Blancco Technology Share Discussion Threads

[mccawber] 18/4/2016 13:34

IMV the thing the market is telling you is that ED's view of the value of BLTG is wrong: ED have started with a fixed view of value and changed their value ps (as al101uk correctly says) by the number of shares post tender. If the market thought the shares were only worth 225p post tender you'd be killed in the rush to sell today....so, if the market thinks the shares were worth less than 237.5p (price now) it sells, if the tender goes at a higher price - price discovery tells you it is worth more. Lets say 240p. If the company buys a share at 240p all the other shares are still worth 240p....So what we know is the market doesn't think these shares are worth 225p per share post tender the market and ED can't both be right! Paul Hill has (unusually) got it wrong - IMHO.

[dlku] 18/4/2016 13:16

nice find



320p WOW

[rivaldo] 18/4/2016 12:17

Panmure Gordon reiterate their Buy and 320p target price today:

[al101uk] 18/4/2016 09:46

Because of the tender offer, the higher the tender offer, the less shares get bought and so there is an adjustment to the eps.

That's one of the things I found interesting.

/edit/ Sorry, I mean that's why they reduced their target price, the market price is completely irrelevant other than it signifies a likely tender offer price.

[ali47fish] 18/4/2016 09:29

how come ed is indicating a tp of 225 when the current ask price is 235?

[al101uk] 18/4/2016 09:04

Some really interesting stuff in that note brummy_git, thanks!

[brummy_git] 18/4/2016 08:48

New research out today from Equity development

hxxps://www.equitydevelopment.co.uk/doc/1481.pdf

[nurdin] 18/4/2016 08:35

Great news but seems to me the Xcaliber business is more aligned with their previous business rather then their data erasure offerings.However the new contract brings with it a whole range of new customers which could prove transformational for Blancco's core activity...imo

[masurenguy] 18/4/2016 08:14

Obviously this contract has been under negotiation for some time and the acquisition deal was all prepared and ready to go with the trigger being the successful conclusion of contract negotiations.

[rivaldo] 18/4/2016 07:56

Good news. The Xcaliber contract win looks very impressive - could be the start of something big if taken up by other retailers in the USA and then elsewhere.

[nw99] 18/4/2016 07:31

Nice acquisition and contract win .

[nurdin] 16/4/2016 10:41

Oh dear al...your post 1371 on the old thread on 6 April:

'I have sold in to the spike (pre rns), probably giving up 10% in hindsight. had hopes I'd be given a chance to get back in, but looks like I'll be out until after the tender offer... and possibly forever now :-( '

I do hope you managed to get back in again!

[b3842517] 15/4/2016 08:31

Great post, thank you al101uk.

[al101uk] 15/4/2016 00:21

Since there is little appetite to discuss the risks, here is a risk free valuation of the company.

Assumptions are 35% margin, which is what was achieved this half year.
30% growth compounded over the next five years (revenue triples), I think this was managements guidance.
Tax @ 20%
Steady amortization at £2 million per year.
Corp costs at a steady £1.5 million per year.
A terminal value of 20x earnings on the 5th year (average multiple for a s/w company listed in the UK).
Using a discount rate of 10% (almost completely arbitrary, but it's where I like to start as it's the standard rate used in the oil industry where I'm more used to calculating NPV).

The result is £3.53

Everyone feel warm and fuzzy now? ... good.

Risks

1) Management forecasts too optimistic (never, not on AIM!)
2) Amortization too low given the intangibles on the books.
3) Technology overtakes their IP or their business model (ATA Secure Erase or changes in SSD technology)
4) No real visibility of ongoing business due to acquisitions/disposals and the affect that this has had on accounts presentation.
5) Corp costs underestimated. Corp costs were divided among continuing and discontinued businesses, the actual costs once the standalone business emerges could be higher and could increase as the business grows.
6) R&D costs could be higher than expected.
7) Competition for the data erasure market could increase faster than management expect (from hardware suppliers as well as s/w companies, from encryption technologies as well as erasure).

Assign you're own numbers to these risks, but please don't discuss them or you will be accused of being a shorter.

rimmy2000,

You need to understand the value you put on the company as it stands today, if you agree with my assumptions you can risk weight the result as you like to get an idea of your valuation (it's easier to do this in the model, but this is all best guess and management guidance so just use your gut).

Once you have a value the decision to sell in the market, tender at a given price or continue to hold should be a simple one.

I hope my post moves you a couple of steps away from a "convoluted gamble" :-)

Valuing a company at this stage of it's development is a long way from an exact science.

That's it, I'm done... I'm outta here!

[al101uk] 14/4/2016 16:59

nurdin,

Maybe you should think again about calling someone who assigns a 30% compound annual growth rate to a company you're invested in a shorter.

Go back and let me know when you work out why my growth rate for 2017 is substantially higher than broker forecasts and explain how that makes me a negative shorter.

Or don't... I don't care.

[nurdin] 14/4/2016 15:05

You seem determined to talk this share down.I can only assume you are short

You say ''the forecasts aren't for normal business operations, they will include money raised on the sale of the legacy part of the business.'' eh? It is very unlikely that the company will include the proceeds of the sale in their P/L account and even if they do they will highlight that as an exceptional item.

Also since the sale took place within the current FY which ends june 2016,it has no bearing on 2017 forecasts!!

[al101uk] 13/4/2016 23:30

The forecasts aren't for normal business operations, they will include money raised on the sale of the legacy part of the business.

Apologies, I should have said the underlying EPS EXCLUDING any proceeds from the sale, if you read my post you can see I didn't factor in sale proceeds.

Moving in to 2017 and they fall pretty much in line with my previous post and I agree if they hit those targets all should be rosey. I just think there are several risks to the downside and as of today I'm not so keen to be paying for those projected earnings.

I want to stress that I'm not particularly bearish here, it's a risk/reward call and a lot of my aversion is down to the doubts I've expressed here COMBINED with the uncertainty that the return of capital throws at investors.

[nw99] 13/4/2016 22:26

26% compound growth 2008-15 for Blancco erasure division

[nurdin] 13/4/2016 16:59

I must admit I hadnt seen those forecasts, so thank you penpont for highlighting.Had I seen those forecasts, my response to al101uk would have been along similiar lines to Rivaldos.I am now thinking of betting my farm lol

[rivaldo] 13/4/2016 16:11

Exactly penpont.

We're only a couple of months away from a year forecast to bring 10.1p EPS. That's a P/E of 22 for a company growing extremely fast - and that P/E will be quite a bit less once the cash pile is stripped out.

That's also a PEG of just 0.28 based on 77% EPS growth.

For a market-leading company with such global potential these numbers aren't expensive imo. I'm also not a "story" investor in general, but where a company is already highly profitable, and has established a global leadership position in an exploding sector, I can see big institutional demand, especially with all the sellers being removed via the tender offer.

[al101uk] 13/4/2016 14:38

nurdin,

It's not a black and white decision by any means and I'll be back when/if the risk/reward falls more in my favour.

Good luck.