Boostgold Discussion Threads

[boll] 09/3/2010 00:21

I think that Constellation would probably win through by increasing the offer to 35- 36p giving Shareholders in GLD certainty rather than wait for the other bidder to complete its due diligence and the bid possibly fall through- I cant see them doing this immediately as they may wait a short while to see what happens before making up their decision.

A reasonable outcome for shareholders I think.

[bobthetrader] 08/3/2010 19:08

I believe Constellation should nip this in the bud and make an offer of 40p.

Last year they followed the same path with a hostile approach and a very low offer which failed. As a result this only aggravated shareholders and 'GLD' management. My view is they are following the same path and allowing more time for other parties to prepare and become involved in the bid process.

If they truly want to purchase the company outright as opposed to the increase in the value of their investment then they should move fast and make an offer they know shareholders will go for and respect them for.

If all those concerned were to bid at the same price, at this present moment in time I would be more willing to sell my shares to one of the other parties than I would Constellation. This is based just purely on the way Constellation has dealt with the bid.

I do understand them trying to buy at the lowest price this is only natural. However I believe the manner in which this has gone over the last year or so will not sit well with most shareholders or management. They still could lose this bid if they are not careful, even though they are the main holders.

In my view their ultimate goal is to takeover 'GLD' rather than increase their investment value. If they move fast with a good offer they are more likely to achieve it. The longer they take the more likely they will have to pay a higher price, as happened last year.

[luckybullboy] 08/3/2010 18:42

gg - has deferred revenue increased? I thought it had gone down at least for the last couple of years.

I suspect the share price is not in the 40-50p range because despite the acquisitions there has only been modest sales growth in the last 4 years. It's a shame that management haven't had a chance to show that the R&D expenditure over the last 2 years will lead to better sales growth and a better rated share price

isis - I agree that the market position should command a premium. Unfortunately unless forced to buyers are going to avoid paying any premium especially in these uncertain times.

[isis] 08/3/2010 15:19

Businesses aren't sold purely on a P/E basis anyway - there are many other factors to take in to consideration.
Enterprise costs, market potential and growth - GLE are by far the largest in the UK and have the local Authority market mainly to themselves now. Competition has been falling not rising too.

[phillis] 08/3/2010 15:14

gg
use EBITDA actually
this is the cash generated from earnings

[isis] 08/3/2010 14:02

There is usually a premium paid for market leaders in almost any sector too.

However you look at it anything under 40p is good value to the buyer.

[greengiant] 08/3/2010 13:48

isis - not the full £7m, only the cash element - it is very very rare to try to add in any other fixed assets.

As for IAS38 (R&D) no company is permitted to capitalise unless it can be ascertained that future revenue will accrue from the sales. Also, if you look under Deferred Revenue in the Balance Sheet, you will see that this has increased, highlighting that capitalisation is correct, as future deferred revenues are increasing.

gg

[isis] 08/3/2010 13:43

All go eh?

GG - did you account for the £7m in your calculations?

[greengiant] 08/3/2010 13:35

LD - I would agree with you with regards to the 36p. I don't believe that CS will do nothing. That is a high risk strategy which will in effect potentially leave then being forced to sell to Active for 36p. It wouldn't make sense to them, 36p still has risk attached to it. That is why I think 38p will be a number at which the deal will get done. I am in 2 minds however, as to whether or not they will go for it.

I don't believe CS are a seller, if they were, then why acquire another 14% at 33p? Also I have not yet worked out what Millenium's position is because they keep asking me whether I want to sell my shares to them.

gg

[ldmachin] 08/3/2010 13:28

So, the way i see it is, we are now waiting on Constellation to make their next move, either:

they accept the 36p offer from Active.
they put in a bid equal or greater to 36p for the remaining share issue.

If i was them... i'd put in a bid for 36p to match Active's bid and see what happens.

[greengiant] 08/3/2010 13:01

billf2003,

That is an interesting way of valuing a company, of course to calculate whether or not a company is cheap, reasonably priced or overpriced, you can use a DCF of future earnings. Doing this shows that GLD at 44p is priced right. I showed the workings ages ago.

Of course if you are a venture capitalist, you would value the company on a debt free cash free basis, using EBIT as the line to apply the multiple to. Currently, as you are no doubt aware, the software sector is selling on a multiple of just under 12x (based on deals done in 2009 by all VC's). Again, this shows GLD to be undervalued.

As for who the parties are, etc etc, to me who the 33p party was is irrelevant. When this process was started, I was asked by Deloittes and GLD whether 33p was a fair bid. My answer was no. They could have just walked away because the majority of the larger shareholders stated they wanted more than 33p.

Millenium are still a buyer at up to 35p.

gg

[isis] 08/3/2010 12:32

egoi/CT/Hotpoint were constantly barracking this share whilst most of us knew they were worth at least what they are now.
You plain got it wrong and will no doubt again.

The weirdest thing is that HP is/was actually a large shareholder - work that out!

[isis] 08/3/2010 12:23

A dividend is academic for most AIM stocks anyway and for one in a bid situation it is neither here nor there.

I hold BT, LGEN and Barclays for Div's - forget AIM.

[egoi] 08/3/2010 11:49

Isis I thank you, I am expecting my three dividends this month, and frankly you have no clue of what my portfolio is.

Having previously failed to back up your claim about a supposed previous post of mine (because it didn't exist?) you now post more garbage. No idea what your problem or agenda might be.

Truth is, I suspect no-one, whatever side they are on re the GLD bid, takes your very imho poorly informed posts on here as other than 'clutter' anyway.

[grt999] 08/3/2010 11:42

"I have been looking for my next investment in the mineral resource sector and do most of my due diligence on www.vantagewire.com because they give free real-time quotes but I cant make up my mind on whether or not I should just stick to gold (play it safe) or potentially diversify...thoughts? "

[isis] 08/3/2010 10:41

egoi - with the Dogs you're holding I would think dividends are the last thing on your mind - solvency would be my priority!!

LOL

Constellation correctly identified GLD as a value play some time ago - of course they want to pay as less as possible - who wouldn't??

[egoi] 08/3/2010 10:35

I asked the question what happened to the 33p offer and why did they walk away, thanks Billf2003 for what, I think, is in effect, the answer. Of course a bidding war can lead to an artificially higher price being paid.

Has anyone asked what Active's divvy policy might be?

[isis] 08/3/2010 10:30

You have to add in other factors though like potential and market leading position - Companies do not always sell on just hard financial information.
Many Companies making big losses sell for billions - there is no hard, fast rules here but if you look at the Software Sector on AIM then Gladstone are one of the very few making a decent profit on a fairly low valuation - just checkout a few.
You also have to factor in the £7m of assets too.

[billf2003] 08/3/2010 10:20

In response to isis's question, I've run several software companies and believe I understand the difficulties in both running those companies and valuing them. In general, successful mature software companies are strongly cash generative, and I tend to use their cash generation as the main guideline – Gladstone generated only £860k last year (cash balance rose from £4.58M to £5.44M) – or up to £1.5M if you factor in some or all of the £0.7M costs marked as exceptionals.

Capitalising R&D is a valid accounting treatment of development costs, but most application software product companies need to maintain a high level of R&D expenditure continuously, both to keep their existing products competitive and to produce new ones. However, when I am trying to value a software company like Gladstone, I take the level of capitalised cost into account and reduce the stated operating profits accordingly.

Looking at forecast profits, one needs access to the company's internal sales information and forecasts, and then one needs an assessment on the likelihood not only of winning the business, but also delivering sufficient in the year to recognise enough revenue. I would have assumed that over the last three months of 'due diligence', several companies have poured over these figures and not come up with a bid of even 33p – except for Constellation who, I am guessing, have not had access to internal company sales information.

The lack of formal bids after three months of 'due diligence' is, to me, the biggest potential problem. Apparently there have been a number of interested parties, some reportedly with the funding in place to make a bid, so if everything they found pointed to £2.5M profit in the current year – why no formal bids after three months?

Gladstone is a solid company without any black holes – so it can only be the valuation that is the potential problem....

[isis] 08/3/2010 09:53

Where is CT?

That Boy never listens! ;-))

[davidosh] 08/3/2010 09:46

billf2003.....Constellation will be desperate to avoid a stalemate too. It is not their style to just sit on a position like this for years and in particular having been rebuffed for a position on the board ! There is no love lost here and both sides will be keen to solve the situation. Constellation will either see the chance to get a satisfactory higher price from a third party or will play hard and get GLD for themselves. I cannot see shareholders retaining an interest here under those conditions and we will see a deal one way or another.

[isis] 08/3/2010 09:40

Constellation could just match the bid and win, there are lots of variables here.
GLD are obviously not happy with 33p and want other bidders.


Constellation should do the decent thing and bid nearer 40p. imo

[isis] 08/3/2010 09:37

billf - why do you see 33p as fair when they have £7m in assets and are on target to make £2.4m this year.
What are you comparing this with?

Under 40p is still cheap. imo

[billf2003] 08/3/2010 09:32

I can see a potential stalemate. The Active Network looks like Gladstone's Board's preferred bidder - but will a formal bid be forthcoming from them? (we haven't seen one over the past three months - why now?)

Although it's not one of Active's pre-conditions, without Constellation's agreement, I can't see The Active Network proceeding with a formal bid. They could acquire control, with up to 56% of the shares, but Constellation's holding would block anything significant that they planned.

My bet is that Constellation won't play ball, and The Active Network won't formally bid. But the figure of 36p (in my mind a generous valuation) will have been put into the minds of Gladstone shareholders, who may therefore rebuff Constellation's 33p bid. And I can't see Constellation upping their bid above 33p.

We therefore have all the ingredients for a stalemate – The Active Network not bidding, and Constellation's 33p bid failing. Personally, I think that the 33p bid values Gladstone fairly, but if the Constellation bid fails, and no-one bids enough to get Constellation to loosen its grip on Gladstone, I see a continued stalemate for the next 12 months (perhaps a reason, if one were required, for Gladstone shareholders to accept the Constellation bid)...

[greengiant] 08/3/2010 09:26

isis - that is true, but you get to a stage where a bidding war is just the thing that you DONT want. We shall wait and see what the outcome of this will be.

gg

PS - Where has CT gone?