Hits: 3

Beyond Meat was up another 12% overnight. $10bn market cap now. $15m loss expected this year.

  • Imitators Agronomics was up carried out a placing at 4.5p a week ago “to invest in the alternative food sector”
  • Note to self: When you see a bandwagon, don’t get on it.

Today – Plus 500 and Rosenblatt have AGM’s today but no announcement out.

OnePM – Earnout

Share Price 41p

Mkt Cap £36m

Conflict disclosure: I Hold

  • Statement – The invoice finance business “Positive Cashflow” has achieved its earnout targets a year ahead of schedule. In 2016 this invoice finance business made profits of £1.1m and the earnout was based on PBT growth targets. The payment of the earnout results in the issue of 2.5m shares at 60p according to the acquisition announcement in 2017.
  • Estimates – Forecasts look for a 9.3% revenue growth over the year to May 19 and 13% PBT growth to £8.6m which is EPS of 6.8p. Given Positive Cashflow is a year ahead one imagines the pressure on forecasts is on the upside.
  • Valuation – PER is 6X the year just ended and a yield of 2.2%. ROE is 13.9% and Price/NAV is 0.8 although price/NTAV is 1.8X
  • Conclusion – Sometimes a stock gets so cheap no one wants to own it. The market has decided that the money on acquisitions of 2-3 years ago was all wasted. This announcement suggests it wasn’t.  Perhaps it will be bid for but I suspect patient investors will get rewarded.

Mortgage Advice Bureau – Acquisition

Share Price 582p

Mkt Cap £299m

Conflict disclosure: No holding

  • Acquisition MAB1 is acquiring 80% of First Mortgage Direct for £16.5m cash which is expected to be significantly earnings accretive. First Mortgage has 90 advisers and is based in Edinburgh with 14 shops. From arranging £2bn mortgages last year it achieved revenue of £10.2m and PBT of £1.5m.
  • Consideration Mab has obtained a revolving credit facility from Nat West for £12m which it intends to repay as quickly as possible aided by reducing dividend payout from 90% to 75%.
  • Estimates December 19 forecasts look for £17.7m PBT which is EPS of 28.3p and a 26.1p dividend.  If we add £1.5m to the PBT we may get EPS of 30.7p and a 75% payout would be a dividend of 23p. So it looks like a dividend cut in the region of 10%.
  • Valuation Pre acquisition PER 19.3X and yield of 4.7%.  Acquisition looks c 8% enhancing.
  • Conclusion This share has long been expensive but reliable and supported by the dividend.  I have recently found myself worrying that over the last two years as Buy to Let mortgages have declined the slack had been taken up by first time buyers and growth in the mortgage switching market but around 2 years ago more mortgages have been moving from 2 year fixed to 5 year fixed which could slow the switching market two years later. An acquisition could be what is needed to fill the gap.  It looks a little defensive and a dividend cut won’t be welcomed.

jeremy@charltonillingworth.co.uk