Climate Exchange Share Discussion Threads

[the_doctor] 21/5/2008 19:01

I have Zakmundo filtered from other threads

Is there any reason revenues arent forecast to grow 20-fold, or 40-fold?
I dont know?? Maybe they are in which case its not overpriced?

[techmark] 21/5/2008 18:48

the_doctor,

As Zakmundo said, there are no barriers to entry. I used the 10 fold rise in revenues merely to point out just how overpriced the stock is. In other words if you buy the stock at £20 you need the business to grow its revenues 10 just to justify the rating you are paying for the stock. That to me leaves you with huge downside risks and limited upside benefits, or a very poor risk reward ratio.

[the_doctor] 21/5/2008 18:41

Yes techmark, but the point is that they have protection for a period

I'm assuming that CLE must have some other means of preventing competition, such as signing up users and becoming the gold standard

The % is irrelevant, since your 10-fold was made up anyway

The market prices in future profits, so I guess these are expected to be high in CLE's case? I dont know.

[zakmundo] 21/5/2008 18:20

the_doctor

in the case of CLE

a) there are no barriers to entry - LSE, NYMEX etc etc can and will develop climate products of their own. Unlike pharma, broad IP in financial futures products is rare and very very hard to protect.

b) as for costs, well right now CLE's costs are a multiple of its sales - but go look at LSE to see an idea of margin...

[techmark] 21/5/2008 17:35

the_doctor,

I didn't know that it did, beside the drugs go generic after a period of time, so it's a slightly odd example to use. Perhaps that is why the margins are kept high because once the drugs go generic it's a free for all.

I don't know the Pharma industry at all well and this is slightly odd argument in the first place as CLE is not an pharma stock. Take a look at GSK's price on a 10 year chart and see if that looks like a stock with 30% margins to you. There's something odd about Pharmas, so I suspect you are citing a unique example rather than the norm.

Regards.

[the_doctor] 21/5/2008 16:49

Yes, so how does Pharma maintain its 33%?
There are barriers to entry

I'm not saying 60% is the case here - it was just an example.
I'd assume that CLE has some measures in place - even just first mover advantage - to prevent mass erosion of its market.

[techmark] 21/5/2008 16:40

The doctor,

You know for a fact that if margins are at 60% in any business or 33% for that matter, fierce competition springs into action. That competition wins business by cutting its prices, and hence lower margins. It's how capitalism works.

[the_doctor] 21/5/2008 16:37

The principle is the same

The pharma industry is 33%
I chose 60% since once this is up and running, costs should be very low?

[techmark] 21/5/2008 16:35

The doctor,

I think you should work on 20% margins at best. How many companies do you know that sustain 60% margins? Once the competition appears I suspect 15% margins are probably more likely. Remember also that high energy prices are going to force people to use less and cleaner energies, more wind and solar for sure. This cannot be a bullish trend for climate exchange in the very long term.

Regards.

[the_doctor] 21/5/2008 15:57

tech, I'm not a holder here & never have

"Businesses are always valued on revenues and profits."

Yes - forecast revenues and profits.

If revenues grow ten-fold, to $250m and if 60% flows to the bottom line, thats $150m, or the current mkt cap is 6.7 times

So, $20/share wouldnt be pricing that in.

Whether or not $250m is high or low, I dont know, but thats the principle

[zakmundo] 21/5/2008 15:53

techmark

bear in mind that the_doctor claims to be a longstanding investor in PRM and still posts 10-20 times a day in support of that co. He has form in being long at the wrong time.

the_doctor

The point is that at £20, CLE is already pricing in multi-year exponential growth. There is room only for disappointment.

[techmark] 21/5/2008 15:16

the_doctor,

Good luck with that thought. Businesses are always valued on revenues and profits. It's share prices that are valued on fantasy and hope.

Even if CLE revenues grow 10 fold from 25 million over the next 5 years this is already priced in at £20.00. Now why would any investor want to put their money at serious risk for no reward? Once again, people have been totally seduced by a theme, a frenzy, rather than applying any sort sensible valuation. This is just a trading exchange after all, it's nothing new, and there is nothing to stop competition either, which is inevitable. Contrary to the market rating, they are not about to discover a cure for cancer, or invent teleportation. It's just a plain old trading exchange and will be rated as one when investors or should that be punters, come to their senses. They will when the shares crash.

Regards

[the_doctor] 21/5/2008 14:52

"why somebody would pay £1 billion for a company with £25 million of revenues"

Because if those sales are forecast to grow at x% for the next 10 years, then the current level of revenues is meaningless.

[techmark] 21/5/2008 14:33

Gsands,

Perhaps you could explain why somebody would pay £1 billion for a company with £25 million of revenues. Yeah try selling that one Gsands!

Doesn't kill my short position. At some point I will be doubling my short position as well. Opportunities like this don't come along that often. The last one was the dot.com madness.

Target price 800p and if things really get going 500p.

Regards.

[gsands] 21/5/2008 14:28

Oh dear. Maybe a bid approach? That's the sort of thing that kills short positions stone dead.

Ouch!

[slapdash] 21/5/2008 14:08

the world has obviously gone mad..... slap

[j l] 20/5/2008 17:39

Priced for sellers again - short above £20!

[techmark] 20/5/2008 15:32

Praipus,

You may actually be right about LSE.

As for CLE, well if you want to horrifically overpay for assets akin to the dot.com boom then CLE is the place to burn your money. It's only a matter of time. I have the patience and the funds to wait for pay day. Trust me when this thing breaks it will break fast just like Phorm did, which lost 60% plus from its high in a flash.

So start praying that the US fund that owns 22% never decides to sell down its position, because if it does the price will be smashed to bits.

Regards

[asparks] 20/5/2008 14:24

Any CLE holders in ALK?

Renewables co Alkane Energy says electricity sales continue at record levels
Stock : Alkane Energy (ALK)

[praipus] 20/5/2008 14:20

Wrong stock wrong timming techmark try shorting LSE its got massive debt and massive negative equity.....CLE is all cash and growth and you will get squeezed...again.

[techmark] 20/5/2008 12:58

Starting to look very weak on L2.

[queeny2] 20/5/2008 09:52

certainly a break-out. I'm biding my time.

[techmark] 20/5/2008 01:43

Gsands,

Let's see who is wrong in a couple of years not a couple of weeks. Based on earnings forecasts the 2009 P/E is 137. If the stock traded on a slightly more realistic P/E of say 30 times (still more than double the current market P/E) then the shares would trade at around 450p. So by all means be my guest and fill your boots on the long side.

Regards.

[gsands] 19/5/2008 22:40

Screaming breakout. Shorters will be burnt to toast.

Still, that is the price you pay for being WRONG.

[queeny2] 19/5/2008 12:25

chelsea let me know if you do email me, cos i rarely check that email