Calnex Solutions Share Discussion Threads

[apad] 28/4/2021 07:36

Spirent
"Whilst we continue to invest to support our future growth plans, we have commenced implementation of a global R&D engineering plan which will rationalise the number of sites and extend our flexibility to serve our global customers. The estimated exceptional cost will be around $8 million over the period 2021-2023 with cash payback estimated within two years."

No competition there then.
apad

[rivaldo] 28/4/2021 07:32

Indeed - some excellent quotes specific to CLX's sector...



"Spirent continues to win in 5G with the development of 5G technology and networks remaining a firm driver underpinning our growth, securing more than 180 deals during the quarter from more than 80 customers demonstrating strong worldwide 5G uptake."

"Lifecycle Service Assurance

Strong order growth in the quarter was driven by continued demand for both our lab and live solutions. We continue to focus on expanding our Services offering and we secured a number of new wins with leading service providers globally, for our managed solutions business. In addition, demand for our new 5G device test solutions and services continues to grow."

"Demand for our assurance solutions continues to strengthen as market drivers for reliable communications remain robust and the pipeline build for our Networks & Security segment is reassuring. Our focus on growing our services business is working, with new secured customer wins for managed solutions and a growing pipeline of new opportunities."

[masurenguy] 28/4/2021 07:25

Good Q1 trading update issued by Spirent this morning !

[dr biotech] 27/4/2021 16:08

I’ve had MFC on filter for a long time. Just look at his/her history, ask yourself are any of the posts worth your time reading.

In fairness I have a lot on filter, I feel these boards have gone downhill over the last year or so.

[onjohn] 27/4/2021 15:22

Advfn showing a very overpriced Pe 42 is this a cannabis stock

[masurenguy] 27/4/2021 15:03

#317: "Hope Muddy Waters don't slag this off now"

What an utterly bizarre comment !

[redartbmud] 27/4/2021 14:12

Dr B

Neither am I it is speculation. I was just hoping that it wasn't a complete write off of time and money.
So far my delvings have improved my thoughts on the business going forward.
I am more positive now, but realise that there is plenty of work to do, if they are going to grow ina meaningful way.
A quality non-exec could be worth his/her weight in gold.

[middlesboroughfc] 27/4/2021 13:34

Nasty read

Chart could fall no further than 60p??


Hope Muddy Waters don't slag this off now

[dr biotech] 27/4/2021 13:29

£500k perhaps buys you a bit of IP and a small handful of useful employees with maybe 1 or 2 that will leave or not be required (ie accounts). I’m not going to read anything into that.

[redartbmud] 27/4/2021 13:19

cartmans

That does seem to be the case.
The whole situation is somewhat opaque, as they issues a series of bonus shares, LTIP type shares and had a share split from nominal 10p to .0125p each. All around the time and after the acquisition of JAR and up to the float at 48p.
I couldn't be bothered to trace through from the original 10352 shares of 10p issued at 90.80p and the 2589312 shares of 0.0125p owned by the JAR shareholders. It must be somewhere in the blurb.
I did follow through some of the accounting entries into the accounts, namely the £507250 in Intangibles, Intellectual Properties in Note 9, and the credit to P&L of £147471. On that basis, the other figures must be somewhere in the jungle, incorporated into other numbers.
They might have closed JAR, but did they pick up anything useful of a technical nature.

[apad] 27/4/2021 09:36

Kelvinside electronics was incorporated in 1987 😊
I believe it haas two sites but do not know whether they are both manufacturing sites.
Also customer repeat orders are not going to be high so volume supply won't become a mass production problem.
In some ways a close relationship could be beneficial, as hastings has posted.
Agree about Spirent, in principle.
However, top class products rule in this type of situation because products failing cause serious knock-on problems during a period of intense roll-out activity - so product leaders are difficult to challenge.
Looking forward, the similarity is perhaps with mobile phone mast's first roll outs where the supply company problems arose when the demand slowed significantly.
apad

[redartbmud] 27/4/2021 08:32

Dr B.
Thanks for the post, it certainly adds to the understanding, and answers questions on risk on the supplier side.

[hastings] 27/4/2021 07:23

Good post Dr B. I'd just add that when I raised Spirent to the CEO he stressed that the relationship was both strong and very mutually beneficial and that as part of that all products relating to Calnex carried the Calnex name!Looking forward to the results next month which we know should be decent.

[dr biotech] 27/4/2021 07:07

I cant really comment on the accounts, but the bit about the manufacturing risk is just cobblers

Calnex says this

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.

I've worked for several small companies that manufacture their own products, delivery is often dependent on customer specs and the availability of boards etc. The volume of equipment sold is actually quite small - the paragon base is about £100k so the actual numbers just aren't that high. No point looking for an alternative, too expensive to produce a handful of units. Risk for me is the high % of sales through spirent, I'm surprised that wasn't mentioned.

[mammyoko] 26/4/2021 20:38

Ciphersense tried the same trick with ELCO. It turned out that it was an ex-employee who had an axe to grind. The market quickly shrugged off the rather feeble dossier of so-called evidence and the share price is now around 50% higher.

Muddy Waters they ain't!

[redartbmud] 26/4/2021 17:30

The questions regarding Kelvinside are:

Can CLX find an alternative supplier that is able to:
1. Produce the product at volume required.
2. Meet the quality standards,
3. Produce at similar or lower cost.
4. Upscale production to meet CLX orders so that there is no delay in supplying customers orders.

It would be healthy to have a back up source of supply, in anycase, just to ensure that any issues at Kelvinside (e.g. Fire in the production area) do not cause such delay. On the 80/20 rule, that may not be sufficient to address a failure of supply, but the third party may be able to upscale their production to mitigate some of the losses until such time as Kelvinside is up and running again. Of course it may not be practical to have a second supplier, for many reasons.
Should the second supplier cost exceed that of Kelvinside, it should be possible to integrate that fact into CLX sales prices.

Just a few thoughts.

[masurenguy] 26/4/2021 16:55

Good, and well-balanced, post Riv !

[nakedmolerat] 26/4/2021 15:05

Well that explains the slight movement in the share price today

[rivaldo] 26/4/2021 15:02

I've just come across that myself. It seems somewhat overblown considering the de minimis amounts involved in the historic acquisitions which comprise the main thesis of the case. Since we're not privy to the ins and outs there may be very good reasons for the impairments, which may be as simple as a tidying up of the books prior to IPO - certainly the matters discussed are disclosed in detail in Note 27 on page 72 of the IPO prospectus.

The writer is actually extremely positive about the prospects of the business itself, its organic growth to date and of course about the potential of 5G sector in which CLX is a leading light.

In addition, CLX - via the CEO who always comes across imo as prudent and sensible - have always said that the preferred route is organic growth, and that acquisitions which may come along on the way are likely to be relatively small.

Acquisitions will always carry risk. But some of my most profitable and multibagging investments - KWS, IDEA, SDI, VLE etc - have carried out dozens of acquisitions without problems.

Kelvinside's status as a major partner does indeed carry more of a risk. But in these times I'm not bothered about accounts being late - the pandemic must have caused similar delays for probably thousands of companies. And CLX can terminate their agreement with Kelvinside on 90/180 days' notice dependent on the circumstances.

CLX post-IPO have a healthy cash pile to enable the necessary scaling up, and a good EBITDA cash conversion rate.

The report is decently written, and brings to light matters which are worth thinking about. But this looks like a case of mountains out of molehills to me. It reminds me a little of PTSG, where similar minor issues were listed in a report which caused PIs to exit and miss the wood for the trees - just weeks later the company was acquired at around a 230% premium to the share price!

[mg1982] 26/4/2021 13:22

Ciphersense has put forward a bear case with apparently no position long or short:



Anyone able to refute it?

[fuji99] 26/4/2021 09:33

Their update was excellent and ahead of expectations.

[abarclay] 26/4/2021 08:54

Gone into WRKS which is breaking out upwards

[luffness] 26/4/2021 08:43

So placed at 48p in Oct share price now 113 I am happy with that return

[fuji99] 26/4/2021 08:33

Cheers RP19.