Braemar Share Discussion Threads

[haywards26] 14/1/2021 12:41

Looking strong, agreed 2.00 is short term target.

[hybrasil] 14/1/2021 12:26

I was prompted to move by Pireric s very helpful post as to the block being cleared

[hybrasil] 14/1/2021 12:15

trying to buy some stock have to pay over market

[hybrasil] 14/1/2021 12:02

does look as if it might break out a bit.I would thought we should be back in the £2.00 range very soon

[mayojames] 13/1/2021 21:00

interesting comment but not sure why CKN would look maybe wrong but biggest division is broking and you do not merge this sector as owners stay with brokers usually thus rationalise and lose shipowners - rest apart from green aqualis already covered unless they buy the aqualis stake. More focus maybe on VShips as just done small get to know you deal and their owners need to move to another level if they want to float - just a thought

[pireric] 11/1/2021 19:44

For arguments sake.... what would accretion look like if CKN did buy BMS (completely theoretical, and as another poster has mentioned, perhaps not likely given area of focus etc). Ignores £16m AB stake etc.

CKN 2019 underlying EBIT 50.5m
Net cash earning pretty much zero interest return = £88.8m at last report

Pretend they table a bid for BMS at 250p = £93.8m outlay
Assume debt of £20m (February 2021 end forecast)
New net debt position £25m

Braemar 2020 underlying EBIT £9.6m on revenues of £121m
Assume they can get 2% of revenues in cost synergies so £2.5m
Pro forma underlying EBIT of £12.1m

Accretion to EBIT 24%

Cost of net debt at 2% = £0.5m

Accretion to EPS approximately 23%. New leverage post deal of 0.4x to EBIT, closer to 0.25x levered on EBITDA

At £3 for BMS, accretion to EPS would be >20%. New leverage post deal of 0.7x to EBIT, closer to 0.5x on EBITDA

Goes to show how conducive it is to do M&A in this interest rate environment if you have a strong balance sheet and cash which is earning you close to nil return.

Eric

[thirty fifty twenty] 11/1/2021 18:00

hi pireric

no industry knowledge from me.
mgt have mentioned that they see consolidation opportunities in the market,
so i have taken them at their word in terms of future growth opportunities when the ship is righted, and also giving me downside protection possibly with themselves to become a target if they dont make a success of the business with such heritage + expertise etc..

as you observed re the rating differences, in my investing style i do like businesses where the CASH flow is valued lowly by the stock market based on the current organisation, but yet those same CASH flows have the potential to be worth a lot more within a different organisation. thus is there is a bid, it will typically be at a much above average premium which can be a nice bonus on a long term stock holding.

All IMHO, DYOR + Bol

[thirty fifty twenty] 11/1/2021 17:54

thanks CWA1 for the additional article.

i think it reads well giving details of the mgt team behind the turnaround,
but then it also seems to lack a bit of financial depth.
they quote profit forecasts but dont point out that achieving 10.5m would give EPS of close to 30p thus making the P/E ratio significantly below market average.
their conclusion to hold/take profits seems to be anchored in the fact that the price is up 50%, when actually i think there is much less risk now 6 mths on at a price 50% higher.

anyway, all good coverage.

i do feel that BMS is an ideal Simon Thompson type tip. i.e. a turnaround story on a low valuation but needs a bit of analysis to understand if the low rating is a worry factor, or a potential market mis-pricing.

All IMHO, DYOR + BoL

[pireric] 11/1/2021 15:29

Helpful, cheers - Case would certainly know the business! Saw that Clarkson had appointed a joint corporate broker this morning, so wondered what they're up to. Often a precursor to some element of M&A/corporate action.

Wonder if the events of 2020 will spur another wave of M&A in the space.

Eric

[shalder] 11/1/2021 14:50

Eric:
Would have thought that expanding the UK footprint not a priority as CKN already dominate here: acquisition to fill in gaps in global coverage would be more consistent with recent policy.

Personal opinion is that t/o of BMS by CKN unlikely - it would however be highly amusing in the context of how Braemar came into being in the first place!

[cwa1] 11/1/2021 14:42

Apologies, you are correct, I picked up the wrong one:-

[pireric] 11/1/2021 14:37

I dont think its related to the DM article. I was monitoring on Friday and a block overhang that had been persisting in the market for a couple of weeks had been bought out late in the day. As a result, was difficult to get any buy quote in size, including for most of today.

Completely side question and zero implications from my side but I'm interested if anyone here has industry expertise. How much competition friction would there be if someone like Clarkson wanted to table a bid for Braemar? They're both strong players in the market but its also a competitive market. The accretion they could get on the back of such a deal would be meaningful on the multiple disparity alone, even before talking about synergies. There's been a decent amount of market M&A over the years and Clarkson have been involved in that

Cheers,
Eric

[otemple3] 11/1/2021 14:00

They have updated but it said hold / take profits from my recollection so was hoping the price might drift! Quite a big move considering

[thirty fifty twenty] 11/1/2021 13:55

this feels like something more significant going on....

[thirty fifty twenty] 11/1/2021 12:55

hi CWA1 - that article is from May 202o i think when the share price was 99p

[thirty fifty twenty] 11/1/2021 12:55

hi CWA1 - that article is from May 202o i think when the share price was 99p

[pireric] 11/1/2021 09:58

I have enough for now, but I think there's a very easy base recovery story to this being back >£2 and closer to £2.50 without having to worry too much. That's back to a base 10-11x multiple

It wouldnt shock me if BMS puts out a trading statement this month. It feels there's some degree of upside risk to the FY21 outturn

Eric

[cwa1] 11/1/2021 09:35

There was a half-hearted tip in the MoS yesterday:-

[thirty fifty twenty] 11/1/2021 09:32

hi pireric

thks for info on CKN - it seems all indicators from others operating in similar sectors is positive so fingers crossed they'll be a decent reaction to the TU when it comes.

I agree too re the LTIP targets. i think they kick it a c.32p earnings. that seems very encouraging that the Board sign that off as realistic and fair.

dont know if you have been buying more but price is looking perky this morning

All IMGO, DYOR + BoL
BMS is in my top 5 hldgs

[pireric] 08/1/2021 08:32

Clarkson above expectations announcement for FY20 today and back to the share price levels from before the pandemic

Eric

[pireric] 07/1/2021 20:00

No problem. I think at the moment only a fraction of the warrants are expected to materialise, so I'd round to zero for calculation purposes. As you say, AqualisBraemar's stock has been on a strong run. There was a hint in a recent Finncap note that it could be a takeover target. To quote "... The deal increases AQUA's renewables footprint and reaffirms its commitment to energy transition. With this focus and pace of progress, we would not be surprised to see a bid in the future, potentially providing a significant source of funds for Braemar." Lock up on the shares expires in about 6 months.

There is deferred consideration of £3.9m and £7m of contingent. I agree with your view. At the current rates that Naves has been operating at, I doubt anywhere near the full amount of contingent will be triggered. The trigger years are this year, next year, and the year after, and they require NAVES to deliver minimum €2m of EBIT to pay out, and €4.375m of EBIT in each year to pay out in full. Unless there is a significant turnaround in fortunes at Naves and a return to 2018/19 levels of profitability(which would help boost EPS anyway), I suspect much of that contingent consideration will fall out without payment. In any case, should be fully payable using cash flow so don't view it as a big detractor especially as it's spread out over 24 months.

The multiple is definitely not right, once the market becomes comfortable with the balance sheet (which I don't think we're a million miles off from). Plenty of companies out there with weak balance sheets trading on extremely high multiples, so it's a psychological barrier more than anything (e.g. James Cropper CRPR, Zotefoams ZTF). Clarkson is the aspirational multiple that I doubt BMS will ever reach, but can't see why it can't recover at bare minimum to halfway. Otherwise, someone should just take BMS out. My view here is that the valuation on a PE basis is at least 50% undercooked

Recent share option EPS targets would be nice if they can meet them!

Eric

[thirty fifty twenty] 07/1/2021 18:45

hi Pireric

Many thanks for providing the clarity. Agree with the 16m. I hadn't realised AB had risen so much, and i also applied a 10% discount just to be conservative. That said i also think they will get some, but not all of the warrants. I think it is an amazing assets to have hidden in the balance sheet - so fingers crossed it is recognised by the market in time.

Re the debt , i think there is c.11m of contingent consideration yet to be finalised. it will be paid part in shares and part in the convertibles. i see that the 11m is a high number but if it is to be paid out in full then it must mean that the acquired business is delivering well on profitability so seems like a natural hedge.

My own view is that the next results will enable mgt to provide clarity on the route to 'normal' levels of financing. then i think the market will value 12-14m of EBITDA much higher than 46m MV.

p.s. have you any other hidden asset gems you might share to me by pm pls. thks

All IMHO, DYOR + BoL
BMS is in my top5

[pireric] 07/1/2021 13:53

Hi,

1) 19.24m ordinary shares at NOK 9.5 is 183M nok = 16m GBP

2) Fiscal year end February 2021 forecast net financial debt including convertibles from Finncap is 19.8m set against EBITDA forecast of 13.9m for FY22. Granted some of the lease depreciation isnt in there so maybe more like 1.6/7 like for like.

Still, at year end, net financial debt minus the associate valuation would be <£5m if we fix where we stand today.

[thirty fifty twenty] 07/1/2021 13:35

hi pireric

couple of questions:
(1) how did you calculate the AB stake as worth 16m - my spreadsheet shows a lower figure.

(2) you quote debt plus convertibles as below 1.5times. could you share the gross figures you use to get to <1.5t as my analysis shows a slightly higher debt position

many thanks

All IMHO, DYOR + BoL
BMS is in my top5

[pireric] 07/1/2021 10:15

Braemar's stake in AqualisBraemar now valued around £16m. I dont think the market has realised that, and that by the end of February total financial gearing (bank debt plus convertibles) will probably be below 1.5x ebitda anyway even before you recognise the associate stake value. So valuing this under say 12-13x P/E as a base doesnt make a great deal of sense to me anymore. Can see this rerating strongly if/when the market wakes up to that