Best Of The Best Share Discussion Threads

[feverfan] 01/2/2023 09:17

Thanks Eric. Do you have the pre-covid / covid era massive growth figures still? I was trying to see how these compared for interest. The comment I that I found most interesting in the update was that CPMs for Meta were returning to pre-covid levels - that’s a massive margin tailwind if it stays that way.

December seasonality feels reasonable given Christmas / people spending happily / wanting to win their dream car. Jan similarly feels fair to be slightly lower as you’d expect people tighten their belts a little.

[pireric] 01/2/2023 08:49

YesI still track this and it is helpful to really confirm that business stabilisation and signs of inflection in real time. There's a tiny bit of seasonality around December each year

July August September were 1.314m, 1.353m, 1.322m

January should be around 1.361 - 1.377m I think so in-line with November and better than July-October levels)

Eric

[feverfan] 31/1/2023 23:07

Anyone still monitoring the SimilarWeb website visits data? I haven’t looked since covid but pleased to see positive trends for H2. H1 looks broadly flat around 1.3m ish but they seem to be gaining traction for H2 - Oct 1.319m, Nov 1.372m, Dec 1.494m. These seemed to be a good indicator of performance during Covid and I recall these went up and the earnings went up…and when they rolled over it was a red flag and signalled the downturn

[feverfan] 30/1/2023 19:12

No. They don’t do this as they’re pretty small. Just the results RNS

[fft] 30/1/2023 07:59

Is there an online presentation of the results and questions ? I thought there was, but can't find any mention of it .

[jackson83] 27/1/2023 18:47

just need this to get back to £20's so I can break even lol

[otemple3] 27/1/2023 14:59

Serratia, I can't see where you mention or give credit to the source you copied and pasted from so here you go: https://smallcapslife.substack.com/p/small-caps-live-weekly-summary-19c

[serratia] 27/1/2023 14:35

Best of the Best PLC - Half-year Report
Revenue of £13.65 million (H1 2021 £19.12m), significantly greater than the £7.60 million delivered pre-pandemic in H1 2020, the most appropriate comparative period

And:

Profit before tax of £2.71 million (H1 2021: £3.04 million), again greater than the £1.38 million generated in H1 2020

However, earnings are strong, especially as they are higher than H1 last year:

Earnings per share 27.95p (H1 2021: 27.26p)

It seems that they have cut one of their games:

As previously reported, in order to put the business in a better position for the reduced levels of revenue post-pandemic we have made changes to the product line-up, re-balancing our three principal weekly competitions - to two enhanced ones with an additional 'Friday Fun' competition under trial. We are pleased with the results of these changes, which have enhanced margins and make the business better operationally geared for future increases in revenue.

Their broker, finnCap, have more details:

In response to changing market conditions, the two mid-week competitions have been consolidated into one at a loss of c.£4.0m pa of revenue, which is reflected in our new forecasts, but there is no impact to EBITDA.

Overall, they say:

Trading since the period end has continued in line with our expectations.

And finnCap leave forecasts unchanged:


Even on unchanged forecasts, that FCF yield does make the company look very cheap if it is realistic. Doing our own basic calculations: annualising the H1 earnings, in a business with little seasonality, would be 56p, and distributable cash is probably around £2.5m or 30p per share. If you said a P/E of 10 then that’s around £6/share as a very undemanding price target. finnCap keep theirs at £9.90.

On the downside, we still don’t have any details on the GIL “Licensing and Distribution Agreement and a Marketing and Collaboration Agreement”, and finnCap now expects this with results in June. And no dividend was declared (they don’t normally declare an interim dividend, but do sometimes do a special), and we have management that sold most of their shares for £4. Still, the low valuation is likely to trump these concerns in the short term.

[johndoe23] 27/1/2023 13:56

Definitely a return to 80/90M Mcap a possibility. Assuming nothing goes wrong!

[pireric] 27/1/2023 09:49

It's worth refreshing valuation parameters at £5 now

£41.8m market capitalisation

Financial year ending April 2024
P/E 8.4x
Enterprise value £28.7m (my new estimate) based on ending this year with nearly £8m of net cash (20% of the market cap), and >£13m at the end of April next year
EV/FCFF 5.3x
FCF yield to enterprise value 19%

The forecasts are assuming only 3.6% revenue growth in the year ahead, which should end up looking rather conservative (potentially very conservative if the GIL agreement ends up being interesting as a traffic channel). The UK business is basically a £5m profit machine and is back on a high-teens % underlying revenue growth trendline vis a vis FY18. Can this be replicated in 2-3 other countries/regions as a starting point over 5 years? That is unpaid for upside at this stage, and fairly so until we know more with GIL, but that's the real earnings kicker beyond the UK returning to good growth.

So still looks more than comfortable on valuation grounds and hopefully can solidify around £5 as a new share price base

Eric

[feverfan] 26/1/2023 13:00

Useful insight re BIDS. I’m not too familiar with the company other than its rollercoaster share price and what it does but…can they target adverts based on age? What’s to stop a 16 year old playing Need For Speed (making this up) seeing the ads, or are there controls in place? There’s no revenue to be had as you can’t play BOTB under 18 anyways so it would be wasted advertising. I’m sure mgt have considered this as they clearly know their channels but was interested in the tech/ data privacy angle of sharing of DOB or whether data regulations forbid that. Is it the banner type advertising around the race circuit, or could it be something like the in game ads I see when I play the free version of doodle jump and every five minutes I’m spammed with videos I have to watch for laptops and so on?

[amelio] 26/1/2023 10:41

They are currently running a large marketing campaign within mobile games via Bidstack BIDS. Lots of BOTB adverts programmatically displayed within mobile games. Appears to be having an impact.

[pireric] 26/1/2023 08:28

Aside from the fact they are finally doing other channels like Tik Tok, one of the more interesting points is that we have first evidence that the second derivative has turned on revenue.

£15.6m of revenue in H2 of last year. £13.7m now in H1 this year. But as Finncap point out they shelved the third core competition which cost £4m of revenue per year but no EBITDA, so underlying spend on retained competitions has actually stabilised as they say. And thats while missing a post pandemic customer cohort as marketing CPMs were too expensive. They've started doing Friday Fun but that is only recently and that's a low priced prize. That should help on the revenue growth front again on better economics

Eric

Also a 4% tailwind on a full year basis from lower weighted average share count versus the first half when the tender happened part way through the period

[pireric] 26/1/2023 08:02

Looks fine overall. EPS forecast levels maintained and the revenue run rate is pretty much back on that pre covid growth trend line now. And importantly have witnessed that their historically higher margin levels were not permanently lost

Still feel this is far underpriced for this getting back to even an ounce of growth. 28p of earnings in the first half, no real seasonality in the business so starting out with a 7x multiple or so with £5m+ of net cash so its really half a turn lower.

It was priced to profit warn on bottom line earnings and hasn't done that. And each time they do that from here I think the stock can start to re-rate again off trough levels. Given the high conversion of profit to cash, 10x current year earnings feels a sensible starting point.

Eric

[feverfan] 26/1/2023 07:24

Half year report out. In line, positive outlook. GIL progressing but looks like they’re taking their time. But I’m not downbeat as there’s evidence in there they’re already working together incl using GILs marketing expertise. No capital returns yet or special divi yet, sounds like wait till YE which I’m fine with.

Returning to my COS forecast above for fun, I said £3.6m H1 prizes plus (6/12x£4.3m) gives £5.75m. They reported £5.5m so I’m not too displeased with that! Guessing the delta is from the reduced profit so lower RGD than I was able to forecast given I didn’t know revenue.

[pireric] 24/1/2023 21:19

H1 results this week

Eric

[pireric] 20/1/2023 18:36

Feeling OK Jackson?

[pireric] 17/1/2023 19:42

My working assumption on that was a modelling error when I noticed it but could be that

Eric

[feverfan] 16/1/2023 22:24

Anyone notice the FCF jump in the forecasts in FY25? From £5.1m FY23 to £5.4m FY24 to suddenly £6.8m FY25 and this is before any impact from the GIL deal. Upon inspection of the Finncap forecasts from June’22 there is a forecast FY25 capex positive of £0.9m vs the usual nil / £0.1m cost. Fixed assets then drop from £1.2m to £0.2m so looks like they’re disposing of an asset…which makes me think - sale and leaseback or something of their HQ which I know they own outright and was valued around that amount I believe per the accounts? Not a game changer but I’ll be treating that as an exceptional £1m for forecasts as it’s certainly a one off if my theory is correct.

I note the volume has ticked up quite heavily in past days - some big trades put through after hours!