Best Of The Best Share Discussion Threads

[thelongandtheshortandthetall] 20/2/2021 16:04

Happy to see £30 well and truly consolidated.
The £50 and £90 arenas might require a new branch to the business. Very possible as they have a decent amount of customers they can promote to.
Or sensible expansion abroad into Germany or Poland etc..

Time is our friend here IMO.

[serratia] 20/2/2021 15:19

Ryan,

I think your multiples are a little optimistic. The market has for a few years ascribed a price at around 23* operating cash flow so maybe mid 30's after H2 results. Still a strong hold with good dividends.

[ryanc106] 20/2/2021 15:04

Quite staggering that we’re talking about these kind of numbers now isn’t it.
The even more staggering thing is they are now very achievable.
If they do £3 eps next year then apply a 30 earnings multiple and that takes us to a share price of about £90.
If we do 180p this year a multiple takes us to a share price circa £50-55!
We really have got an unbelievable business on our hands here haven’t we.
No one is having my shares... this is a closed shop

[serratia] 20/2/2021 13:22

I get to revenue generation via a series of links. If I take the growth for H2 last year as 1 in H1 this year I see it as 2.2 This is not a direct growth rate but a start point which leads to total revenue. It's interesting as I can see them switching advertising on and off which usually changes on the first of the month so is constantly changing. For example in July last year when they were pushing on at bid time it was 2.9. In October it was 1.7.
As we moved into H2 it's varied each month but as of yesterday it's averaging 2.05 for H2 to date. That drills down to continuing good growth through this half.
There are still a couple of months of this half to go so things can change but I am looking at a little higher than the 180p mentioned above. As they control their growth re advertising etc and maybe the new app I will only see how next year is going as we move into H1 next year. It's impossible to say but if they push on next year at the same rate as they're running this half I'd look for just under 300p.
In summary your estimates look pretty good to me. Then it just boils down to the multiple the market applies to the earnings.

[peart] 20/2/2021 12:39

Another thing to consider is the current UK market which by historic standards and compared to our international peers is currently cheap. This is well written about as I'm sure other posters have observed. As such, even taking a conservative eps (in my view) for the year to April 30th of £1.35, we are trading on a fwd p/e of 20 times currently. For a p/e of 20 with 300% growth that is cheap. Let's assume we actually earn min £1.50 and fwd eps is set at £3.00 per share, with some multiple expansion the shares could, to put it mildly, rise quite a lot from here!! If the company can suggest substantial earnings growth for next year as well (£3.00 plus), I think the market will respond and award a higher share price as it will be confirmed as not been just a one off. I think patience will reward shareholders in BOTB. 2021 could be another boom year.

[peart] 20/2/2021 11:36

Nice post mammyoko.

I don't know obviously, but re EPS for the year and going forward, I suspect your estimates are a bit light. I'm sure we both hope I'm correct here!!
My reasoning is quite simple. EPS for the 1st half was circa 60p which was much higher than management or anyone on this panel had assumed. I know I was really shocked - very pleasantly though - I'd guessed 40p 'ish and at the time (last Autumn) expected 60p 'ish for the 2nd half. As such it appears to me that the growth rate from the company has clearly been accelerating in a bit of an exponential fashion. Why, as such, at the half year stage is growth suddenly going to stabilise and there be no growth from the 1st to 2nd half. £1.20 per share for the year would imply this. This would still equate to about 225% growth on the 37.5p earned last year, which is obviously fantastic, but I suspect the odds are that the 2nd half would be quite a bit up on the 1st half. My guess is circa £1.50 for the year, which may still prove light.
You stated two options between £1.2 and £1.4, so taking the mid point of £1.3, I would also be surprised if from this level earnings were to grow to only £1.80 for the year to start 1.5.21. Again simple reasoning - how can it be that a company grows from £0.375 to £1.3 (250%), to then only grow by 38% the following year. Obviously anything is possible (is the growth all Covid related??), as is a fall in earnings after such a stellar year, but I view the chances are that the company has hit the sweet spot on growth and will probably grow to quite a lot higher than £1.80 per share for 2021/22.
Such growth rates will not and cannot last forever but BOTB is still a minnow and I'd be guessing that we will earn circa £1.50 for this year and fwd £3.00 min. for next year. I accept that there is some wishful thinking here, but these are just my judgement calls on what we have seen in the last year or so from the company. I do agree that if we receive good earnings and a positive outlook for the year, even at £1.80 fwd eps that £50 per share is realistic for later this year.

I have no real feel or idea about offshore expansion. I do feel that the company is still very small and suspect that there is quite a lot of room for more growth in the UK and the expansion of the offering in the UK. If we'd had several years of stellar annual growth say, from 300% to 150% to 80% to 30% to 10% to 6% in the UK, I could see justification in looking further afield for the next growth faze. I somehow doubt that we grow by say 250-300% this year and then the UK is tapped out as it were growth wise, but I could obviously be wrong. Going abroad might work very well, but we should remember that the USA for example is a graveyard for a lot of companies that try to expand there. Expansion abroad would no doubt be expensive and there are no guarantees. I do however view management as a shrewd lot though and would happily let them roll the dice on foreign expansion, if they deemed it prudent to do so.

[mammyoko] 19/2/2021 20:11

It is possible to construct a scenario where this is valued at £50 per share. At a mid-price currently of £27 and based upon a best guess of eps of £1.20 for the year, the implied p/e is around 23. If earnings actually come in at £1.40 with a forecast of, say, £1.80 for 2022 then it's possible to see a price of £50 per share this year.

The question is where is future growth going to come from? Why has the company not tried to replicate the model in other territories? Because there was enough business to go after in the UK without complicating matters and stretching resources in unfamiliar places? Or because management knows that the business model doesn't work in other territories? I don't know the answer to that but perhaps Paul Scott, who may be reading this and who has been following the company for much longer than me, may be able to answer that question from previous conversations with management? Or perhaps other investors have put that question to management in the past and have useful information to share?

If the answer is that there was always enough business to go after in the UK then potential expansion overseas could be the key to growing the business and the share price significantly. If the answer is that it's been tried before / that the model doesn't work elsewhere / regulations in other countries would prevent it from working then the question is how much bigger can the market get in the UK?

Recent UK growth might suggest that management has always believed that there was enough business to go after in the UK without taking on the problems of replicating it elsewhere. Certainly, it would be risky to attempt to open up elsewhere when the UK business is growing so strongly.

But any suggestion that the business could be successfully exported to, say, the US or the Far East would take the company's valuation to a different level.

These are, presumably, questions that any potential acquirer would be testing. Because, at these levels, there's really nothing left on the table for PE. I would suggest that one way of compensating for the inevitable share price weakness once the sales process is ended would be for management to suggest that they are considering the possibility of taking their model overseas. That might come across as a little rampy. But I think I am right in saying that there have been virtually no rampy statements from management in the last five years since I have been following the company - the share price has got where it is purely on good trading, clean accounting and under-stated communication.

Be interested to hear others' views of whether the model can be exported. Of course, even if it can the question is whether management has the will to build a £1bn cap business or whether they prefer to cash in at this level?

[peart] 16/2/2021 17:55

Mind you Investographer, I've looked back further and there wasn't a May update in 2017, so maybe as the business has prospered and grown management have increased updates, so perhaps we will get one next month as they did one last year in March. Who knows, but with the current buzz around the company updates are always interesting!

[peart] 16/2/2021 17:30

Re Investographer post re trading updates. I was referring to the March update position which has changed. May updates haven’t changed and have always been in place. Cheers

[ryanc106] 16/2/2021 11:57

We continue to float up as the market finally starts to understand how stupendously well we are trading.
TBH even if they offered £50 in a takeover bid I wouldn't accept it

[this tea tastes of chicken] 16/2/2021 11:11

Thanks for coming back those of you that did. Much appreciated.

I am attempting to do an investor healthcheck on BOTB, method which is used by a friend of mine in Canada. I shall share it when i complete it. Ive done the easy bit I just need to do an objectivity scan.

[bookbroker] 16/2/2021 10:47

Only thing a sale of company for cash would present to stockholders would CGT bill, better if it were sold for stock.

[shanklin] 16/2/2021 10:43

It would be helpful, at least for the sake of shareholder clarity, for the FSP situation to be resolved ASAP and a broker forecast to be published by FinnCap.

At least that would put a sensible stake in the ground against which future expectations could be managed by BOTB. The current year 69.8p EPS forecast is so ludicrous that phrases like "significantly beat" would be completely uninformative.

The only useful way of updating shareholders currently would be to be very precise as to a specific PBT/EPS they expect to beat.

[investographer] 16/2/2021 10:26

Peart, the trading update in 2019 actually came in May.So for the last two years, there have been trading updates in the spring.

[peart] 16/2/2021 07:46

We'll hear something perhaps next month or if not in May (agreed Shanklin). Management will decide when!

[shanklin] 16/2/2021 07:31

Surely, as I posted last week, it was a trading ahead TS. Given the ongoing FSP and therefore no remotely sensible broker forecast currently, difficult to have a clue what BOTB will do this year. Normally there is a TS just after y/e anyway.

[peart] 16/2/2021 07:20

I've commented recently that we will get a trading update next month. However, I've just checked back through announcements and we did receive an update on 17.3.20, but did not receive one in March 2019 or March 2018 or March 2017 for that matter, so perhaps we may or may not receive one next month! It's a bit up in the air, unless last year was the start of something new, in which case it might continue - we'll have to wait and see!!

[shanklin] 15/2/2021 08:05

FWIW, albeit the b/o spread is generally 10%'ish, I have been able to buy a fair few BOTB since the H1 results, most of them over the last couple of weeks. There was generally at least 1k on the offer although I have generally bought smaller amounts.

Obviously a big shame I wasn't buying a lot earlier but I was worried about the possibility of duplicating the business model and did not realise how much momentum was in the business, with such great operational leverage.

Obviously still a valuation and duplication risk, but I would currently rather be invested here in size (for me). Touch wood.

[peart] 14/2/2021 17:36

I have no idea of the legalities of operating in another country, but I suspect with BOTB having cracked the online marketing side of things that an international rollout to other countries, perhaps one by one, might be not too complex. There will be plenty of prizes available - no issue obviously - so what they would need is another prize presentation team to award and manage the prizes. What the perception/reception/attitude to such games in other countries by potential customers would be, I have no idea. I guess in most European countries it would be similar to that of the UK. I'm sure BOTB management would look at that. Who knows, maybe they are considering it, well they will have done but if they are to action it, we'll have to wait and see. I do suspect there's a lot more growth to be had from the UK still, but maybe they'll do both.

[investographer] 14/2/2021 17:13

Has anybody known an FSP to take 8 months? It is a bit silly now, considering that Finncap cant even put out a broker note/ update.Im really hoping they announce an international launch- outside of Europe. Maybe waiting for the App to fully launch. Anybody know if it has been launched on Android yet? I regularly play on the iPhone app.

[peart] 14/2/2021 15:51

That's a thought 3ootuk, maybe they could offer a franchise to another country. I guess there's a lot of options for them moving forward. My guess is they can do a lot with what they are doing at present as as I've said before this is a very fast growing minnow of a company stock market wise.

They've mentioned they have a growing and valuable database, perhaps they could use this to sell other products/offerings to. Who Knows....

[peart] 14/2/2021 15:48

This Tea Tastes of Chicken, many thanks for the question. At current prices 25% of the company that is not owned by management equates to roughly £60 million - total market cap circa £240 million at present. The plus part is that I would assume that management would have to offer a premium to that to entice shareholders. However my guess is that this scenario will not happen - It's just a possibility. I think it's more likely that management would accept a totally knock out offer for the whole company only and I suspect that buyers won't stump up what management deem as reasonable knowing what they know they can do with the company going forward. But, as I've said before we don't know what their personal circumstances are so anything is possible. Most likely, I'd bet that they are hitting the sweet spot growth wise, can see a real gem materialising and unless someone has deep pockets and say is prepared to pay for what they guess/estimate they can earn in 4 or 5 years they won't take it and will simply carry on developing the business. This is obviously just my hunch and I have no greater knowledge than anyone else. In the meantime, we'll just have to wait and see what management announce. They will say something next month, if history repeats - last year on 17.3.20.

[3ootuk] 14/2/2021 14:59

TTTC.. I thought it referred to my query on whether management could take the company private at a fairly cheap premium. Say 2m shares from PIs at £30/share.
That really depends on the philosophy of the owners, and it seems that they are decent people who wouldn't shaft PIs.

Rather than selling the company, maybe there's an outside chance of a franchise being offered for another country? BOTB have the processing capability for the metrics, and the experience of how to build a digital brand.