AI Claims Solutions Share Discussion Threads

[alexacj] 21/2/2006 19:03

Hi ....ACE's forecast p/e for 2006 is about 27......they operate at the prestige end of the market and run their own fleet.....so their margins are substantially higher than ACS (and imho always will be)......I think the overiding factor that has ensured that ACE is on such a high rating is primarily that the management have overdelivered on all of their results so far.....they aggresively chase business from dealers and manufacturers and pay a commission for all referred claims(either cash or agreed car purchases from dealerships).....they have been exceptionally successful with (as far as I'm aware) no profit warnings only upgrades....that leaves the management in a great light and in an industry where all of the companies put together only accounts for 20-30% of the available market....so a growth sector which attracts a higher p/e (as long as you deliver!).....ACS on the other hand does not run it's own fleet and ONLY deals with insurers.....this means that their margin will be somewhat below ACE's & HHR's....but they don't pay commissions... and are trying to position themselves as an outsource company for insurers claims handling depts......so in short their turnover should grow rapidly but their margins will remain low (not necessarily 21%!).....high volume low margin.....but remember the size of the market available!.....the only problem so far is the direct line set back and the poor information management....overcome that then we should see a re-rating....aimho!

[masurenguy] 21/2/2006 18:47

Well leaving aside the existing credibility problem that ACS management have to overcome the comparison with ACE is crazy.
ACS could be on track for annual revenues in the region of £45m - £50m and a pretax of circa £2m. Their current market cap is just over £12m with a forward P/E of circa 6 IF they achieve these annual results.
ACE made £6m on sales of £20m last year and currently have a market cap of circa £315m which represents a PE of around 60 !

Any idea why the ACE valuation is so rich !!

[alexacj] 21/2/2006 18:27

Hi Masurenguy.....I'm holding just a little below 22p...so fairly similar.....time will tell whether that's good or bad!.....they are reporting interims next week so I would hope to see pre tax of around £500-£750k with turnover somewhere just below £20 million.....we should get a picture for the full year outlook...together with blended margin to date....that imho will have more of an impact on the s.p.....but there is still a degree of "mistrust" of the management due to the previous RNS debacles.....so my feeling is IF the interims are good enough to suggest that ACS could make their target of £2million for the full year then we should creep towards 30p....if the results surprise to the upside we should be able to get closer to 40p.....all imho and subject to the last trading update on performance being accurate!

[masurenguy] 21/2/2006 17:58

alexacj - I've been holding these for a while and averaged down last year so my current composite valuation is 22.7p a share. If they report pretax of say £1.25m next week on sales of around £50m, what do you think would be the short term impact on the share price ?

[alexacj] 21/2/2006 17:11

"AI Claims Solutions PLC will announce its interim results for the six months
ended 31 December 2005 on 28 February 2006."

Results out slightly earlier than anticipated.....looks like we won't be having the RNS that some feared....as they only have 4 days to issue it!!!!....should bode well for "on course" results....price action today caused by 2 sells totalling about £9k.....as we all know this go's up and down dramatically on very little volume.....just been looking again at the last set of results......their blended margin was 21%....down from nearly 34% in prior periods.....looking at HHRs blended margin it appears to be 43%.....you would expect it to be higher due to utilisation of own fleet and higher hire rates......but if ACS are able to "tweek" their margin through higher levels of hires even by 1 or 2 %.....on a turnover of potentially £50 million then every % point equates to £500k increase in operating profits.I am obviously no expert but I would have thought that whilst we should expect lower margins than HHR & ACE we should at least expect them to achieve a somewhat "better" blend than they reported last period(and indeed if the margin had remained at 34% that would be an additional £6.5 million in operating profit and most of it would be to the bottom line!!!!!!!)......next Tuesday will show a better picture of any likelyhood of margin improvement and turnover prospects!

[scotswhaehae] 20/2/2006 15:39

With IQE and IND the difference is that I have my spreadsheets which strongly support/yell at me to buy...with ACS my spreadsheet says stay away (maybe just for now, and especially given the broker expectations)

anyway...all for now

good luck!

[alexacj] 20/2/2006 14:36

Scots everyone to his/her own....but it generally helps when you post something that supports your view......just a belief out of thin air lacks credibility.....but I do admit you have a fifty percent chance of being right!......you simply don't believe the forecasts....and that is understandable given the performance to date....but I do think that you understand that generally the market looks forward....and if you invest in stocks such as IQE IND etc.....then you have to have a great deal of faith in forward projections!.....hence why I make the statement on ACS share price IF they hit their targets......they don't just stop at £3 million PBT...especially in a sector where if you put all of the competition together they only currently have about 20% of the business......shows there's still alot to go for.....I think that it's management credibility at the moment that is holding this back..and we may see short term weakness....but...IF they deliver then it will be re-rated......I genuinely thought that you had some specific information that led to your about turn....but it seems not....good luck.

[scotswhaehae] 20/2/2006 14:29

Anyway...no point in arguing...I'll leave it for now... and time will tell

[scotswhaehae] 20/2/2006 14:26

mr trixter...'and the bestinvest clients and others keep adding...'

hmmm...yet the share price 'keeps' falling....!

mr alexacj...lets assume for a moment that you (and the brokers)are right and they make £3m for 2006/7... are u seriously suggesting that merits a 100p share price!!? (over 30x fully taxed PER)

As it happens I believe £1m is more likely for 2006/7...either way the risk is on the downside imho with brokers forecasts so optimistic...

We shall see...

Good luck all!

ps stick to IQE !!

pps I havent said '10p' actually!

[alexacj] 20/2/2006 14:17

Trixter let's hope that they deliver on their rhetoric this time!......Scots I have looked back on this thread at your postings and am somewhat confused by your comments......this time last year you were commenting on an share price being well into the 60s and then after the warning were quoting the broker notes and expected potential of this co to earn over £3million profit as their new contracts came on stream....you were even quoting 35p target when the brokers were quoting 25p in the middle of 2005..looks like your comments are similar to ACS....it's going to triple...oh no its not it's going to 10p!...what has changed so dramatically....I would be very interested in any info that you may have gleaned that backs up your targets....it obviously happens that sometimes PIs get snippets of info that are not yet public on these boards.....& Lord Orphan seems to be pretty good at that e.g. the warning when ACS (AUT) lost the Direct Line contract a couple of years ago....proved to be totally accurate....so please share the info if you have any as we all need any help we can get!.........thanks in advance.

[trixter] 20/2/2006 12:31

alex - and they talked about making "significant progress" in the current year, when they updated the market in July and that they were still on track (confident) when they updated in November. Lot's of investment has gone into establishing the business, which is clearly expanding and the gearing looks good. I like the look of the new appointments, considerable director buying (at higher levels) and options (at higher levels). Scots hanging around here talking this down in his none too subtle way indicates a healthy degree of interest. :-)

oh, and the bestinvest clients and others keep adding. I wonder why?

[alexacj] 20/2/2006 08:57

Hi Scots.....FYI I have copied the Broker forecasts for this year and the next....and you will see that they are forecasting 2.9m pre tax for 2nd year.Remember that these forecasts are based upon the last set of results where the company were only just showing recovery from the loss of Direct Line.So IF they make their earnings then it places them on a p/e of 5.18 in an a sector that is normally on 18-20......couple that with the fact that IF they make their earnings then growth will not stop there.....so my guess would be that the share price would be more than £1 going into year 3.....BUT....they have to make year 1 yet....let's take it one step at a time.....so far everything is pointing in the right direction......IF we don't get one of those rather annoying about turn RNS's then I think we may have finally started down the road....but short term still agree that the share price may weaken ...but its the longer term view that's the prize...let's see!
Here's a bit of homework for you.....what was the share price of ACE when they were earning £3million....was it 40p!....when HHR were earning £0.19million what was their s.p...was it over £1...when HHR bought Swift which had a turnover of £7.8million and an operating profit of £1.2million what was the equivalent s.p.....was it nearly 50p!....a bit of light fun but interesting wouldn't you say!
BTW do you own shares in this co?

Broker Date Rec Pre-tax (£) EPS(p) DPS(p) Pre-tax(£) EPS(p) DPS(p)
Teather & Greenwood 13-12-05 HOLD 1.50 2.22 0.50
Evolution Securities Ltd 12-10-05 ADD 2.00 3.20 0.40 2.90 4.10 0.50

Consensus 1.73 2.67 0.45 2.90 4.10 0.50
1 Month Change 0.00 0.00 0.00 0.00 0.00 0.00
3 Month Change -0.27 -0.53 0.05 0.00 0.00 0.00

Growth (%) 573.50 53.56
Standard Deviation (p) 0.49 0.00
PE Prospective (x) 7.96 5.18

[scotswhaehae] 19/2/2006 16:59

re post 547...

How does '£3m' pbt equal 100p share price??

What PER are you using?

40p max imho if '£3m'...

[alexacj] 17/2/2006 18:09

Agreed LO....but if I were an insurer and I was being given invoices from HHR that were higher than ACS for the same vehicle I would be more inclined to outsource my business to the lower cost operator ....(I haven't looked at every vehicle but another e.g. is a Porche Boxter HHR £204 compared with ACS £169).....so whilst it may take time the ultimate payee as you point out is the insurer and when they continually receive invoices from one company that are lower than all the others eventually the message must sink in that the only company that actually saves them cash not just on outsourcing but also on "at fault" accidents is ACS....mustn't it?...or is that just wishful thinking....cos if it is, ACS are wasting an awful lot of potential profit!!!!!!!!!!!!!
I hope I understand their strategy and agree with it for the longer term....but as a shareholder who ideally wants to see an share price performance similar to ACE it's frustrating......cos it seems clear that for a short to medium term profit performance, maximising the rental margin would almost certainly enhance the bottom line substantially.....only thing is it would blow their long term strategic goal of being positioned totally on the side of the insurers!

[lord orphan] 17/2/2006 17:52

Alexcj
I too have looked at the ABI hire rates and noticed differences between companies. I didn't think they were that great across the whole fleet. Of course, on credit hire the third party insurer doesn't pick the hire company as that is down to the non-fault party or his broker/bodyshop. The insurer only picks the hire company on third party intervention or authorised hire business and there the rates are generally below the ABI tariff by negotiation.
LO

[trixter] 17/2/2006 16:43

alex - great post and agree with what you say on medium-long term outlook. IMHO, ACS have invested significantly in setting up a cost effective (and state of the art) solution for insurers. They have been winning significant business, made some good appointments, etc., and I expect the future to be rather good. Brokers target share price was 60p for 12-18 months from now (if I remember correctly). Of course, the down side is that they have disappointed so they have to prove they have turned things around. The upside is that this allows one to buy in at a favourable level if you are prepared to take the risk.

[alexacj] 17/2/2006 16:25

Don't get me wrong....I still expect this company to perform...and the next update will give us a clue on what to expect and when....if all remains on track we should see £2million profits this year rising to £3million for the next year....so that to me suggests a possible target within 2 years of £1 per share.....but the short term trend remains down and this imho will only be broken by a positive set of interims and a bullish outlook....the main bull point for me is the fact that putting ALL of the competition together they only account for approx 20% of the available market.....and with 80% left to go for there should be enough for everyone!......add to this the fact that insurers appear to be accepting that outsourcing can save them money.....the only puzzler for me is that ACS seems to have the lowest ABI TPH rates...for example HHR charges the insurers £140.50 for a Land Rover Discovery and ACS charges them £98.98 for the same vehicle.....why on earth would any insurer sign up to HHR....but they do....what am I missing or is this just a timing/marketing issue on the part of ACS?....answers on a post card!

[elmfield] 17/2/2006 16:11

Holding, showing a loss from average buy price of 25p but will let it ride.

[trixter] 17/2/2006 16:06

Wiganer - 20pish is a ball park figure. There is a lot of "noise" on the ACS share price as it is so tightly held, so moves on very small volume. I am expecting a reasonable next report and confirmation of excellent prospects for the foreseeable future based on the last statement (below) and the fact that directors pushed through options at 24.5 p (I think) on the quiet, just before Christmas.


Trading update and AGM statement - 18th November 2005

At the AGM, to be held at noon today, the Chairman, Charles Good, will give the
following comment on trading.

"In line with our annual report I am pleased to say that we remain optimistic
for our new business prospects with the confirmation in the last four weeks of
two new contracts with Insurers for accident management services. Accordingly
your board continues to view the results for the current year, with their
expected weighting toward the second half, with confidence."

[wiganer] 17/2/2006 15:41

Why do you reckon 20p is support. I'd have said 18p was the obvious next support level looking at the chart. I'm no great Chartist though...

[trixter] 17/2/2006 15:34

I may be wrong (!), but we are nearing support (20pish) and I expect us to bounce off it. Nothing to suggest that the next update will be disappointing, although the company have stated that the significant turnaround they expect is weighted to the second half. Looking forward to results and the up date on progress for the year. ACS falls (but also rises) on small volume.

[scotswhaehae] 17/2/2006 15:01

Yep...probably best to stay clear...

IQE is where I see the great upside at the moment...

Good luck all!

[alexacj] 17/2/2006 14:50

Well Scots you may well be right....looks like there is a real weakness in these shares.....the MMs either have heard a rumour of an impending profit warning (last years was on 22nd February) or they are holding too many shares on their books....either way looks set for falls now below 20p with support between 16p-18p....aimho!