18: £38.8 million)
· EBITDA2 up by 11.4% to £8.9 million (HY18: £8.0 million)
· Operating profit up by 16.4% to £7.3 million (HY18: £6.2 million)
· Profit before tax up by 22.6% to £7.2 million (HY18: £5.8 million)
· Basic earnings per share up 23.3% to 11.1p (HY18: 9.0p)
· Diluted earnings per share up by 23.6% to 11.0p (HY18: 8.9p)
· Net cash of £26.2 million (FY18: £22.8 million, HY18: £19.7 million)
· Interim dividend of 1.2 pence, up 20.0% from 1.0 pence in HY18
RNS here ... https://www.investegate.co.uk/focusrite-plc--tune-/rns/half-year-results/201904300700094709X/
I used to hold.
Pondering about re-buying, but price is still bouncy and expensive, although testing its 5y CAGR % this is 31%, which is high in contrast to many UK stocks.
Regards
Howard
Reading the Align research report, they imply BigDish (LON:DISH) were targeting 2 million downloads of the app within 12 months of floating.
Currently almost 9 months after float, google shows >10,000 downloads. As far as I can tell, this means between 10,000 and 50,000 downloads (presumably any corporation that pays google has access to more precise data ?).
I would imagine this means they are a long way behind target.
Obviously, if they do scale this business over the long term, the upside is immense. Whether they have the strategy, operational excellence and funds to rise above the competition is a big question.
Graham
Thanks for the observation that Watches of Switzerland (LON:WOSG) has a new ticker. It cheered up my morning.
FREng
BigDish (LON:DISH) - as a parent of someone who is trying to make a living out of owning/running a very small (20 customers is pretty packed) craft beer/cafe in the county town of Lewes I rather despair when such companies come along.
" and boosts their profits from bringing diners in at otherwise quiet or empty times" - the problem is that diners, in the main, are not stupid. Once they realise that they can eat for half price at certain times then they'll just change their meal times. Those that were eating at the "quiet" times anyway will now be able to eat for half price.
Fresh food prepared and cooked on the premises and a choice of ten constantly changing craft beers with the price pressures already on from the usual chain operators mean that 50% discounts would mean selling at a loss.
It's no surprise that we hear of restaurants closing on a weekly basis - the public shouldn't be surprised when, one day, they look around and find the only choice is "Subway" or similar.
Sorry - rant over.
Hi Laughton,
If you look into it in more detail, BigDish is a lot more sophisticated than you have imagined, and your fears are ungrounded I think!
In particular, using your 20-seat site as an example;
Restaurants can choose how many BigDish seats they want to offer, at 50% or 25% discounts. So in your case, a small restaurant might only offer 4 seats at a 50% discount, at say 6pm. Then maybe 4 more seats at 25% discount, at 6:30pm (it operates in half hour slots). After that, no discounts. It's all customisable, in real time, through the merchant app, which puts it streets ahead of other discount schemes in my view.
This has the effect of getting a few bums on seats when you first open, which attracts in more full price diners, as your place instead of being empty, has 2 tables, each with a couple already dining - much more appealing than walking into an empty restaurant . Remember that other customers coming in don't know that the existing customers are eating at a 25% or 50% discount.
The discount only applies to food, not drinks. Customers are required to buy at least one drink each, which recoups some of the lost gross margin. The full price diners who ask for tap water, are probably not generating much more gross margin than the discounted food people buying 1 drink each.
Studies have shown that people who get a good discount on food often recycle that into ordering something extra - e.g. a dessert, or a bottle of wine, where they wouldn't have done so if paying full price. So the average spend for a discounted meal often ends up being at or near the full price total spend.
DISH accumulates loads of data about customers. Whereas many other discount schemes have no way of knowing who used the discount, where else they eat, etc. In time therefore, DISH hopes to use its data for targeted marketing, and other purposes.
I'll let you know when BigDish opens in Lewes, so you can try it out! They're about to launch in Brighton actually, which is nearby, so why not check it out & talk to the managers of restaurants using it? That's what I did. Their main grip was that not enough customers know about Bigdish, so I'd like to see the company do a smallish fundraising, to up their marketing efforts, through social media influencers (foodie blogs, etc) being probably the best way to spread the word. Or introduce a friend type deals.
Regards, Paul.
I think it's also pretty dynamic - if it starts getting busier at odd times, the discounts can be reduced or removed. It's not a promise for 50% off at 4pm on Tuesdays forever! I really like the concept, seems win-win to me. Bought just after IPO so am sitting on a really small profit on a tiny position (I need to stop doing this really)!
Re BigDish (LON:DISH), in principle I like the idea but isn't it in the nature of trying to sell restauarant seats at quiet times that there aren't going to be many customers for the service?
I used to work in Cyprus, where many similar restaurants have "persuaders" outside. I always thought they would be better off giving a free or discounted meal to one or two couples and sitting them up front. It reassures potential customers far more.
But getting traction for the app means marketing cost, as Paul has identified, and usually takes longer / costs more than anticipated.
Interesting, but too risky for me.
Good you're covering this type of share Paul and I fully agree with your analysis.I bought a small amount at 3.7p, but am watching closely. The concept is interesting so execution will be key. How do they draw in new users and drive usage - and at what cost? I understand Laughton's comments but BigDish gives the restaurant control. The CEO also said that he would concentrate on the independents rather than the chains because people want variety/ choice. You mention the quality of the app, but I liked how the CEO is focusing on the whole user experience , and going to medium sized towns before attacking the big cities. Seems well thought through from an executional point of view. This leaves me thinking they have the know-how to drive awareness. Speculative but I like what I see so far.
Good morning!
BigDish (LON:DISH) is a very interesting concept - yield management app for restaurants, allowing them to offer discounts at specific days/times. It cropped up on my radar earlier this year, so I decided to download the app and try it out. It's absolutely fantastic - easy to use, and providing large discounts, at good restaurants, mainly at off-peak times.
Even though the business is generating negligible revenues at this stage, it's started a UK-wide roll-out. Today's RNS says they are expanding the regional roll-out managers from currently about 2 or 3, to adding 10 more - so a significant stepping up of the roll-out pace.
How to value the shares? On the historic numbers, you would probably value it at nothing! So it's all about what potential people see for the future. This is how I see it;
Bull points
Bear points
The share price has been rising on heavy volume for several days now.
What's it worth? No idea! I bought some shares (average 2.7p) because the app is so good, and the UK roll-out was just about to start. That seemed to me a good time to take a highly speculative, punt on this.
This share won't suit most people here of course.
Regards, Paul.
Hi Paul,
The BigDish (LON:DISH) app looks good, and it's an appealing idea, but it only works in a few south & southwest towns at the moment. Any idea when it's hitting that there London?
Mike
I would like to support the two requests for Volvere (LON:VLE) - Volvere. I hold and don't particularly need the cash at the moment. But I do see a period of share price stagnation after the offer as the management do not make hasty purchases.
Richard
Hi RDHOWART/Richard - yes, I'm covering Volvere today.
Cheers
Graham
Would be interested to get Graham's views on the tender offer by Volvere (£VLE) to buy back shares at 1290p. In simple terms, I suppose it is an opportunity to crystallise a good profit (30% + for me in 16 months) or take a longer term view. The directorate has an excellent track record but, having sold most of their investments recently, there would seem to be no vehicle by which they can create value in the short term.
I know this is a major holding of Graham's and would appreciate his views.
More good news for Graham's top pick Volvere (LON:VLE) yesterday afternoon. Returning £16.6m through a tender at 1290.... so if you are awash with great ideas and desperate for cash, a perfect opportunity to take profit. On the other hand it will nudge the NAV higher (should you care) and increase equity leverage to their next deal if you are willing to wait.
Burford Capital (LON:BUR)
I am probably reading the whole situation wrong here, but on a quick glance i read todays news as suggesting that if everything hadn't worked out Burford would have had to pay back $100 mill. Would that sum have been booked as a loss / exceptional loss this year? or was there a prior provision for this possibility. Ok i see the argument that constant revaluations must go on to give a true picture of where they are, on so it does make some sense to book profits as you go. But i don't particularly like the thought that 18 months after the year $100 mill of prior years profits could suddenly vanish - that's quite material numbers. Specifically as Argentina is concerned here i do see how anyone can say its prudent to book disputed income from the government until the cash is in the bank and out of the country and in a different country (mild used sarcasm here). Interesting and fair play to the company for providing chapter and verse details - i am sure they will give the same chapter and verse for the first big one that goes its up. I am presuming it was also reasonably flagged up previously that that is where they were ref this case for anyone who to the trouble to go looking.
Your reading is correct. They recognised most of the gain when they sold ( $87 million of income ($100 million of the sale price less Burford's $13 million investment))
Fair enough if you don't like the accounting. If things had gone against them after the sale, then they would have had to write (some of?) that back down. I've been thinking for a while that the company might have a disappointing result going against them at some stage. So far it hasn't happened. But you're right to worry that they could disappoint in future.
For me the point about Burford is the asymetry of risk reward, the Teinver investment produced $107 million of proceeds on a $13 million investment for a total profit of $94 million, a 722% return on invested capital and a 39% IRR.
Burford Capital (LON:BUR) have had plenty of results go against them, as can be seen from the detailed investment data they released after their last finals:
https://www.burfordcapital.com/investors/investor-information/burford-capital-investment-data/
These losses (as well as the gains) must be happening all the time, we just don't get to hear about the vast majority of them. However I don't think the losses should be viewed as disappointing, rather they are just a cost of doing business. Whilst you would of course always prefer investments to end in a win, there are always going to be a minority of cases which result in a loss, that is just the nature of the beast and should not be viewed as a negative in my view.
Given the skewed asymmetry of the payoff, and as any professional poker player or gambler will tell you, you should bet when the odds and the expected return are in your favour. So it still makes sense for Burford to invest on the basis and expectation that 20%-30% of their investments will end up losing.
But that only holds true as long as they operate at a scale big enough that losses do not present an existential risk or harm the ability of the business to keep reinvesting in other cases, and of course scale and diversity of the investment portfolio is an advantage Burford has in spades over their competitors.
Re Burford Capital (LON:BUR)
Indeed 20-30% of their cases have lost so far.
What I think is just as important is how much the winners make? There's no point having 70% of cases winning, if they only return 1% each.
I've actually crunched the numbers for any interested. To save me repeating the same information on 2 threads, here is the link to my previous post:
https://www.stockopedia.com/content/burford-capital-ndashan-exception-to-the-stock-rank-rules-202527/?comment=300#300
Burford sold their interest in the Teinver case. They have been paid. The risk involved in collecting the money due from the Argentines now lies with the people that bought that interest. Presumably they bought at a discount to the full judgement amount that prices in their view of that risk.
The risk of an annulment was very low - say 1-2% max. Burford insured that risk for a 7% premium. They might have lost but that's the nature of selling insurance. They would have regained their entitlement to the full claim and been free to continue to pursue it.
I appreciate that this might not be the forum but there is pleasing announcement from Oakley Capital Investments (LON:OCI) this morning. This is a private equity orientated investment vehicle, market cap round £425m. Oakley Capital Investments (LON:OCI) presented at the Mello funds day.
The prime mover is Peter Dubens, a very successful entrepreneur who holds about 5% of the equity. The discount to NAV has been gradually reducing from well over 30% since the company adopted a more open dialogue with investors and introduced a dividend. The current discount to NAV is around 25% and yield about 2.1%. In some respects it is not too dissimilar to B.P. Marsh & Partners (LON:BPM) but it operates in a different area of expertise.
I hold Oakley Capital Investments (LON:OCI) AND £BPM
I mentioned OCI previously in connection with its holding in Time Out and having held now for 2 or 3 years from a much lower price it is now one of my larger and most profitable holdings. They seem to keep realising investments at above book value as they have reported today. There is a great list of director buys, the chart is good, it pays a dividend and there have been very few shorts which are four points I often look for.
Update from Aptitude Software (LON:APTD) on the future of Microgen financial systems.
Instead of being demerged and shareholders owning two different companies it is now being sold subject to shareholder approval.
Possibly a better outcome, certainly avoids some people having small holdings of a small company, and avoids the risk of volatility with holders selling out of the smaller company. But I can't help thinking it's a nice little company (Microgen financial systems) that produces cash. The sort of thing that's getting bought all the time as a takeover and here we are selling it for a fair price but not what it would be in a takeover situation.
Announcement here:
https://www.stockopedia.com/share-prices/aptitude-software-LON:APTD/news/aptitude-software-proposed-sale-of-microgen-financial-systems-urn:newsml:reuters.com:20190530:nRSd5402Aa/
Nice update from Burford Capital (LON:BUR) too spelling out how they recognise income on an investment.
600 (LON:SIXH).
Pension scheme buyout completion and trading update.
Graham last commented on this company in SCVR 19th Nov 2018. Maybe worthy of another comment. The completion of the transaction provides the Group with significantly greater liquidity and financial flexibility. The £4.1m/ $5.2m post-tax cash surplus will be used to fund working capital, invest in product development and provide flexibility to supplement organic growth and value-enhancing bolt-on acquisition opportunities. The full year results expected at the end of June/ early July 2019.
Hi mercury61,
Re 600 (LON:SIXH) - I had a quick look at the figures this morning, deciding;
- announcement today seems to confirm what was already known, so not a lot new in it
- company looks cheap on a low PER & good divi yield
- however, even after pension money received, it will still have high levels of debt, so adjust that out, and the PER isn't quite to cheap after all
- it seems to own some decent businesses, and who knows, might re-rate a little now the pension problem is gone?
- extremely illiquid share, so not one for me - too difficult to get in & out of
Best wishes, Paul.
Thanks as ever Paul
My morning smallcap tweet:
Gresham Technologies (LON:GHT), Quadrise Fuels International (LON:QFI)
Gresham Technologies (GHT) wins 'strategically significant' (=not that big) contract with a global central counterparty (which shall not be named) and rates and multi-asset class clearing house. Worth £1.2m over 5 years.
Quadrise Fuels (QFI) signs MOA with a Saudi co for exclusive relationship to progress and supply MSAR projects for Saudi. Aims to win MSAR installation contracts refineries for commercial supply of fuel in Saudi. May not lead to anything.