I Read The News Today Oh Boy! 8-Nov-2018

8th Nov '18 by matylda

5 comments 2456 reads

Morning all!

Gattaca ( Gattaca (LON:GATC) ) – 131p – £44.7m – PER 5.5

Preliminary Results For The 12 Months To End July 2018 – Revenue up ever so slightly with Underlying PBT of £12.7m (2017: £16.1m), in line with market expectations - Year end Net Debt remains high at £40.9m (2017: £40.3m). No Final Dividend (in line with revised policy communicated at Interim Results).

Remains on my Avoid list (that Net Debt is just too high for my liking).

Game Digital ( GAME Digital (LON:GMD) ) – 28.8p – £50.2m – PER n/a

Final Results For The 52 Weeks To 28^th July 2018 – Revenue flat, LBT smaller at -£7.4m (-£10m last time), Cash of £58.7m (£47.2m last time) – No Dividend as investment in Belong remains a priority (Pay To Play performance up 50% YoY in the first 14 weeks).

Remains too difficult for me to work out where this is going to end up so I remain Neutral.

Tracsis ( Tracsis (LON:TRCS) ) – 590p – £167.6m – PER 23.1

Audited Results For The 12 Months To End July 2018 – Revenue up 16% to £39.8m (2017: £34.5m), Operating Profit (before exceptionals) up 22% to £5.9m (2017: £4.9m), Cash at £22.3m (2017: £15.4m), FY Dividend up 14% to 1.6p (2017: 1.4p), Fully Diluted Adjusted EPS up 9% to 25.47p (2017: 23.29p).

I still find the valuation too rich here – I remain Neutral.

Wincanton ( Wincanton (LON:WIN) ) – 215.p – £276.5m – PER 6.9

Results For The 6 Months To End September 2018 – Revenue flat, Underlying PBT and EPS up 7.1% and 8% respectively and the Interim Dividend is up 10.1%. Net Debt down from -£43.5m to -£24.2m. FY to be in-line.

This still looks attractive for those looking for income (an almost 5% yield) but I will remain Neutral as the growth story isn’t so tempting.

Arrow Global ( Arrow Global (LON:ARW) ) – 199p – £345.5m – PER 4.58

Results For The 9 Months To End September 2018 – Quite encouraging and expects to meet FY expectations.…

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MrContrarian

8th Nov '18

My morning smallcap tweet:

Akers Biosciences Inc (LON:AKR)

Akers Biosciences (AKR) Yet more buffoonery. Suspends shares allegedly due to a consolidation: "The Company is completing the necessary work streams for admission to AIM of the consolidated common shares. This work is expected to take approximately five to seven business days to complete." Never seen that before. As Ami Winehouse said, what kind of f***ery is this?

Mark Tughan

I went to Arrow Global (LON:ARW) 's capital markets day today, because I am a holder and was keen to hear directly from the company, following a fairly sustained SP decline, and also as I was aware that the company had become quite heavily shorted.

It seemed well attended (around 75 people) and the presentations were detailed and long.

I'm afraid I don't have time here and now to share much (and the material that was given out was marked not for further dissemination without permission) , but I would say that it was clear that the management feel that the business is badly misunderstood, and that this was the start of a process whereby they correct what they believe to be misunderstandings and possibly worse.

I have to say I was deeply impressed with the management and the information presented. They (IMO) have potentially built a compelling and differentiated/unique business proposition, now with some scale. They came across as highly experienced, knowledgable and actually very conservative in relation to risk and future outlook.

Imagine my joy then so see the SP rise by 40p (20%) today to 238p.

There were plenty of questions at the end and though no one specifically mentioned the short interest, it was being discussed among some of us who chatted over the tasty lunch provided.

I have not see any published "bear case" but the chatter among analysts was that perhaps Arrow Global (LON:ARW) has just become a lazy proxy to take a bearish view on a worsening in credit conditions. This is expected - even planned for by the company and is of course a threat and an opportunity for Arrow Global (LON:ARW), on different timeframes.

I hope the company goes one stage further and takes its message to the PI community as well (and I may suggest they contact Paul S and/or Graham N and be on hand for their final results when they come out). Graham has referenced Arrow Global (LON:ARW) twice in his SCVR''s ("I'm still tempted to dabble in it. What's holding me back is that it has become a bit too large and complicated for me"). I can help here and inform readers that the message today appeared to be that M & A is largely done for now!

Existing dividends are generous and expected to rise. Buy-backs were also mooted, as well as reducing leverage.

Probably still not for the faint hearted, but if this is the start of a short squeeze, or even just a gradual unwinding of the short positions, I would expect a decent re-rating, and am seriously considering a top up.

In short, I'm optimistic, but then again I may be suffering one if not not many or all behavioural biases!

As always - comments welcome!

AnonymousUser252054

Hi, Fredericktug

I read somewhere that there were concerns over the asset management side. The shorting case seems to be that Arrow Global (LON:ARW) had got their numbers wrong and were losing money, finding it more expensive to claw back the debt than anticipated. It's hard to pick out anything decisive in that regard from a fairly brisk read through the RNS today, although it's written to sound like all is well, and they are expanding that area.

Any thoughts?

9th Nov '18

Hi Shine,

From the information presented, collections were consistently running ahead of forecast. Of course is all part of the assessments and they never expect full recovery, this is factored into the price they pay for the assets.

The asset management side they say is the capital light (thought lower margin - and lower risk) part if the business and they are guiding us to grow to around 50% of the business (it's 30% revenues now).

in answer to several analyst questions, they were also quite firm in their reply that collection costs should be assumed to be a fairly constant 17%, over the life of the asset (with variation in costs at different points in the lifecycle of the asset, and different cost profiles too for differing asset classes (secured/unsecured/mortgage/motor etc).

As for them running out of money, the company was adamant that there will be ample FCF for deleveraging to their target range (of 3 to 3.5x adjusted LTM Ebitda), a growing dividend, and then some possible buybacks. They were keen to stress their cost of debt is 3.9% wihh no bond maturities until 2024.

I will probably take a deeper dive myself into the accounts to look for any red flags in this regard. You'd expect the company to present itself in good light but there were no specific concerns raised in the Q & A from the analysts present.

I've just seen that you can actually watch the presentations and download the material as of this morning here: https://fotwlive.videosync.fi/... (or by clicking through on the link given in yesterdays announcement) - I would urge anyone interested to do do but beware, the session was half a day. More usefully you can download the 116 slides of material.

Happy researching! I see the SP is softening a little. I'll be watching closely to see of the short interest declines as this may signal a re-rating,.

Effortless Cool

Thanks. fredericktug, the Arrow Global (LON:ARW) feedback is much appreciated. Their published results always give the impression that management has a deep understanding of their business, so it is reassuring that you came away with the same impression after meeting them face-to-face.

I Read The News Today Oh Boy! 8-Nov-2018

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Matylda

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