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I find it can be useful to consider the bounce back in China’s PMI published overnight. Happy Tuesday.

Appreciate Group – Trading and COVID 19 Update

Share Price 35p

Mkt Cap £65m

Conflict Disclosure:No Holding

  • Update –11 months to February was in line with expectations. However, running a voucher business when the shops are closed is “uncertain”. £30m free cash. The company makes the point that a reduction in billings means an increase in available cash. While medium term it accelerates the move to digital. Dividend cancelled, bonuses reviewed, discretionary spend cut.
  • Balance Sheet – March 19 NAV was £16.7m with cash of £37m, some of which may have been restricted.  
  • Valuation Last year’s EPS was 4.8p. 13.5X prior to Giftly.
  • Conclusion The uncertainty over Giftly traction is now replaced by a new set of uncertainties.  This could get cheaper before the focus turns back to the potential success of the new product.

Urban Exposure – General Meeting

Share price 37.5p

Mkt Cap £59m

Conflict Disclosure: No Holding

  • Meeting The Resolutions to approve the sale of the loan book to Honeycomb was approved as was the resolution to subsequently dispose of the opco to the management team. The resolution to cancel the AIM listing wasn’t approved. HHL has subsequently indicated it does not wish to proceed with the transaction in the light of market conditions. The Company reserves its position to enforce specific performance of the share purchase agreement dated 10 March 2020.
  • Valuation Should the transaction proceed the anticipated return to shareholders was 71p. Now the company will remain as a shell that may reduce a little, but the upside is considerable if the share purchase agreement on 10 March 2020 can be enforced on Honeycomb.
  • Conclusion Honeycomb’s NAV is c £375m, which is a good credit. I don’t imagine contracts can be unwound because of harsh markets, but I am not a lawyer. Appears a reasonable risk/reward with 86% upside.

jeremy@charltonillingworth.co.uk