Calnex Solutions Share Discussion Threads

[se81] 16/10/2023 13:19

Large prints just gone through- first potential attempt at a bottom here?

[fuji99] 16/10/2023 13:19

Sharesurfer1: I definitely agree with the red flags you pointed out. I think this will go far lower than where it stands now and I won't even be surprised to see staff leaving if it stinks rotten fish. IMO any business model without at least 50% visibility on revenues is doomed to fail as it survives in a probabilistic world - basically a lottery.

[value viper] 16/10/2023 10:11

Staggering drop / fall from grace this From 195p in January to well under IPO price nowAgree about the guy who dumped shares Questions should be asked Almost feel company needs to put a further announcement out, this is such a mess

[adamb1978] 16/10/2023 07:26

There's a long list of apparent insiders selling ahead of profits warning. I dont recall ever seeing anyone convicted from insider dealing.

Perhaps lots of people have credible defences? The VP of Bus Dev should know that sales are slow, he/she might claim that they dont follow equity markets or what analyst forecasts are, and therefore wouldnt know whether its material or not. No idea...but I wouldnt waste your time waiting for something to happening with the trades which you mention

[sharesurfer1] 15/10/2023 20:41

I have taken my time to analyse this, as calnex is suffering alongside the market in general, and there is opportunity that a rebound makes the current pricing very opportunistic. But there are a lot of things within their RNS submissions that pull up red flags.
1. VP of business development didn’t just sell shares before the most recent trading update, they did it right before the negative February update aswell. As have a number of VPs within the business over the last 12 months. Surely the regulator needs to review the timing of these sales, as once is unfortunate, twice in quick succession and before a 70% drop in value linked to revenue a business development VP would have clear visibility of - well that stinks. I would be shocked if all the VP team didn’t have visibility of the position that was coming.
2. VPs were issued essentially nil price options of considerable volume 2 months prior to a negative trading update. Who approved an LTIP scheme of this magnitude in the current trading circumstances? Very inappropriate, and I would suggest not aligned with the current size or position of a smaller aim business.
3. The 3pm release of the trading update stinks, I struggle to believe an experienced board do this by accident. Some serious credibility questions need answered.

[sharesurfer1] 15/10/2023 20:09

Why would any director buy? The VPs were all issued share options with a vesting of only 1p, 2 months before a trading update that crashed the share price due to under performance (which they would all have been aware of)

[fuji99] 13/10/2023 11:53

And yet no director buying ! Unless their arms are too short to reach their pockets ...

[value viper] 12/10/2023 17:32

48p was the ipo price having just reminded myself

[fuji99] 12/10/2023 14:27

Now below floatation value.
Strangely, no director buying at these extremely low levels.
Shall we understand the share value will drop further ?

[74tom] 12/10/2023 12:44

From the admission doc;

"Manufacturing

Calnex has outsourced the manufacturing of its products to Kelvinside Electronics since 2007. Kelvinside Electronics is a specialist manufacturer of advanced electronic products, operating from a custom built 40,000 sq. ft. facility located in Kilsyth, Scotland.

Calnex utilises real time sales information with which it can optimise the production and manufacturing processes. The Company provides Kelvinside Electronics with rolling forecasts of product orders and regular face-to-face contact ensures that procurement and production schedules are efficient. Kelvinside Electronics manages the procurement on behalf of Calnex and maintains a base inventory of key materials which enables flexible manufacturing. Calnex provides technical product training to Kelvinside Electronics’ engineering team.

Calnex business represents over 20 per cent. of Kelvinside Electronics’ revenues and the Company has become a key client for Kelvinside Electronics in recent years. Calnex’s management team has reviewed Kelvinside Electronics’ Disaster Recovery Plan. From their worst-case predictions of outage, Calnex has modelled its financial response to produce a contingency plan to deal with such an event. The typical lead times from customer order to delivery (4-8 weeks, with 12 weeks not
unusual), provide Calnex with the ability to prioritise manufacturing such that equipment and component inventories can be maintained.

Whilst Kelvinside Electronics currently is the sole manufacturer of the Company’s products, Calnex’s management team monitors the availability of alternative UK-based contract manufacturers with comparable capability and is satisfied that in the unlikely event of a manufacturing issue, the Company would be able to manage the situation until the outage was resolved or production was moved to an alternative supplier."

[mtioc] 12/10/2023 11:57

Great point APAD. Small company with c. £11m sales and 11/12% PBT margin. If I have the right company, accounts and confirmation statement appear to be overdue at Companies House (see Kelvinside Electronics (Number 1) Limited).

[apad] 12/10/2023 10:17

I have been speculating about the private company that does the manufacturing for CLX. It is a special relationship and as things are bad for CLX they could be worse for their manufacturer. Because it is a private company we have no means of knowing whether it can/wants to weather a recession.
apad

[scepticalinvestor] 12/10/2023 08:33

Shorters dream

[74tom] 12/10/2023 08:21

Agree on a mid 30's entry price, let's see how things are looking when they announce their results on 21st November though. Spirent appears a far safer bet & also pays a dividend, so as you say the upside needs to be very significant to tempt decent money to buy & hold. One thing is for sure, there will be some major opportunities when the macro does turn, the key is avoiding the profit warnings between now & then!

[dr biotech] 12/10/2023 08:20

Problem is with any trading update is when does it become news? Sure you have the post period planned updates, but for warnings like this they would have known they were behind weeks ago. At what point do you have to fess up? It’s not been a single event, it’s been death by 1000 unplaced orders.

Will wait before it stops falling before I think about taking a position (and probably won’t)

[adamb1978] 12/10/2023 08:04

Fair point re share price reaction 74Tom. Who knows. this has been on my watch list and remains there. Entry price in the mid 30s feels reasonble - 12x-15 PE in 2025 of say 5p-6p so buying at 35p gives 100% upside in 2 years, which feels an appropriate target given the risk

[owenski] 12/10/2023 07:57

Bit of a shocker then if this only turns in 20m turnover for the year.

Prior to the recent 'late'in the day issue TU, this company was IMO overvalued anyway, and now with this business uncertainty and questionable sale from a director, it's an avoid for now.

[74tom] 12/10/2023 07:42

Maybe. It's schoolboy either way. I'd also add that the share price behaviour on the day shows no sign of any leak, with average activity levels and a static share price around 94/95p.

Should the broker should be receiving the information before the market?

"An AIM company must issue notification without delay of any new developments which are not public knowledge which, if made public, would be likely to lead to a significant movement in the price of its AIM securities"

IMO it's a hard no, as it vastly increases the chance of a leak & the creation of a disorderly market.

[adamb1978] 12/10/2023 07:21

My guess on the timing was that it leaked somehow/somewhere and the company needed to scramble. Perhaps they told Cavendish in the morning and had planned to announce the day after, with the Cavendish note to follow...but then something happened and forced then to announce asap. Hence why Cavendish where so quick off the mark

Might be other explanations but can't think that anyone would intentionally aim to announce intra-day

[blackhorse23] 12/10/2023 07:20

Switched to WJG

[garbetklb] 11/10/2023 21:51

Just to update - I received a reply from Tommy Cook this evening, which I appreciated.

His comments were v much as one would expect - and may well have come from broker/nomad.

[fuji99] 11/10/2023 15:27

If people who should respond are "out of office", it shows the extend of what they probably know. If one sticks this to massive share sells, then no need to understand any further.

[dr biotech] 11/10/2023 12:02

Its a shame to see this fall so far - I was in here, but sold some time ago. I've invested in a few IPOs in the last few years and most have been rubbish - ProCook, MTEC,KITW (rare success)- lots seemed to be on the back of the covid wave or just one or two good years. This seemed to be doing well, but there is little they can do if their market has collapsed. Spirent of course was huge red flag, but as always it seems the PI is last to know.

I don't understand the mid afternoon RNS yesterday either - perhaps they were planning to release it this morning but the info may have leaked out somewhere? Feel for those left in. Not sure how much of a hit 5G has been with the telcos, I haven't bothered to upgrade as 4G does everything I need.

This will stay on my watchlist, but as stated above it'll be some time before it will return to growth

[74tom] 11/10/2023 10:58

Agree with the comments on the broker note being a really ugly part of this saga, it tells you that Cavendish (Cenkos + Finncap) were in possession of this information long before the RNS was released. I've no idea why that would ever be the case & I certainly haven't seen it before. The RNS should have been released at 7am and the broker note in the days after, otherwise it just looks ridiculous.

Regarding a return to 'normality', I think it's worth consulting the 15 year Spirent chart for clues. They did very well from 2009-13, went nowhere for 5 years & then did well from 2019-22, before the recent crash back to earth. It very much feels like a 4/5 year cycle of investment then pull back. High interest rates will certainly put downward pressure on telecoms CAPEX, new projects will be deferred in favour of paying down debt etc etc.

I don't see a recovery for at least 12 months and as such feel this has a lot further to fall, SPT trades on an EV/SALES of <1x, so the 2x that Calnex is trading on right now (54p) still seems generous. Bottom line, this looks like dead money for a good while.

[redartbmud] 11/10/2023 10:08

According to the header, Tommy Cook has 21.0% of the share capital.
No idea what the carrying cost is after options etc, but he must be smarting at this point in time.

The only comfort that I have is the cash in the bank.
It wasn't so long ago that they hired more staff, so any discussions with partners and industry experts didn't indicate an eartquake and landslide on the immediate horizon.
The forecast indicates a recovery in 2025 but a lot of water has to flow under the bridge before then.

A number of questions now arise for Clx and the industry.
1. What will happen to R&D?
2. Will capacity be semi-permanently withdrawn from the market place as businesses retrench?
3. When 'normality' returns, how fast will demand pick up, and to what extent?
4. What will happen to prices, margins and therefore profitability going forward?
5. Will/should the players reduce staff numbers in the immediate short-term if there are no orders and no work. Staff are an expensive commodity and a drain on cash reserves if significantly under-utilised.

Maybe Tommy & Ashleigh should fess up in front of the cameras and explain what, how, why and when things happened and how they plan to move forward to recover the situation that they are in control of, relative to the industry problem that has arisen.

Consolidation of businesses from a position of weakness all around may not be an answer that anyone would wish to happen.

red