Arkle Resources Share Discussion Threads

[kiwihope] 03/11/2003 12:07

I've given up on these moving on sentiment. I don't think they'll move up until there is some positive news from the company - hopefully increased sales. But that will not be until after Xmas.

[spyderman] 03/11/2003 10:02

at 20p key support, FTSE making good gains, whats the upside for a bounce?

[spyderman] 31/10/2003 09:33

my concern is management might try to snap up company at say ang5's 26.5p, finance the MBO with the £40m cash in bank, cut costs to the bone, drive up revenues, and float company back off to public in say 3-4 yrs time with prospective revenues of £50m and 30% margins, on a PE of say 30 for a £450m valuation.

of course if they tried that the employees would have to sacrifice the economic value of their share options, largely with exercise prices between 25-35p i believe

[kiwihope] 30/10/2003 10:21

Yes spyderman ... better than this. But ARK has been up higher in past years and has now dropped. It had it's chance and has disappointed ... or so many investors think. However if you can detach yourself from the short-termism and take a calculated look, I for one still think it's in with a shout.

[spyderman] 30/10/2003 09:35

put it this way, if a company was about to IPO. it has spent some £48m over last 4.75 yrs on R&D with promising new products. it will have some £40m cash immediately following the IPO and no debt. brokers expect revenues of about £14m in yr1 with say £13m cash burn and say £25m revenues and £4m cash burn in yr2 and profits in yr3. what market valuation range do you think the company should deserve?

[kiwihope] 30/10/2003 08:49

So much selling - been that way for weeks now. Nothing much has really changed with trading performance. Only reason I can think of is buyers who got in during August blip (and there were a lot of them) are giving up and selling at a loss. There are risers elsewhere and maybe a lot are selling to join other bandwagons.

[spyderman] 30/10/2003 08:24

ang5

can you clarify your 26.5p calculation please

[spyderman] 30/10/2003 08:22

kiwihope, thanks for your comments

of course if Q3 was up 93%, and 480k is correct, Q2 would be 250...

Q3/02: less than £0.1M
Q4/02: £0.2M
Q1/03: £0.2M
Q2/03: £0.25M
Q3/03: £0.48M

[ang5] 29/10/2003 22:33

Cash 40.3m,= 26.5 P/share, if 1 year cash burn 13m, they have 27m cash at Sept 2003.(=18.5p/share)
So price downsid may be 18-20P/share, upside 25-30P,
now price =20.5P, buy or hold. One city old man said:
"When you buy, first think downside risk, if risk is lower. you can play waiting games..."

[kiwihope] 29/10/2003 12:12

spyderman,

My best info on Asian revenues is (and I may be wrong):

Q3/02: less than £0.1M
Q4/02: £0.2M
Q1/03: £0.2M
Q3/03: £0.5M

So Asian sales are rising but they are not yet compensating for declining sales in the US.

I think the royalty revenues were:

Q2/02 and before: less than £0.1M
Q3/02 Q4/02 Q1/03: £0.2M
Q2/03: £0.4M
Q3/03: £0.5M

The growth in the last 12 months has been pretty spectacular in % terms. However I just don't know how much potential is left, i.e how many more products already developed that use ARC designs have yet to go into volume production?

With regards Q4 revenues, my best guess is:

£0.5M maintenance & service (always this figure)
£0.5-0.7M royalties (CEO indicated royalties should be maintained, i.e £0.5M is minimum and I'm always optimistic, hence £0.7M!!)
£1.7M licences (modest increase from £1.5M in Q3 based on improving world economy and Asian growth)

Total: £2.7-2.9M, 8-16% up on Q3.

But what do I know!!

[spyderman] 29/10/2003 10:08

kiwihope, dont worry about the sellers, theyre only small volumes, and probably just telegraph readers bailing out. ;)

[spyderman] 29/10/2003 09:59

kiwihope, what have the asian revenues figures in £ terms? based on your figures above...

Q3 2002 - 3%
Q4 2002 - 6%
Q1 2003 - 8%
Q2 2003 - ?
Q3 2003 - 18%

i am just trying to establish the growth profile, will fill figures in later. would be grateful if you can point out any mistakes.

my thoughts are that if asia continues to grow at such a pace, Q4 2003 will be the first period it has a real impact on revenues, helping take group revenues to £3m+, which could lead to upgrades in 2004 revenues forecasts to £18-20m area from the current approx £14m.

what do you think?

[kiwihope] 29/10/2003 09:28

I'm afraid I think people are selling ARC to invest elsewhere in other semicon shares that are moving up. A shame. This is only a fairly small part of my portfolio so I will probably just hold and wait a while.

[kiwihope] 28/10/2003 12:16

Probably going into a quiet period now (as if it wasn't already ...) no news expected for 2-3 months until FY results.

Ho hum ...

[spyderman] 28/10/2003 09:27

with a bit of luck perhaps this ARC will be the ARCadia of 2004

[kiwihope] 27/10/2003 08:42

I agree. What they seem to miss is that arc deosn't have to become profitable before the share price will rise. It just has to make a meaningful start on that road. Sure it's stalled for the last 3 years - but then so have a lot of other similar companies.

My main point, and the most important reason I'm holding is that on balance I think they can start to increase revenues. And a start is all that's required. Imagine what might happen if they achieve an extra £1M a qtr on the back of an improving market. "Arc increases sales by 30%, cuts losses and issues a bullish outlook"!

Also, if it only takes 2 years to achieve profitability I'd be ecstatic! Again, this article misses the point - they assume cash burn will continue at its present rate. It will reduce, because of cost cutting AND a decrease in losses. Also it is likely they will be cash breakeven before profitability because of non-cash charges.

I get sick of these so-called "experts" who advise people to sell when a stock is already rock bottom, and buy when it's obvious the price is too high. Look at most of the great investors of the past. They did well by going against the consensus view, and bought cheap - sold high, and had the balls to follow their gut instinct.

Having said all this, yes there are risks with this one, but not the ones the article seems to suggest.

[spyderman] 27/10/2003 08:39

thanks mitsis, found it now

sunday telegraph is a funny paper. had this story about fund manager accusing the city of having sold arcadia too cheaply at 408p. all very easy in hindsight isnt it.

and dont forget just a couple of years before that many brokers had sells on arcadia at just 20p

[mitzis] 27/10/2003 08:16

I wouldnt believe too much what the Sunday Telegraph says as they have been wrong on many occasions.

[king of jungle] 27/10/2003 03:14

For a high tech start up to have 10 mil revenue is a fairly good starting point, as a business, this 10 mil revenue must be worth something to someone out there.

and there is this 40 mil cash pile plus some hard assets and the brand and technology which has taken so much money to develop.

so ARC must be worth far more than 30 mil at the moment, it might evaporate in time but this is the sort of risk all investors must take on whatever stock they get into.

[spyderman] 26/10/2003 19:54

thanks cheesemonkey,

whats the source?

its just more potential confirmation of there having been a high level of a bearish sentiment at bottom of market

and what shockingly poor analysis. so what if ARK are unlikely to make profits for atleast two years? thats all to obvious and it is what happens after then that matters. indeed it is because ARK is making losses that it would have been irresponsible for the management to have handed back more than £50m at that point, putting the company and its employees at greater risk.

and frankly IMO its irresponsible to recommend selling bombed out stocks trading at less than net cash. the cash abates financial risk.

market cap is only £30m vs some £1400m soon after flotation in late 2000. sure, they might burn through the rest of the cash pile and wind up. but they might also get those revenues up and the shares rebound accordingly. costs are running at around £30m and if revenues move above that level profits would be very sensitive to further revenue increases indeed. then theres tax losses

regards

spyderman

[cheesemonkey] 26/10/2003 14:48

Out of Arc

Last November we advised readers to sell Arc International, the chip designer, when the shares stood at 26.5p. We were disappointed by the management's refusal to return a substantial proportion of its £111m cash pile to shareholders. In the end it agreed to return just £50m.

Almost a year later our sentiment towards the company is unchanged. Arc may have narrowed its losses in the third quarter, but it recently warned - for the third time this year - that revenues would fall short of City forecasts. The company now seems unlikely to make any profits for at least a further two years.

Given that analysts have calculated that the company's cost base will be higher than its revenues for the foreseeable future, the outlook seems bleak. The shares have slipped back to 20.75p, reflecting continuing doubts. Readers should keep selling.

[spyderman] 25/10/2003 11:29

kiwihope,

thanks for your comments on the presentation

the asian numbers are still tiny and if they can continue to grow at anywhere near the recent rates there has got to be a chance of reaching 3.5 in Q4, if theres a more moderate pickup elsewhere.

brokers consensus revenues for 2004 seem to have come back to around 14, and most are sell/reduce, reminds me when retailer arcadia were 20p ;)

regards

spyderman

[kiwihope] 24/10/2003 12:11

From the ARC CEO and FD presentation yesterday, Q3 Asian revenues were 18% of £2.5M = £450K. Five quarters ago they were negligible.

I think Q4 revenues of £3.5M may be a bit much (40% increase in one qtr?). What I'm unsure about is whether the 18% Asian revenue is mainly licenses or royalties. And how much potential is there for royalty growth? Their CEO said that they received royalties on many millions of units (I forget the exact figure), which worked out at a few pence each. With these volumes it doesn't need many pence change per unit for a big effect on the top line.

The CEO also said he expects Q4 royalties to be 'maintained'. I take this to mean at least as good as Q3.

The FD also said she expects the exceptional charge in Q4 (relating to 10% head-reduction) to be about £200K, but this will save £0.6M per quarter in expenses going forward.

[kiwihope] 24/10/2003 11:59

spyderman ... a few too many /// for me to understand your post! Could you simplify for me?